Thursday, October 31, 2002

So William Webster ran the audit committe of a now insolvent company under investigation for fraud. In fact, he fired his accountants when they raised concerns about accounting practices. Harvey Pitt knew about it but didn't bother to inform anyone else at the SEC [on the other hand, they are the fucking SEC -- shouldn't they be able to figure this shit out for themselves?]. None of this should surprise anyone. But said company's line of work may sound curiously, uh, archaic:
U.S. Technologies invests in young Internet companies and runs a contract labor company using prison inmates.
[I meant the forced labor, although it is clearly naive of me to find that more archaic than internet start-ups].

Is anyone dumber than Harvey Pitt? This is what the WSJ said about Webster last week:

Why Judge Webster would want to play along with this is a mystery. He has little expertise in auditing, and the suspicion in financial markets, however unfair, will be that he's Mr. Pitt's factotum. Mr. Webster deserves better than to be dragged into service as political eyewash at this stage of his career.

No one expects cleansing miracles from the accounting board, but it will help financial markets if everyone believes that it is genuinely independent. Its most important work will be in the first two years when it sets general industry mores and some enforcement precedents.

One reason the U.S. recovers from its business scandals faster than, say, Japan is that it cleans up better. The political and bureaucratic connections that block reform and punishment in Tokyo get exposed and overcome in the U.S., and investor faith is restored more quickly. That's a point Mr. Webster could make to Mr. Pitt when turning down his job offer.

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