SEC’s Pitt Fouls Up Again

The recent conduct of Harvey L. Pitt, chairman of the Securities and Exchange Commission, is a sharp reminder of why the nation’s chief fiscal watchdog needs watching. Despite his promises to clean up the accounting industry, Pitt is mired in his own flagrant conflicts of interest. He is also reported to be backpedaling on appointing a strong independent oversight commission.

This year, Pitt met privately with the chiefs of the accounting firm KPMG, which Pitt had previously represented as a lawyer, and Xerox. Both were under investigation by the commission. By meeting with them, Pitt created the impression that the companies could influence the SEC’s investigations. Once the meetings became public, a seemingly chastened Pitt hastened to assure lawmakers that he would not make the same mistake again.

But last month Pitt met with Goldman Sachs Chairman Henry M. Paulson Jr. without bringing along any representatives of the commission’s enforcement division, even though the SEC is investigating Goldman Sachs. Reps. John D. Dingell (D-Mich.) and Edward J. Markey (D-Mass.) were right to complain in an Oct. 3 letter to Pitt that his meeting flatly contradicted his promise to avoid even the appearance of impropriety.

Add to Pitt’s ethical indifference his bobbing and weaving on who should head the oversight board. In July, President Bush signed an accounting reform bill that ended the profession’s self-regulation and created an independent oversight board of five members.

The New York Times reported this week that two Democratic SEC commissioners, Roel C. Campos and Harvey J. Goldschmid, urged Pitt to support John H. Biggs, a champion of reform and chairman of TIAA-CREF, one of the nation’s largest pension funds, to head the board. Last month Pitt reportedly told Biggs he supported him for the job but later caved to anti-Biggs pressure from the accounting industry.

Pitt called the stories false. Biggs might still be selected, but the brouhaha prompted Senate Majority Leader Tom Daschle (D-S.D.) and House Minority Leader Richard A. Gephardt (D-Mo.) to ask Bush Wednesday to fire Pitt.

More than just election-year politics are involved here: At a moment when Sens. Joseph I. Lieberman (D-Conn.) and Fred Thompson (R-Tenn.) have released a report finding “systemic and catastrophic failure” by the commission in regulating Enron, Pitt’s lack of leadership is unacceptable. This editorial page has called for his resignation before. Pitt’s recent actions strengthen the case for removing him before he does more damage to the credibility of the commission.