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. Last Updated: 07/27/2016

SEC Oversight Chief Admits to Oversight

WASHINGTON -- Shortly before William Webster was appointed to head a new board overseeing the accounting profession by the U.S. Securities and Exchange Commission last Friday, he told the commission's chairman, Harvey Pitt, that he had until recently headed the auditing committee of a company that was facing fraud accusations, Webster said Wednesday.

Pitt chose not to tell the other four commissioners who voted on Webster's nomination that day, according to SEC officials. White House officials said they, too, were not informed about the details of Webster's work for the company.

The small, publicly traded company, U.S. Technologies, is now all but insolvent, and it and its chief executive, Gregory Earls, are facing suits by investors who say they were defrauded of millions of dollars. The suits contend the misconduct occurred in late 2001 and this year. That was after the three-person audit committee, headed by Webster, had voted to dismiss the outside auditors in the summer of 2001 after the auditors raised concerns about the company's internal financial controls.

Webster, 78, a former director of the CIA and FBI, said he told Pitt and Robert Herdman, the agency's chief accountant, about the investor lawsuits before he was approved last Friday.

"I told them that people are making accusations," Webster said of his conversation with Pitt before he was appointed last Friday. "I said if this is a problem, then maybe we shouldn't go forward. I raised it because I didn't want it to become an issue."

Webster said he was assured by Pitt that the staff of the commission had looked into the issue and that it would not pose a problem. Pitt had urged Webster to take the job.

But U.S. Technologies' former outside accounting firm, other members of the audit committee, company executives, and investors and their lawyers who say they were defrauded say they were never called by anyone at the commission about Webster's candidacy for the new oversight board.

Three days later, Webster said in an interview Wednesday, he called Pitt again to say he had heard over the weekend from another former director that a government investigation had recently been begun to examine possible fraud by the chief executive of the company.

Pitt declined to discuss the selection of Webster or U.S. Technologies. Christi Harlan, a spokeswoman at the SEC, said that Webster informed the commission's accounting staff, headed by Herdman, about his service on the board of the company and that the staff concluded that there was nothing worthy of passing on to other commissioners or disqualifying Webster.