SEC Probes Firm Where Donaldson Was on Board

The head of the Securities and Exchange Commission should remove himself from the agency’s investigation of accounting at a company where he served on the audit committee, ethics experts said Thursday.

To ensure public confidence in the SEC probe, Chairman William H. Donaldson “has to take himself out in a credible way,” said Stephen Gillers, a law professor at New York University.

Donaldson would be expected under government ethics rules to recuse himself from the investigation into EasyLink Services Corp., the technology company where he was a director and member of the board’s audit panel until he resigned in November 2002. A month later he was named SEC chairman by President Bush.

The Piscataway, N.J.-based company confirmed Thursday that the SEC was examining its accounting for $3 million in revenue from its advertising network business in 2000.

Donaldson, a former chairman of the New York Stock Exchange, became a director of EasyLink in 2001 after he stepped down as chairman, president and chief executive of major insurer Aetna Inc. As a member of the audit committee, Donaldson was charged to act as a watchdog over the firm’s accounting.

It was not known whether Donaldson had voted on authorizing the inquiry into EasyLink. He has declined to comment on the issue.