Methinks the chairman doth protest too much. In a carefully worded letter to the House Committee on Energy and Commerce this week, KPMG chairman Eugene O'Kelly delicately backpedaled from remarks he made about a meeting with Securities and Exchange Commission chairman Harvey Pitt.

To recap: In an internal e-mail which was promptly leaked to the media last week, O’Kelly said that during his meeting with Pitt, they discussed an SEC probe of the firm related to its audit of Xerox. Pitt characterized the meeting as merely a courtesy call and said the pair never discussed any enforcement matters.

Coming fast on the heels of Andersen’s swift decline following the Enron mess, critics had a field day accusing Pitt – who represented both Andersen and KPMG before he came to the SEC -- of serious conflicts of interest.

Why was the SEC chairman meeting with a target of a government probe in the first place? Especially considering that the accounting industry and Pitt have been under ever-increasing scrutiny post-Enron?

And most interestingly, who was lying – Pitt or O’Kelly?

Pitt remains firm. "Neither Mr. O’Kelly nor I discussed any enforcement matter, including Xerox," he said in a statement following the brouhaha.

Initially O’Kelly appeared to stand his ground, too, saying "I referenced a potential proceeding against KPMG at the very end of our meeting and that KPMG would take all necessary steps to protect our firm and its reputation."

Fast forward to Tuesday. In a letter sent to lawmakers, O’Kelly took great pains to distance himself from his initially strong statement. The new version of events?

O’Kelly said he never mentioned Xerox by name during the meeting and implied that a brief reference he made regarding the government inquiry of the matter was taken out of context.

"Towards the end of the meeting, I reiterated our commitment to a constructive relationship with the SEC. I said that even though we may disagree with the SEC from time to time, we believe it is in the best interest of the profession and the public that we maintain a positive, open dialogue and respectful relationship," O’Kelly wrote. "In that context, I briefly referenced, though not by name, a pending matter that could prompt such a disagreement. My intention was simply to express that even where we and the SEC might have a disagreement, my hope was that we could do so in the context of a candid, mutually respectful relationship."

So he didn’t mention Xerox by name? That may or may not be true. But he didn’t really need to anyway. Both he and Pitt knew exactly what he was talking about. Pitt helped defend O’Kelly’s firm against the SEC in the past, and judging from Pitt’s feeble efforts at reigning in the accounting profession since he took office, O’Kelly might have every reason to believe that he now has a friend in high places.

So in this war of words, O’Kelly apparently calculated the brouhaha’s near-term damage to the profession and Pitt and blinked. But those searching his statement for clues about a future relationship between KPMG and Pitt also detect that he may have done so with a wink.

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