Washington (Dec. 20, 2002) -- Infighting and poor communication at the Securities and Exchange Commission led to confusion in the process of selecting a leader for the new accounting oversight board, according to a report by the General Accounting Office, a copy of which was obtained by the Wall Street Journal.

When SEC Chairman Harvey Pitt and his chief accountant Robert Herdman quit last month during a controversy over appointing former FBI and CIA director William Webster to chair the new board, Congressional Democrats requested a study to find out what went wrong.

"Several factors contributed to the eventual breakdown of SEC's selection and vetting processing, including the inability of the commissioners to reach agreement" on procedures for filling the five-member board, according to the GAO report, which was slated to be released Thursday. The report also noted "insufficient communication" between the commission and its staff, notably Herdman.

Herdman apparently knew about Webster’s role as audit committee chairman of a troubled Internet investment company, but didn’t share the information with Pitt or anyone else. He apparently felt that Webster’s "prominence and reputation" and the fact that he’d undergo closer scrutiny following the SEC appointment made it unnecessary to inform others about the issue.

-- Electronic Accountant Newswire staff

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