Arthur Levitt Jr. (born February 3, 1931) is the former chairman of the United States Securities and Exchange Commission (SEC). He served from 1993 to 2001 as the twenty-fifth and longest-serving chairman of the commission. Widely hailed as a champion of the individual investor, he has been criticized for not pushing for tougher accounting rules. Since May 2001 he has been employed as a senior adviser at the Carlyle Group.[1] Levitt previously served as a policy advisor to Goldman Sachs[2] and is a Director of Bloomberg LP, parent of Bloomberg News.[3]
Before joining the SEC, Levitt owned Roll Call, a newspaper that covers Capitol Hill, which he purchased from the paper's founder, Sid Yudain, in 1986.[6] The newspaper was eventually sold to The Economist for $15 million in 1993.[7]
Chairman of the SEC
Levitt was appointed to his first five-year term as Chairman of the SEC by President Clinton in July 1993 and reappointed in May 1998. He left the Commission on February 9, 2001, and was succeeded by Harvey Pitt. Levitt has said that he first learned of his being considered for the job from The Wall Street Journal.[citation needed]
At the time Levitt came to the SEC, the Financial Accounting Standards Board (FASB) had proposed requiring companies to record stock options on their income statements, which split the accounting industry and was opposed by many in the American business community. According to a Merrill Lynch study, expensing stock options would have reduced profits among leading high-tech companies by 60% on average. Congress began to exert pressure on the FASB, and on May 3, 1994, the Senate, led by Democratic Senator Joe Lieberman, offered a non-binding resolution urging FASB not to adopt the proposed rule; the vote in favor was 88–9. Concerned that insensitivity to this sentiment in Congress might threaten FASB as an independent standard setter, Levitt urged the FASB to not go ahead with the rule proposal. He later said this "was probably the single biggest mistake I made in my years at the SEC."[8]
In September 1998 at New York University, he gave a speech entitled "The Numbers Game". It addressed five ways in which corporations were managing earnings (big bath charges, creative acquisition accounting, cookie-jar reserves, materiality, revenue recognition). In his speech, Levitt advocated improving the transparency and comparability of financial statements.[citation needed]
In 1997, the SEC under Levitt's leadership approved the exemption of some Enron partnerships from the tight accounting controls of the Investment Company Act of 1940. Without this exemption, critics maintain, the company would have been constrained by strict rules found in 1996 legislation that would have prohibited certain foreign investments and the shifting of debt to its foreign subsidiary shell companies.[citation needed]
During Levitt's tenure at the SEC, he was widely viewed as a pro-investor advocate and received favorable press coverage.
After the SEC
Levitt serves on the Board of Directors for RiskMetrics Group.[9]
Levitt oversaw an audit published in August 2006, by Kroll Inc. – where he is a consultant – describing how the City of San Diego had allowed a pension deficit of $1.43 billion. The report blamed around 30 city officials, including five incumbent council members. Kroll charged the City of San Diego $21 million for the report, with Levitt's time billed at $900 per hour.[10]
Labaton, Stephen (January 22, 2002). "Exemption Won in 1997 Set Stage For Enron Woes". New York Times.
"Arthur Levitt". On Wall Street Magazine. June 2005. Archived from the original on September 11, 2006. Retrieved 2006-09-11. Levitt's biography as told by him to the editorial staff.
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