The Rittenhouse Review

A Philadelphia Journal of Politics, Finance, Ethics, and Culture

Saturday, October 19, 2002  

SEC Chairman Creates His Escape Hatch

Securities and Exchange Commission Chairman Harvey Pitt yesterday came clean, or at least came as clean as one can expect a Bush administration official to, about his past legal work for America Online Inc. and AOL Time Warner Inc.

According to today’s New York Post, Pitt acknowledged yesterday that he worked on at least three matters for AOL Time Warner and attended to personal legal matters for the company’s chairman, Steve Case.

As reported previously, “Pitt originally denied he personally did any work for AOL, but later amended his story when confronted with a statement from AOL confirming that he had,” the Post reports. “A source told the Post that Pitt not only advised AOL in the late 1990s but played an informal advisory role in helping structure the accounting for marketing deals that have come under scrutiny by the SEC. The source described Pitt’s role as a liaison between AOL and the SEC to affirm the accounting for numerous deals in the 1990s.”

Today we hear another denial. “Pitt denies that,” the Post reports. “But an SEC spokesperson added that ‘we really can’t talk about the details of the chairman’s prior practice.’”

Oh, okay, well, I guess that clears things up. Never mind. Sorry we bothered you. Back to what you were doing. We’ll show ourselves out.

Meanwhile, the Washington Post yesterday reported Pitt “has not decided whether to participate in his agency’s probe of the accounting practices at AOL Time Warner Inc.”

Pitt’s defense is classic Republican truth-aversion: “On a hypothetical basis, if a matter is something I gained personal knowledge of, or had personal involvement in, then I wouldn’t want to be involved.” He added, “If it is a matter that doesn’t involve anything I worked on for a former client, I don’t have to recuse myself. But even in those areas, I will review the situations carefully and make a case-by-case decision.”

I think I can read through this. Hell, a seventh grader could read through it. What Pitt is saying is that, hypothetically, of course, if he actually worked on the AOL matters under investigation at the SEC, which he claims he didn’t, he would have to recuse himself from participating in the probe.

However, a recusal in such circumstances would amount to an admission by Pitt that he has been lying about what he did for AOL while an attorney in private practice at Fried Frank Harris Shriver & Jacobson.

We can’t have that happen, of course, so Pitt gives himself an out: he might recuse himself anyway if, after a careful review and a “case-by-case,” or better a “case-by-case-by-Case,” analysis, he concludes he should do so.

This ultimately gives Pitt four options: (1) Stay on the case because he in fact didn’t do any SEC accounting-related work for AOL (this assumes the AOL employees who say otherwise are mistaken); (2) Stay on the case denying he did any SEC accounting-related work for AOL (thereby sticking with the lie); (3) Recuse himself because he did SEC accounting-related work for AOL but publicly lied about it (in which case, at least during a normal administration, he would have to resign); and (4) Recuse himself because he thinks it’s the best thing to do in this case, no other justification or explanation needed (this is the escape hatch).

It’s a sure thing he won’t choose option number three. I’ll bet he goes with option four. It’s called covering your ass, Bush administration style. And do you know what? He’ll probably get away with it.

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