Harvey's Pittfalls

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Pitt came around late, and not before setting off a partisan dispute, rare within the SEC. Democratic commissioners Harvey Goldschmid and Roel Campos voted against Webster, while Pitt, Atkins and Cynthia Glassman carried the day. "I deeply regret that the commission has not acted unanimously, or wisely, today," Goldschmid said after the decision.

Or, it turned out, with complete information. In discussions with Pitt, Webster made it clear that he was a member of the tainted U.S. Technologies board, which had fired its outside auditor on his watch. U.S. Technologies is close to insolvent, its management under suspicion and its shareholders in court. Pitt handed this information to his accounting staff, led by Robert Herdman, to check. Herdman cleared Webster, but Pitt never told the other commissioners about it.

The chief knock against Webster is that rectitude shouldn't be confused with aptitude. Webster sits on the boards of a number of big companies, including Anheuser-Busch. But U.S. Technologies was a New Economy animal that managed a portfolio of startups. Last year its auditors, BDO Seidman, said the company lacked proper financial controls. U.S. Technologies then fired Seidman, with Webster's approval. U.S. Technologies later told the SEC it would not challenge Seidman's conclusions. "[Webster] was chair of the audit committee at a company that had no internal controls," says Sarah Teslik, executive director of the Council of Institutional Investors. Says James Cox, a professor of law at Duke University: "He's not the guy we can expect to be an agent of change."

That doesn't mean Webster won't have a job. SEC sources tell TIME that some commissioners are furious with Pitt, but will wait for the results of the internal investigation before deciding Webster's fate. Webster is also the subject of a separate SEC investigation into his role at U.S. Technologies. Atkins has said he still supports Webster, as has Congressman Oxley.

Pitt may be out of friends, but he has vowed to carry on. Sadly, the controversy has overshadowed the SEC's enforcement efforts under his leadership, which now number 598 actions, in contrast to 483 in fiscal year 2001. When he was the SEC's youngest general counsel 25 years ago, Pitt was famous for his late-night work habits. Even today no one can accuse Harvey Pitt of being anything less than a hardworking and committed public servant. But after the maelstrom he created last week, no one much cares.