WASHINGTON, Oct. 31 (UPI) -- Securities and Exchange Commission Chairman Harvey Pitt was under increasing pressure from congressional Democrats on Thursday to step aside after he failed to disclose relevant information about the background of the recently appointed U.S. accounting monitor.
House Minority Leader Dick Gephardt, D-Mo., called on Pitt to resign, saying he had deprived fellow commissioners of material information about William Webster's role as chairman of an auditing committee for a company facing fraud allegations.
In a letter to President George W. Bush on Thursday, Sens. Christopher Dodd, D-Conn., and Jon Corzine, D-N.J., said that the integrity of the SEC and the new accounting oversight board have been tarnished because of the circumstances surrounding Webster's appointment to the board and allegations that Pitt had failed to disclose to members of the SEC information that could have affected Webster's nomination.
The senators said that by not disclosing information that had an impact on Webster's suitability to head the oversight board, Pitt had failed to fulfill his duty as head of the SEC. They added that they feared that these circumstances would further undermine confidence in the U.S. financial markets.
White House spokeswoman Jeanie Mamo told United Press International late Thursday: "The White House supports Chairman Pitt."
Earlier, aboard Air Force One en route to South Bend, Ind., White House spokesman Scott McClellan told reporters that Pitt didn't tell fellow commissioners before they voted on Webster's nomination that the former FBI director had been in charge of an audit committee of a company sued for fraud.
McClellan said the first time the administration learned of the matter was when it was contacted by The New York Times.
The paper reported Thursday that Webster formerly headed the audit committee of U.S. Technologies, which is facing shareholder lawsuits for alleged fraud over accounting problems.
"We don't know all the facts," McClellan said. "This was a decision made by the SEC."
Webster wasn't available for comment on Thursday.
On Friday, the SEC voted 3-2 to appoint Webster, 78, as chairman of the Public Company Accounting Oversight Board. The panel, which is the centerpiece of the Sarbanes-Oxley Act, will oversee the audits of the financial statements of U.S. public companies.
On Thursday, Pitt asked the commission's inspector general to investigate Webster's appointment.
Earlier this month, the Times reported that the accounting industry, working with Rep. Michael Oxley, R-Ohio, covertly pressured Pitt to drop John H. Biggs, who is retiring as the head of pension fund giant TIAA-CREF, as his first choice.
Webster, the former head of the FBI and CIA, was selected over the objections of the SEC's two Democratic commissioners who said he lacked the financial expertise to head the board. The two Democratic SEC members had favored Biggs.
"Pitt not only deprived his fellow commissioners of vital information about one of the most important appointments they would ever make, he knowingly endorsed a candidate for chairman ... without seriously investigating this matter," said Gephardt.
Gephardt accused Pitt of torpedoing a qualified candidate in favor of Webster, who has almost no experience in the auditing industry.
"The president should finally begin to restore investor confidence by appointing an SEC chairman devoted to the public interest, not the accounting industry," he said.
(Incorporating material from a news media pool report.)
