Daschle: SEC chief 'too cozy' with accountants

Pitt

WASHINGTON (CNN) -- The chairman of the federal agency charged with protecting investors and maintaining the integrity of the securities markets is a "huge disappointment," the Senate majority leader said Sunday.

"He's had too cozy a relationship," U.S. Sen. Tom Daschle, D-South Dakota, said of Securities and Exchange Commission Chairman Harvey Pitt. "He met with the accountants on many occasions before issuing regulations.

"He's been the one who's said we want a kinder and gentler SEC, the opposite of what we should have had," Daschle said. "We could do a lot better than Harvey Pitt in that position today."

Daschle's comments on Pitt on CBS' "Face the Nation" were in response to questions about revelations of accounting misdeeds at companies such as Enron Corp. and WorldCom Inc.

The SEC also is responsible for overseeing stock exchanges, broker-dealers, investment advisers, mutual funds and public utility holding companies.

But Sen. Richard Shelby, R-Alabama, said he is willing to give Pitt the benefit of the doubt. The SEC chairman "is a very able person," Shelby told CNN's "Late Edition With Wolf Blitzer."

"The question is, 'Will he lead rather than follow?' " Shelby said.

U.S. Rep. Nancy Pelosi, D-California, supported Daschle's view, telling "Late Edition" that Republicans enabled some corporate wrongdoing when the GOP-led Congress ignored recommendations by former SEC Chairman Arthur Levitt to strengthen securities laws during the Clinton administration.

"I think that Pitt should not be in that job," Pelosi said, adding that he represented ties to accounting firms before taking the SEC job.

Senate to take up reform legislation

The Senate is scheduled to take up a bill this week that would improve financial reporting, independent audits and accounting services for public companies and would strengthen the independence of firms that audit those companies. It also aims to improve SEC resources and oversight functions.

Houston,Texas-based Enron filed the largest bankruptcy in U.S. history in December, having allegedly used thousands of off-the-book partnerships to hide nearly $1 billion in debt and to inflate profits.

WorldCom stock was dropped from the Nasdaq exchange after the company revealed that $3.8 billion of expenses were improperly reported as capital expenditures in 2001 and in the first quarter of this year.

Asked whether Sen. Phil Gramm, R-Texas -- whose wife, Wendy, served on the Enron board and audit committee -- should recuse himself from action on the bill, Daschle replied, "That's up to Sen. Gramm to analyze and come to some conclusion about."

Gramm is the ranking Republican on the Senate Banking Committee. Wendy Gramm resigned from Enron's board last month.

Shelby said he supports the financial bill in the Senate.

"I believe it is a strong bill," Shelby said. "I think you've got to have individual responsibility everywhere you can get it. We need to close every loophole you can image.

"It's very important that we bring credibility, which is integrity, to our capital markets. And we're going to have to do this by strengthening in a big way our accounting profession."

Shelby and Pelosi told "Late Edition" that they support jail terms for corporate offenders.

"We have to remember the impact this has had on individual investors," Pelosi said.

Daschle said he would support having CEOs sign corporate financial statements.

"They've got to be held to that level of accountability," he said.

Dasche, however, stopped short of agreeing that corporate chiefs should be held personally responsible for a company's financial troubles.