http://news.bbc.co.uk/2/hi/business/2362819.stm

Friday, 25 October, 2002, 19:53 GMT 20:53 UK

Ex-CIA BOSS to regulate US auditors

William Webster (centre) is backed by Republicans
Former Central Intelligence Agency (CIA) chief William
Webster has been appointed as chairman of a new
body set up to regulate the US accountancy profession.

The new agency is designed to
prevent accounting scandals of the
kind that engulfed corporate America
earlier this year, leading to the
collapse of Enron and Worldcom.

Mr Webster saw off a
challenge from rival
candidate John Biggs, head
of a major US pension fund.

But Mr Webster's appointment - backed by Republicans
and senior accountants - has proved controversial, with
some commentators saying that he is less likely to
push for far-reaching reforms of the audit profession.

Squabble

Critics have also said that Mr Webster does not have
enough direct accounting experience to do the job.

The accounting profession and some Republican
politicians had objected to Mr Biggs' candidacy on the
grounds that he would impose excessive regulatory
burdens on the audit industry.

Mr Biggs, formerly a member of the National Association
of Securities Dealers' accounting body, has been
portrayed as a champion of small investors and a keen
supporter of accounting reform.

Mr Webster's appointment was confirmed on Friday after
the commissioners of the Securities and Exchange
Commission - the stock market regulator in charge of
setting up the new audit watchdog - voted 3-2 in his
favour.

Party politics

The vote was split along
party lines, with the three
Republican commissioners
- including SEC chairman
Harvey Pitt - backing Mr
Webster, and their two
Democrat colleagues
favouring Mr Biggs.

Mr Webster, also a Republican, is a former judge
and lawyer from Missouri.

He served as head of the Federal Bureau of
Investigation (FBI) before being appointed as
head of the CIA by President Ronald Reagan in
1987.

He is currently a partner at corporate law firm
Milbank, Tweed, Hadley & McCloy.

Tainted

Some US politicians have said the political
in-fighting within the SEC has cast doubt on its
independence.

"The SEC...is becoming a laughing stock, riddled
with conflicts of interest and White House
operatives," said Democrat congressman Edward
Markey.

But Mr Pitt rejected suggestions that the SEC
vote had been swayed by party political
considerations.

"I am fiercely independent. I am beholden to no
one," he said.

Enron fallout

The new audit body, known as the Public
Company Accounting Oversight Board, was
created under new laws pushed through the US
Congress earlier this year in the wake of the
Enron and Worldcom scandals.

Both companies collapsed after it emerged that
they had misled investors over their true financial
position by hiding debts or inflating revenues.

The affair thrust the audit profession into the
spotlight, with investors and regulators asking
why Enron and Worldcom's accountants had not
blown the whistle on irregularities in the
companies' books.

Arthur Andersen, which signed off both the Enron
and Worldcom accounts, was earlier this year
found guilty of obstructing an official enquiry into
Enron's finances.