Few people were as committed to the US Securities and Exchange Commission as Harvey Pitt. The watchdog’s youngest-ever general counsel, later became its chairman and led the response to the 2001 terrorist attacks and a series of corporate scandals, including the collapse of Enron.
But Pitt, who has passed away aged 78, also faced extraordinary criticism during his presidency over the watchdog from people who claimed he was tone-deaf — and too close to the industries he regulated. He resigned after just 18 months.
He remained a powerful influence on financial regulation until his death, regularly testifying before Congress and working as a consultant. He was tasked by the SEC to lead a major investigation leading to a 2021 review of the top US accounting regulator.
“Harvey loved this agency,” SEC chairman Gary Gensler and the other four commissioners present said in a statement mourning Pitt’s death. “Even over the past year, he has made himself available to advise and has continued to submit comment letters on our regulatory proposals.”
Born in Brooklyn in 1945 to immigrant parents, Pitt was the first in his family to attend college. While in law school at St. John’s University, his appearance in a moot court so impressed the SEC officials involved in the review process that they suggested he join them after graduation.
There he quickly rose through the ranks, advising the chairman, arguing for the agency in court and helping to establish its power to punish the professionals who appeared before it. Although initially signed for only three years, he stayed for ten years before leaving for private practice. “I was totally hooked,” he recalled in a 2007 interview. “I guess you could say I was hooked (on) the SEC. I just thought it was a great place; the people I met were great; the issues were fascinating.”
In two decades with the law firm of Fried Frank, he became a go-to attorney for the securities industry. He has defended Merrill Lynch and notorious insider trader Ivan Boesky, among others, and helped fend off regulations that would have prohibited accounting firms from offering advisory services to their audit clients. Pitt could be witty and charming, but he also displayed a stubborn confidence that earned him the description “rarely wrong, never in doubt”.
When George W. Bush, then president, recruited him to become SEC chairman in the summer of 2001, Pitt described it as “truly a dream come true.” But his wife, Saree Ruffin Pitt, feared he lacked the delicate political touch that such a visible post required and reportedly warned him not to accept it.
Just days after his appointment as SEC chairman, terrorists attacked the World Trade Center, killing thousands, taking U.S. markets offline for nearly a week, and destroying the SEC’s regional office in New York. Pitt received praise for emerging as a “voice of calm” as the exchanges struggled to reopen.
But a speech to the accounting industry in October 2001 ended badly when Pitt pledged “a new era of respect and cooperation” and vowed to make the SEC “a kinder and gentler place” for everyone. The tone set alarm bells ringing among Democrats and investor groups, who feared Pitt’s vast client base would make him soft on the industry.
The dot-com crash, followed by a series of massive corporate meltdowns, fueled investor anger at Pitt’s cooperative approach and left the SEC vulnerable as New York’s energetic Attorney General Eliot Spitzer decided to make a name for himself through conflicts of interest in Wall to investigate. Street survey notes. It was an issue that Pitt was well aware of and had urged the big banks and brokers to address. But Spitzer made headlines by releasing Merrill Lynch emails that showed research analysts privately disparaging the stocks they told the public to buy.
Pitt teamed up with Spitzer to win a $1.4 billion settlement with 10 major banks for biased research, and his supporters point to his thoughtful response to the blatant fraud at Enron and WorldCom. He forced directors of publicly traded companies to testify personally to the accuracy of their financial reports. That caused many companies to clean up their books and many more to improve their controls. The requirement later became part of the Sarbanes Oxley Business Reform Act of 2002 and is credited with improving U.S. corporate accounting.
But his tenure was dogged by repeated missteps: He proposed raising his own salary as part of the post-Enron reforms and met with Goldman Sachs private officials when the bank was under investigation. The final straw came when he failed to tell fellow SEC commissioners that his choice to head the new Public Company Accounting Oversight Board had led the audit committee of a company accused of fraud.
Initially bitter about what he saw as a partisan hit “based on so much nothing”, Pitt blossomed as an elder statesman. He was the first president of the SEC Historical Society, ran a small but thriving Washington consulting firm, and had recently advocated for a new regulatory regime for cryptocurrencies.
“Harvey Pitt was one of the greatest securities attorneys of his generation and a close friend of the mutual fund industry,” recalled Paul Schott Stevens, former CEO of the Investment Company Institute. “But in the modern SEC, it’s not enough to be a great lawyer, you also have to be a very skilled politician.”