Alan Murray believes that Harvey Pitt has no choice but to appoint a tough reformer to be Chair of the Accounting Oversight Board.

The problem from Pitt's perspective is that his political masters lack enthusiasm for the task, and would rather that the SEC went to sleep and the entire issue just went away.

It's a tough spot to be in.

WSJ.com - Political Capital

The Wall Street Journal | October 22, 2002 | POLITICAL CAPITAL | By ALAN MURRAY

Harvey Pitt Faces Dilemma
On Choice for Oversight Panel

Harvey Pitt can't win.

If the Securities and Exchange Commission chairman doesn't appoint John Biggs of TIAA-CREF to head the government's new accounting-oversight board, he'll be accused of shamelessly caving to the accounting industry and its friends in Congress.

But if he gives Mr. Biggs the job, he'll be accused of shamelessly caving to an energetic lobbying campaign by his predecessor as SEC chief, Arthur Levitt.

In either case, the accusation would be correct.

The SEC has only six more days to make the decision, which could be the most important of Mr. Pitt's troubled chairmanship. The Sarbanes-Oxley legislation left many critical decisions about how to clean up the accounting business to the new board, formally named the Public Company Accounting Oversight Board.

Mr. Biggs has all the right qualifications for the job. As president and chief executive of TIAA-CREF, he ran a sprawling investment company that managed $280 billion in assets. Those who have worked with him are unstinting in their praise of his intelligence and integrity.

"I think he's outstanding," says Pete Petersen of the Blackstone Group, who serves with Mr. Biggs on a Conference Board blue-ribbon commission looking into corporate governance. "He's been a very tough minded, highly informed and sophisticated student of accounting and corporate governance."

The accounting industry's opposition to his appointment only strengthens the case. The dossier against him circulating on Capitol Hill includes testimony from as far back as September 2000 in which he argued vigorously for "bright line" division between auditing and consulting by accounting firms. He also favors regular rotation of auditors and expensing of stock options. His opponents say this shows Mr. Biggs is some sort of radical reformer. What it really shows is that he understood the industry's problems far clearer and sooner than most.

The problem for Mr. Pitt, though, is that if he names Mr. Biggs for the job now, Mr. Levitt will get the credit. The former chairman jumped into action after reports that the SEC was backing away from Mr. Biggs and mounted an impressive rescue campaign, lobbying both in public and in private. Among insiders, Mr. Levitt is seen as the "shadow chairman," says Sarah Teslik of the Council for Institutional Investors. She says the struggle between the new and old chairmen reminds her of English history, when people were said to be "more afraid of Edward I dead than Edward II alive."

The absurdity of this beltway battle reached its apogee when Mr. Pitt turned to former FBI and CIA director William Webster as the way out. Mr. Webster is the man everyone in Washington turns to when they are having "integrity" problems. He has overseen probes of abuses at the IRS and in the Los Angeles Police Department. He seems to be the only person in Washington whose integrity is considered intact.

But he's 78 years old, and it shows. He has no particular expertise in the tough accounting issues the board must address. And his record in rooting out corruption, truth be told, is more imagined than real. Mr. Webster, for instance, was one of the members of the Independent Review Board overseeing the cleanup of the Teamsters union in the 1990s, which for years ignored evidence that "reform" President Ron Carey was becoming as corrupt as his predecessors. Mr. Webster isn't the way out of this mess. If he wants to maintain his reputation for integrity, he'll do what former Federal Reserve Board Chairman Paul Volcker has done -- refuse to allow his name to be considered.

Mr. Pitt's frustration is understandable. Friends say he wants nothing more in life than to be a strong and successful chairman of the SEC. He certainly has the knowledge and intelligence to achieve that goal. And during his first year on the job, he has compiled a record of tough-minded enforcement. But he still gets no respect. He seems to be the wrong man for the moment, inept at handling the political and public relations challenges facing him, and too arrogant to accept the advice of those who might help him. As a result, he perpetually looks like a man on the run, rushing to clean up the last mess he has made, and struggling to keep up with New York State Attorney General Eliot Spitzer or Arthur Levitt.

Mr. Pitt can't win. So what should he do? The best course would be to accept his fate, and do what's right for the nation: Give Mr. Biggs the job. If he chooses anyone else, he'll be saddling that unfortunate person with the same curse he already carries -- an unshakable perception that he or she is simply a tool of the accounting industry.