SEC's Pitt Says CEOs Will Go to Jail; Watch Out, Terry McAuliffe and Jon Corzine

Wes Vernon, NewsMax.com Saturday, July 20, 2002 WASHINGTON – Securities and Exchange Commission Chairman Harvey Pitt says the top brass of rogue corporations will have to go to jail before the public is reassured about the stock market.

The chairman denounced political opportunism on the part of those who call for his resignation or try to blame the stock market dive (a 390-point Dow plunge Friday) on President Bush.

Meanwhile, NewsMax.com uncovered documents indicating the SEC is pursuing a probe that might lead to Democrat national chairman Terry McAuliffe’s dealings with Global Crossing.

"When people see some taking advantage" of dishonest accounting and inflated stock prices, "that promotes the feeling among the public that maybe the system is not yet ready for aggressive reform," Pitt said at a Friday luncheon of the National Press Club.

"It is going to take some people going to jail to do hard time for hard crime," the SEC boss told his audience. There will be a need for "real CEOs and real CFOs actually going to jail for perpetrating fraud."

The top securities regulator said the idea that anyone’s retirement portfolio can go down to zero because of corporate malfeasance "is un-American. And we intend to see to it that it is un-American."

Written questions by NewsMax.com regarding suspicious dealing on the part of leading Democrats did not make the cut with the master of ceremonies at the Press Club.

However, NewsMax later unearthed a public document indicating that perhaps the agency is indeed pursuing the cases.

The first question NewsMax submitted to Pitt, and repeated later to SEC spokesman Michael Robinson, was as follows:

"DNC Chairman Terry McAuliffe turned a $100,000 investment in Global Crossing into an $18 million profit, taking his money off the table before the company tanked, leaving employees and small investors high and dry. Given that this happened while he was connecting the company CEO [Gary Winnick] with then President Clinton, does the SEC consider that worthy of at least a preliminary probe?"

When contacted by NewsMax, Robinson would say only, "The SEC neither confirms nor denies reports of investigations." However, he encouraged us to log on to the commission’s Web site. What we found there was a written comment by Pitt dated March 14 that indicated Global Crossing is indeed attracting the attention of agency’s investigators.

Following news that the Justice Department had obtained an indictment of the accounting firm Arthur Andersen, Pitt declared, "The commission is closely monitoring these developments, particularly with respect to Anderson’s public company clients who are in the process of having their financial statements audited."

Because Global Crossing was an Arthur Andersen client, it is no secret that company officials have become well-acquainted with SEC gumshoes, and that comment by the chairman confirmed it. Beyond that, public information will have to await any concrete action to "bring [prosecute] a case" against the firm, in which case there would be a public statement, said Robinson.

DNC chairman McAuliffe, who continues to demagogue Republicans on the corporate scandals, could ultimately discover he lives in a glass house.

The SEC spokesman gave the same response to our inquiry about a Goldman-Sachs case when that investment firm was headed by Sen. Jon Corzine, D-N.J. Here’s the question:

"A class-action suit and a former broker have accused Goldman-Sachs of forcing underwriting investors to pay artificially high prices for certain stocks. Published reports [in the Washington Times] indicate the matter has been brought to the attention of the SEC. What is the status of that investigation?"

Again, no comment beyond the above stock answer. However, the Times' story says the whistle-blowing broker, Nicholas Maier, had discussed the matter with SEC investigators.

Corzine claims he knew nothing about such schemes when he ran the firm from 1994 to 1999. He left a multimillionaire to run for the Senate, an office he obtained by burying New Jersey voters with an avalanche of ads paid for by his deep pockets.

The Mickey-the-Dunce mantra of "I didn’t know anything about this" is an excuse Pitt wants to take away from CEOs in the future.

The senator is quoted as saying: "Goldman-Sachs never forced anyone to buy anything when I was chairman. I can tell you that." Maier contradicts that.

The Press Club's allocation of questions to its luncheon guests is limited by the constraints of time and the number of reporters who submit the same questions. Several reporters apparently wanted Pitt to address political charges leveled against Bush administration officials, including the president himself, Vice President Dick Cheney and Army Secretary Richard White.

The chairman reminded the luncheon attendees that the Bush case regarding the Harken firm had been fully investigated by the SEC 12 years ago by a conscientious professional investigator who was a political independent, and he concluded there was no need for action and no violation of the law.

"Some people seek to extract political advantage out of that," the top regulator said. As for Cheney/Halliburton and White/Enron, Pitt said any action by the commission would be fair.

As for suggestions that he himself should resign because of his past dealings with leading accounting firms, Pitt says that’s the very reason he should not step down for the job he has held for 11 months, and for which he took more than a 99 percent cut in pay.

Most people understand you need somebody "who knows where the bodies are buried," and he would not "walk away" from his responsibilities.

As for those who demagogue the corporate scandals to gain a couple of congressional seats, "I don’t listen."

I don't know about the SEC, but I do. I think they ought to audit Congressional spending too.

Here are some good suggestions for restoring faith in the economy:

We Can Stop CEO Fraud - Here's How

I know, but hopefully that could change. The U.S. Government should be governed by the sames rules it sets upon the rest of us.

In the end the gov will go from not doing anything to nailing CEOs that don't know every trick their CFOs come up with. Most people don't understand that CEOs tend to be salesmen with horrendously heavy travel schedules while CFOs are money engineers with more tricks that they claim to be legal than anyone in the circus.

As for those who demagogue the corporate scandals to gain a couple of congressional seats, "I don’t listen."

It is no wonder the Democrats are shrieking for his resignation; they're scared he can't be put off the scent or bludgeoned into submission by their bullying. These tactics worked wonders during the heady Clinton Years.

I like this guy. Carry on, Mr Pitt!

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