VideoNow that Securities and Exchange Commission chairman Harvey Pitt has tendered his resignation, the big question is: How long will William Webster remain as head of the SEC's Public Company Accounting Oversight Board?
It seems that Webster has told colleagues he will resign if questions about his record keep the board from doing its job, according to Tuesday's Washington Post.
Several candidates are apparently in the running to take over as PCAOB chair if Webster does decide to step down.
Former SEC chairman Richard C. Breeden, former SEC enforcement chief Gary Lynch, and James Doty, a longtime Bush family friend and lawyer who was chief counsel of the SEC from 1990 to 1992, have been approached about taking Webster's place, according to the paper.
Doty, you may recall, was at the SEC when it initially investigated George W. Bush for potential insider trading in connection with Harken Energy Co. That probe found no case against Bush, although questions were again raised earlier this year about dealings at Harken.
Don't expect the rest of the new PCAOB board members to sit around awaiting Webster's decision, however.
According to the Washington Post, the new group plans to meet for the first time on November 13. "We're all eager and anxious to get going and are not waiting for the SEC to finish their investigation," a board member told the paper.
It's not likely that John Biggs will be heading the board when it does meet.
Yesterday the Post revealed that Biggs, former head of pension fund TIAA-CREF and Pitt's initial choice to head the PCAOB, has an accounting controversy in his past as well. It seems that Biggs sat on the audit committee of a company that the SEC accused of inflating its financial results.
According to the Post, SEC chief accountant Robert K. Herdman has told some SEC commissioners that in 1996, defense contractor McDonnell Douglas Corp.—without admitting or denying wrongdoing—agreed to pay $500,000 to settle SEC civil charges that it used improper accounting to inflate pretax earnings in 1990.
Reportedly, Biggs was a director of the company when the inflating took place.
Herdman should be familiar with the goings-on at the defense and aerospace contractor. He once served as an executive at Ernst & Young, which audited McDonnell Douglas. E&Y helped defend the company before the SEC, according to the Post, citing a source familiar with the matter.
The paper said Herdman and Biggs declined to comment.
In other PCAOB matters:
BDO Seidman LLP formally asked to be legally released from client confidentiality obligations so it can challenge claims made by Webster. According to a recent New York Times article, Webster headed a three-person audit committee at US Technologies, which voted in 2001 to fire BDO Seidman after the auditors raised concern about the company's internal controls.
Also yesterday: Senate Banking Committee chairman Paul S. Sarbanes (D-Md.) and Sen. Richard C. Shelby (R-Ala.), who will be the committee's senior Republican next year, said they will hold hearings about the controversy. "The issue is much bigger than an individual. The process to me is now tainted," Shelby told the Post.
WorldCom: Another Restatement Possible
As CFO.com reported yesterday, WorldCom Inc. said it may restate earnings by as much as an additional $2 billion.
In a brief statement, management at the bankrupt telecom giant said, "In settlement discussions with the Securities and Exchange Commission, WorldCom advised the agency that, based on very preliminary reviews of past accounting, it expects an additional restatement of earnings which, when added to WorldCom's past restatements, could total in excess of $9 billion."
The company added it is continuing to finalize its review. Once the review is complete, it will make the final information public.
The company did note, however, that restatements of past accounting have no impact on its ability to continue to provide service to its customers or on its ability to emerge from bankruptcy protection. WorldCom management expects to come out of Chapter 11 in mid-2003.
"The company continues to possess more than $1 billion of cash on hand and debtor-in-possession financing of $1.1 billion, which it has not tapped," the telco's management asserted.
Earlier this week, former Attorney General Richard Thornburgh said in a report filed with the U.S. bankruptcy court that he expects WorldCom to add to the $7.68 billion in revenue revisions it has already made.
One Reuters source speculated this additional restatement could amount to as much as $3 billion, which would take the total adjustment to over $10 billion—a staggering figure.
Charter Warns about Tax Adjustment
Charter Communications Inc., which is being investigated by federal prosecutors for its accounting practices, reported it will delay the reporting of its most recent quarterly results because it may make adjustments to its income tax expense.
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