US: The centrepiece of action by the US Congress to clean up the scandal-ridden accountancy profession in the US was to be the creation of a new accounting oversight board. This would show that Washington was tough on corporate crime and restore confidence to the financial markets.
Instead, it has become mired in a scandal of its own that threatens to undermine the Bush administration's claim to be serious about reform and to damage Republican candidates in the run-up to Tuesday's mid-term elections.
The affair erupted over a decision by the chairman of the Securities and Exchange Commission Chairman, Mr Harvey Pitt, to put forward former FBI director, Mr William Webster (78), as chairman of the new Public Company Accounting Oversight Board.
Earlier he had controversially dropped his first choice, Mr John Biggs, a retirement fund executive, after he had been challenged by the accountancy profession as too aggressive.
On Friday last, the Republican-dominated SEC voted 3-2 after a bitter partisan wrangle to appoint Mr Webster.
Two days ago, the New York Times dropped a bombshell. It disclosed Mr Webster had briefed Mr Pitt about fraud accusations against a company he was involved in before the vote, but that the SEC chairman had withheld this crucial information from his fellow commissioners.
The company, US Technologies, which is now insolvent, is facing lawsuits by investors who say they were defrauded of millions of dollars in early 2001 and this year. US Technologies three-person audit committee, headed by Mr Webster, had voted to dismiss the outside auditors in mid-2001 after the auditors raised concerns about internal financial controls.
Mr Pitt is now under mounting pressure to step down for not disclosing such damaging information. In a ludicrous twist, he has joined the other commissioners in calling for an investigation into his own handling of the appointment process.
House Minority Leader, Mr Dick Gephardt, yesterday called on Mr Pitt to resign, saying he had deprived fellow commissioners of material information about Mr Webster and that Mr Pitt, a personal appointee of US President George Bush, had torpedoed a qualified candidate in favour of Mr Webster, who has almost no experience in the auditing industry.
In a letter to Mr Bush, Democratic Senators Chris Dodd and Jon Corzine said that the integrity of the SEC and the new accounting oversight board had been tarnished and that the matter could further undermine confidence in the US financial markets.
Under Mr Pitt, a former lawyer for the big five accountancy firms, the SEC has struggled with the perception that it has become irrelevant in tackling corruption on Wall Street.
The lead has been taken by the US Justice Department and the New York attorney general, Mr Eliot Spizer.
The White House has continued to support Mr Pitt and Mr Webster, who will oversee the audits of financial statements of US public companies.
Senator Paul Sarbanes, joint author of the Act of Congress creating the new body, said, "This whole process is enough to make you weep."
The SEC is riven with dissension over the affair. An SEC announcement that Mr Pitt had called for the investigation into the appointment was changed after some commissioners complained angrily that they, and not Mr Pitt, had pressed for the investigation.
Mr Pitt has been harshly criticised by Democrats for other blunders, including meeting with the heads of companies under SEC investigation.