Sep. 26–FAIRFIELD, Conn.–Taking aim at accountants, corporate directors and Congress, former Securities and Exchange Commission Chairman Arthur Levitt has revealed what happened at the SEC in theyears leading up to a rash of corporate scandals.
Levitt, a Westport resident and author of “Take on the Street: What Wall Street and Corporate America Don’t Want You to Know,” kicked off the Pequot Library’s Meet the Author lectures Wednesday. Many of the approximately 100 who heard Levitt said the discussion was timely, given a recent scandal over the chairman of the New York Stock Exchange’s pay and an unfolding story about hedge funds being allowed to buy into mutual funds after the close of trading.
Levitt said serving as SEC chairman was the most rewarding job of his life. Since graduating from college, Levitt has been a journalist, sold cattle and worked in a brokerage firm. President Clinton named him SEC chairman in 1993.
Levitt said Congress, accountants and corporations pressured him during his service to drop some of the causes he took up. One of those causes was separating auditing and consulting functions, he said. Levitt said mingling both services helped create many of the scandals that brought down Enron and other companies because accountants’ interests became tied to corporate management instead of to investors.
Levitt said auditors must make judgment calls when looking at a company’s books. But when it came down to making a decision on reporting something in favor of management or alerting investors of a potential problem, accountants were siding with managers who were paying the accountants large consulting fees, he said. Outcries from accountants and Congress met efforts to separate the two functions, he added.
At one point, Levitt said, he received a letter signed by 48 members of Congress stating that he was doing the wrong thing, but he didn’t back down and Congress has since changed its tune. Most of the 48 bills Congress offered up to address the scandals go too far, Levitt said.
But the Sarbanes-Oxley Act, which provides an oversight board for public accountants, was necessary, because accountants had forfeited their right to be trusted, he said. Levitt also said that in their rush to be competitive, corporate managers forgot that they work for investors and engaged in unethical practices. But boards of directors are beginning to change their policies and even their membership in order to better serve their investors, he said.
Although he leveled harsh criticism against some auditors, corporate managers and Congress, Levitt said investors also must bear some of the blame, because they did not do enough homework on the companies in which they were investing.
Ultimately, Levitt said, he did not feel the problems that led to the scandals were systemic but were part of a cycle of corruption that follows any runaway bull markets that seduces the main players. “It happened before. It may very well happen again,” he said.
—–
To see more of the Connecticut Post, or to subscribe to the newspaper, go to http://www.connpost.com
(c) 2003, Connecticut Post, Bridgeport. Distributed by Knight Ridder/Tribune Business News.
ENRNQ,
