In the letter, Webster expressed concern that his continued presence on the board “will only generate more distractions which will not be helpful to the important mission of the board.”
“Unfortunately, many forces at work produced a kind of ‘perfect storm’ …Therefore I must step aside,” Webster wrote.
Webster’s resignation follows that of Securities and Exchange Commission Chairman Harvey Pitt, who came under fire for allegedly failing to tell the four other SEC commissioners of Webster’s connection to U.S. Technologies Inc., a nearly bankrupt Internet company under investigation for fraud.
In August 2001, Webster was a head of the audit committee of U.S. Technologies when it fired its auditor, BDO Seidman, after an audit showed that the company’s financial records were disorganized and possibly illegal. Webster had said BDO Seidman was too expensive and slow, but the audit firm said Webster’s statements were “false and misleading.”
The 78-year-old Webster told The New York Times he discussed his role at U.S. Technologies with Pitt and SEC Chief Accountant Robert K. Herdman days before the commission’s vote to have him head the accounting oversight committee.
“I told them that people are making accusations,” Webster told the Times. “I said if this is a problem, then maybe we shouldn’t go forward.”
Webster said Pitt had reassured him that the SEC had reviewed the issue and said it would not present a problem to his nomination to the accounting panel. The other members of the commission that approved Webster’s nomination, however, say they were not aware of the investigation.
In a vote split along party lines, the five SEC commissioners nominated Webster to head the new panel. The two Democratic SEC commissioners wanted John H. Biggs of TIAA-CREF pension fund, whom they said would push for tougher oversight and regulation of the accounting industry. Bush administration officials and Pitt had strongly endorsed Webster’s appointment.
After the vote, Senate Banking Committee Chairman Paul Sarbanes (D-Md.), co-author of the 2002 corporate reform bill, called for Pitt’s resignation, alleging the SEC head was heavily influenced by the accounting industry.
Congress created the Public Company Accounting Oversight Board over the summer in the wake of multi-billion-dollar scandals at Enron and Arthur Andersen. The new board, which has yet to formally meet, will be armed with subpoena authority and disciplinary powers.
The accounting board was scheduled to hold its first meeting in Washington on Wednesday.