In a truly remarkable turn of events, the just-appointed head of the Public Company Accounting Oversight Board, William Webster, has come under fire for serving as the chair of an audit committee of a company that is undergoing an investigation for fraud. Chairman Webster resigned from his directorship in July. Part of the allegations include complaints from the company’s independent auditor about inadequate internal controls – and a dispute over whether (and when) the audit committee was told about them.
Even more remarkable is that SEC Chairman Pitt was aware of this issue – but is reported to have not shared this information with any of the other SEC commissioners before they voted last friday to appoint the Oversight Board. As a result, Chairman Pitt has asked the SEC’s inspector general to conduct an investigation into Chairman Pitt’s own actions. Even this has come under fire, as Senator Paul Sarbanes (D-Md.), the head of the Senate Banking Committee, has noted that the inspector general reports to Chairman Pitt.
Senator Sarbanes has repeated his call for Chairman Pitt to resign and has asked Chairman Webster to reconsider his own appointment. In addition, Senator Sarbanes will conduct hearings into the process by which the Oversight Board was selected. At last friday’s open Commission meeting, Commissioner Harvey Goldschmid voted against all five appointees because of his displeasure over the process. For example, he had not received the names of the potential appointees – nor had a chance to vet their credentials – until shortly before the meeting was held to vote on the nominees.
See the Washington Post article about this new development at http://www.washingtonpost.com/wp-dyn/articles/A49150-2002Oct31.html.