Whopper of the Week: Harvey Pitt
The hole in Judge Webster's résumé.
—What Securities and Exchange Commission chairman Harvey Pitt told his fellow SEC commissioners prior to their vote approving former FBI and CIA director William Webster as head of their new accounting oversight panel, about certain difficulties arising from Webster's earlier role leading the audit committee of U.S. Technologies.
"The small publicly traded company, U.S. Technologies, is now all but insolvent and it and its chief executive, C. Gregory Earls, are facing suits by investors who say they were defrauded of millions of dollars. The suits contend the misconduct occurred in late 2001 and this year. That was after the three-person audit committee, headed by Mr. Webster, had voted to dismiss the outside auditors in the summer of 2001 after those auditors raised concerns about internal financial controls.
"Mr. Webster … said he told Mr. Pitt and Robert K. Herdman, the agency's chief accountant, about the investor lawsuits before he was approved last Friday.
" 'I told them that people are making accusations,' Mr. Webster said of his conversation with Mr. Pitt before he was appointed last Friday. 'I said if this is a problem, then maybe we shouldn't go forward. I raised it because I didn't want it to become an issue.'
"Mr. Webster said he was assured by Mr. Pitt that the staff of the commission had looked into the issue and that it would not pose a problem. Mr. Pitt had urged Mr. Webster to take the job.
"But U.S. Technologies' former outside accounting firm, other members of the audit committee, company executives, and investors and their lawyers who say they were defrauded say they were never called by anyone at the commission about Mr. Webster's candidacy for the new oversight board."
—Stephen Labaton, "Audit Overseer Cited Problems in Previous Post," in the Oct. 31 New York Times.
"The S.E.C. announced this morning that it had ordered its inspector general to conduct an inquiry after several of its commissioners complained privately that they had not been notified about the conversation Mr. Webster had with Mr. Pitt about U.S. Technologies.
"Mr. Pitt did not tell the other commissioners about a later conversation, either, S.E.C. officials said. Just after his appointment, Mr. Webster said, he learned that a government investigation had begun into the chief executive of the company for possible fraud. Mr. Webster, who left the company's board in July, said he called Mr. Pitt with this news on Monday, but S.E.C. officials said Mr. Pitt did not pass it on.
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.