Webster quits in selection dispute

Marcy Gordon

Wednesday, Nov. 13, 2002 | 9:45 a.m.

WASHINGTON -- Former FBI Director William Webster resigned under pressure as head of a special accounting oversight board created by Congress to rebuild public confidence shaken by a cascade of business scandals.

Webster was caught up in controversy over his selection by the Securities and Exchange Commission to head the new board, a debacle that already had brought the resignations of SEC Chairman Harvey Pitt and the SEC's chief accountant.

Webster's resignation was announced Tuesday, one day before the oversight board was scheduled to have its first meeting. The meeting, described as informal and dealing with administrative matters such as office space and staff, was proceeding today.

Webster declined to blame Pitt for not informing fellow SEC commissioners that Webster had headed the audit committee of a company now under investigation for fraud and had fired the company's outside auditors. But he acknowledged that the information should have been shared. Pitt, a Bush appointee, resigned a week ago over that.

"I don't want to put any responsibility on" Pitt, Webster said on CNN's "Moneyline" program. "I disclosed a possible problem and they said they'd look into it and they did. But I had no knowledge of what they might decide to do about it."

Asked whether he would agree that the commissioners should have been told, Webster replied: "I think it would help even if the information, in the opinion of those who looked at it, was as unimportant as it appeared to be in my case -- because you never know."

In a resignation letter to Pitt, Webster, who also once headed the CIA, said he now believed his continued presence on the board "will only generate more distractions which will not be helpful to the important mission of the board."

"Those who know me will appreciate that I do not abandon duty lightly. It is time to clear the air," he wrote.

Pitt, whose 15-month tenure has been marked by a series of political missteps, has remained in office pending President Bush's naming a replacement to be confirmed by the Senate.

Bush last week voiced confidence in Webster's integrity, although the president also said he wanted to see the outcome of an investigation of the circumstances surrounding Webster's selection.

"Judge Webster is a fine man. We wish him well and respect his decision," White House spokeswoman Claire Buchan said Tuesday. "The president believes the oversight board has important work to do and he urges them to pursue their work quickly and aggressively."

Pitt is facing investigations into whether he concealed from other SEC members Webster's role for a company that is under investigation. The SEC voted 3-2, along party lines, to appoint him on Oct. 25. Pitt and the other two Republicans approved Webster and the two Democrats opposed his appointment.

In a statement accepting the resignation, Pitt made no mention of the controversy surrounding Webster's appointment. "I continue to believe that investors would have benefited from Judge Webster's dedication to the best interest of the American people," he said.

The turmoil comes at a time when the government is trying to bolster the confidence of investors and consumers shaken by corporate scandals over the past year and the SEC is investigating questionable accounting at dozens of big companies.

Webster's appointment was pushed by Pitt and endorsed by the White House. Democrats preferred John Biggs, head of the nation's largest teachers' pension fund, whom they believed would be tough on the accounting industry.

Creation of the oversight board was mandated by Congress last summer in legislation responding to the wave of accounting scandals at Enron Corp., WorldCom Inc. and other big companies. The five-member board, to be independent of the accounting industry, will be armed with subpoena authority and disciplinary powers and financed by fees from publicly traded companies. Each board member will be paid about $400,000 a year.

The SEC inspector general and Congress' auditing arm, the General Accounting Office, are investigating the circumstances surrounding Webster's appointment and the Senate Banking Committee plans hearings.

Webster has said he told Pitt that he headed the audit committee at U.S. Technologies, which is considered insolvent and has been sued by shareholders alleging fraud. The office of the chief accountant, Robert Herdman, then told Pitt that information did not create a problem for Webster's selection.

Webster fired U.S. Technologies' outside auditors last year when he headed the board of directors' auditing committee.

The auditing firm, BDO Seidman, recently alleged that Webster had made "false and misleading statements" about how much he knew about the company's financial problems.

BDO Seidman also released documents showing that in a July 13, 2001, conference call with the audit committee, its accountants warned the committee members of "material weaknesses in internal accounting control."

Webster said last week that the auditors did voice concerns, but not in an urgent, "house on fire" way. He continued to insist that BDO Seidman was fired because the audit committee believed it was charging too much and taking too long to do its audits -- not because of a warning about the company's financial controls.