—What Securities and Exchange Commission chairman Harvey Pitt told his fellow SEC commissioners prior to their vote approving former FBI and CIA director William Webster as head of their new accounting oversight panel, about certain difficulties arising from Webster’s earlier role leading the audit committee of U.S. Technologies.
“The small publicly traded company, U.S. Technologies, is now all but insolvent and it and its chief executive, C. Gregory Earls, are facing suits by investors who say they were defrauded of millions of dollars. The suits contend the misconduct occurred in late 2001 and this year. That was after the three-person audit committee, headed by Mr. Webster, had voted to dismiss the outside auditors in the summer of 2001 after those auditors raised concerns about internal financial controls.
“Mr. Webster … said he told Mr. Pitt and Robert K. Herdman, the agency’s chief accountant, about the investor lawsuits before he was approved last Friday.
” ‘I told them that people are making accusations,’ Mr. Webster said of his conversation with Mr. Pitt before he was appointed last Friday. ‘I said if this is a problem, then maybe we shouldn’t go forward. I raised it because I didn’t want it to become an issue.’
“Mr. Webster said he was assured by Mr. Pitt that the staff of the commission had looked into the issue and that it would not pose a problem. Mr. Pitt had urged Mr. Webster to take the job.
“But U.S. Technologies’ former outside accounting firm, other members of the audit committee, company executives, and investors and their lawyers who say they were defrauded say they were never called by anyone at the commission about Mr. Webster’s candidacy for the new oversight board.”
—Stephen Labaton, “Audit Overseer Cited Problems in Previous Post,” in the Oct. 31 New York Times.
“The S.E.C. announced this morning that it had ordered its inspector general to conduct an inquiry after several of its commissioners complained privately that they had not been notified about the conversation Mr. Webster had with Mr. Pitt about U.S. Technologies.
“Mr. Pitt did not tell the other commissioners about a later conversation, either, S.E.C. officials said. Just after his appointment, Mr. Webster said, he learned that a government investigation had begun into the chief executive of the company for possible fraud. Mr. Webster, who left the company’s board in July, said he called Mr. Pitt with this news on Monday, but S.E.C. officials said Mr. Pitt did not pass it on.
“The announcement about the inquiry was amended later in the day, exposing the extreme bitterness now enveloping the S.E.C. The agency initially announced that Mr. Pitt had called for the investigation. The announcement was modified after some commissioners complained that they, and not Mr. Pitt, had pressed for the investigation.”
—Labaton, “Pitt Under Fire for Not Telling All He Knew About Webster,” in the Nov. 1 New York Times
Discussion:Ordinarily, Chatterbox shies away from lies of omission, because the standard seems too subjective. In this instance, though, even the conservative Wall Street Journal editorial page has observed that “you don’t have to be an ethicist to think he owed his colleagues the Webster news before they made a highly public and contentious vote. … Mr. Pitt is proving to be an expensive man to defend.”
Got a whopper? Send it to firstname.lastname@example.org. To be considered, an entry must be an unambiguously false statement paired with an unambiguous refutation, and both must be derived from some appropriately reliable public source. Preference will be given to newspapers and other documents that Chatterbox can link to online.
Oct. 25, 2002: George W. Bush
Oct. 18, 2002: North Korea
Oct. 11, 2002: Michael Bloomberg
Sept. 27, 2002: Rep. Tom Tancredo
Sept. 13, 2002: Al-Muhajiroun
Sept. 6, 2002: National Republican Congressional Committee
Aug. 29, 2002: Eddie Joe Lloyd
Aug. 22, 2002: Larry Klayman
Aug. 2, 2002: Al Gore
July 26, 2002: Princeton admissions dean Stephen LeMenager
July 19, 2002: James Traficant
July 12, 2002: Maryland Lt. Gov. candidate Michael S. Steele
July 5, 2002: Hesham Mohamed Hadayet
June 28, 2002: WorldCom
June 21, 2002: Terry Lynn Barton
June 14, 2002: Tom Ridge
June 7, 2002: Former FBI Deputy Director Weldon Kennedy
May 31, 2002: Ari Fleischer
May 23, 2002: Condoleezza Rice
May 17, 2002: Robert Mueller
May 9, 2002: Karl Rove
May 3, 2002: Gen. Richard Myers
April 25, 2002: Donald Rumsfeld
April 18, 2002: George W. Bush
April 11, 2002: The Rev. Robert J. Banks, archdiocese of Boston
April 5, 2002: George W. Bush
March 29, 2002: Major League Baseball
March 21, 2002: Billy Graham
March 14, 2002: INS commissioner James W. Ziglar
March 8, 2002: Robert Zoellick and the U.S. steel industry
Feb. 28, 2002: Al Sharpton
Feb. 22, 2002: Olympic skating judge Marie-Reine Le Gougne
Feb. 14, 2002: Kenneth Lay
Feb. 8, 2002: Enron spokeswoman Peggy Mahoney
Jan. 31, 2002: Monsanto
Jan. 24, 2002: Linda Chavez
Jan. 17, 2002: George W. Bush
Jan. 10, 2002: Simon & Schuster
Jan. 4, 2002: The Associated Press
(Click here to access the Whopper Archive for 2001.)