Harvey L. Pitt
"In his two decades of dedicated service to an array of corporations, Securities & Exchange Commission Chairman Harvey L. Pitt won renown as a legal scholar. But that expertise came at a price--a close identification with the interests of his clients. Controversy rages over Pitt's history of legal work for Big Five accounting firms, including Enron (ENE) auditor Arthur Andersen LLP, which threatens to undermine his leadership in formulating accounting reforms. And Pitt's conflict-of-interest nightmare may only be just beginning.
"As a partner in the Washington law firm of Fried Frank Harris Shriver & Jacobson, he represented firms and individuals throughout the financial-services industry. Although most previous SEC chairmen had worked on Wall Street or were securities lawyers, Pitt's practice was unique in its sheer size and scope. Securities lawyers say that Pitt thus faces actual or apparent conflicts of interest--either can be just as troubling--on a host of issues. Another constraint is equally daunting: Legal ethics forbid him from acting on information he obtained from ex-clients.
"The heart of his future difficulties can be found in a single-spaced, six-page document that Pitt filed with the U.S. Office of Government Ethics on May 24, 2001, after he was nominated to the SEC. It lists Pitt's 112 clients during the preceding two years. Apart from the Big Five accounting firms, the list includes major banks, the mutual-fund and securities industry trade groups, brokerages such as Bear Stearns and Morgan Stanley Dean Witter, the New York Stock Exchange, hedge fund titan Dawson Samberg, and corporations such as media giant America Online and its Chairman Stephen M. Case."
"Pitt first joined the agency in 1971, shortly after graduating from law school. He worked in a variety of legal positions at the agency, including a three-year stint as general counsel from 1975 to 1978, when he left to join Fried Frank.
"'Harvey Pitt was one of the youngest and most active general counsels in the history of the SEC, and now all of his assets are suddenly a source of criticism,' Sen. Phil Gramm (R-Tex.) said, defending Pitt at a hearing last week. Gramm has called Pitt 'as qualified as anyone who has ever been chairman of the SEC.'
"With an undergraduate degree from Brooklyn College and a law degree from St. John's, Pitt did not fit the profile of a Fried Frank lawyer. He hadn't attended an Ivy League school, as many of his colleagues had, nor did he come from a well-to-do background, a fact he often emphasizes during speeches, when he refers to himself as a 'poor boy from Brooklyn.'
"His tenure at Fried Frank made him independently wealthy, he has told people. For years he functioned as the managing partner of the firm's Washington office, and even with those duties, he had time to bring in so much business that for many years he was the top billing partner at the firm, according to sources at the firm. It was not uncommon for Pitt to bill 3,000 hours a year, according to law firm sources, an astonishing total that has caused more than one lawyer who has worked for him to wonder how he could do much work for clients while performing so many other tasks, including running an active social life.
"One characteristic that makes it possible, one colleague notes, is that Pitt doesn't need much sleep.
"Pitt has many loyal followers at Fried Frank, but he also clashed with many colleagues. His tenure as co-head of the firm ended less than a year after it started when he resigned in a huff in the summer of 1998 over arguments with his partners in New York over how to divvy up salaries between younger and older partners. He even threatened to leave the firm, though sources say he was talked out of it."
Other Related SourceWatch Resources
- Kathleen Day and Albert B. Crenshaw, SEC, Accounting Firms Redrafting Audit Rules. Agency Chairman Draws Fire for Role in Effort, Washington Post, January 16, 2002.
- Gary Weiss, Commentary: A Regulator with His Own Conflicts of Interest, BusinessWeek, February 4, 2002.