Harvey Pitt, SEC Chairman for Intense 18 Months, Dies at 78 (2)

Harvey Pitt, who led the US Securities and Exchange Commission through a tumultuous 18-month period for markets that included the 9/11 terror attacks and the Enron Corp. accounting fraud, has died. He was 78.

He died on May 30, according to Jane Cobb, executive director of the SEC Historical Society. No other details were available. In a joint statement, the current five members of the SEC said of Pitt, “Even in the last year, he has made himself available to offer advice and continued to submit comment letters on our rulemaking proposals.”

Pitt, chairman from August 2001 until February 2003, was barely on the job on Sept. 11, 2001, when two hijacked airplanes struck the Twin Towers of New York City’s World Trade Center. The attack knocked out 80% of the communications capability of the New York Stock Exchange.

Harvey Pitt

Photographer: Joshua Roberts/Bloomberg *** Local Caption *** Harvey Pitt

Pitt took charge in coordinating with the NYSE, the American Stock Exchange, Nasdaq and option exchanges to close financial markets immediately that Tuesday morning and leave them shut until the start of the following week.

“My biggest fear, which didn’t get allayed until Sept. 17, was if we got the markets back up and running, would they collapse again?” Pitt told the SEC Historical Society in a 2008 oral history interview.

“What we couldn’t tolerate was getting the markets back up and running, and have them break down for some reason, because then it would be on us,” he added.

Paul Atkins, who served with Pitt on the SEC, said in an interview that getting stock markets up and running “was a huge achievement in an uncertain time.”

Pitt’s tenure was brief and rocky. The fraud that brought down Texas-based energy-trading company Enron came to light in October 2001 and was followed swiftly by similar accounting scandals at WorldCom Inc. and Adelphia Communications Inc., among others.

Enron’s crime implicated its auditor, Arthur Andersen LLP, then one of the Big Five accounting firms. Enron had hidden billions of dollars in debt in off-the-books entities while Andersen was vouching for its accounts.

As a private lawyer, Pitt had represented all five of the leading accounting firms and their lobbying arm, often to thwart legislative or regulatory efforts to tighten supervision of their activities. Because of that history, Pitt faced accusations that he had a conflict of interest atop the SEC as the accounting scandals were being investigated.

Pitt refused calls to resign. President George W. Bush, who had appointed him, stood by Pitt.

Accounting Board

Pitt called for a new independent oversight board to regulate accounting firms. Congress established such a body, the Public Company Accounting Oversight Board, as part of the Sarbanes-Oxley Act of 2002. In a 3-2 vote, with Pitt joining two fellow Republicans in the majority, the SEC appointed William Webster, the former head of the Federal Bureau of Investigation and the Central Intelligence Agency, to head the new board.

Within days, it emerged that Webster’s own career history included an accounting hiccup: While Webster was chairman of the audit committee of a company called US Technologies, its outside auditor, BDO Seidman LLP, reported that company didn’t properly record large transactions, misplaced documents and lacked an experienced chief financial officer. The audit committee fired BDO Seidman.

Webster’s experience at US Technologies hadn’t been widely shared within the SEC before the vote to name him as PCAOB chair. Much of the blame fell on Pitt; even Bush was said to be poised to fire Pitt after the SEC finished an internal investigation.

Pitt submitted his resignation on Nov. 5, 2002, followed shortly by the SEC’s chief accountant, Robert Herdman, and then by Webster himself. Pitt stayed on for a few months until his successor, William Donaldson, took office.

A report by the investigative arm of Congress found that Pitt, SEC staff and SEC commissioners all shared responsibiliy for the bungled PCAOB appointment.

“My tenure at the SEC has been shorter than I expected,” Pitt said in a speech after announcing his intent to resign.

“I hope my successor isn’t greeted with the same climate of attack and partisanship,” he said. “It’s easy to find fault, and it’s easy to criticize. In a partisan environment, criticism often devolves into attack. This doesn’t help anyone. In fact, it’s not just unproductive, it’s counterproductive.”

Long SEC Career

Harvey Lloyd Pitt was born on Feb. 28, 1945, in Brooklyn, New York, to Morris and Sara Pitt. He graduated from Stuyvesant High School in 1961, Brooklyn College in 1965 and St. John’s School of Law in 1968.

In 1969, he began a long SEC career as a legal assistant to one of the agency’s commissioners and became a special counsel in 1971. In 1972 he was named the chief counsel for the agency’s market regulation division. The next year he became the executive assistant to the SEC’s chairman, Ray Garrett Jr. In 1975, he was named the SEC’s youngest-ever general counsel.

He went into private practice in 1978 with the New York firm Fried, Frank, Harris, Shriver & Jacobson, where he rose to co-chair before his appointment as SEC chairman.

After Pitt left the SEC, he founded Washington, DC-based Kalorama Partners, which offered clients risk assessment, governance and legal services.

He was a frequent commentator on television on securities issues, and a columnist for Compliance Week. He was a founder and first president of the SEC Historical Society.

Pitt married Saree Ruffin in 1984, and they had a son, Robert, and a daughter, Sara. From a previous marriage Pitt had a daughter, Emily, and a son, Jonathan.

(Adds SEC statements in second and seventh paragraphs, family details at end.)

--With assistance from Lydia Beyoud and Austin Weinstein.

To contact the editor responsible for this story:
Laurence Arnold at larnold4@bloomberg.net

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