Members of Congress asked the chairman of the Securities and Exchange Commission (SEC) and the CEO of KPMG LLP to provide accounts of a meeting last week that triggered ethics concerns. The concerns seem to have stemmed from an unfortunate misperception that got a lot of play in the media. House Financial Services Chairman Michael Oxley called the media accounts and resulting controversy "much ado about nothing."
The event that started the furor was a courtesy meeting between newly-elected KPMG CEO Gene O'Kelly and SEC Chairman Harvey Pitt. That was one piece of the puzzle. Another piece was an excerpt from an internal memo shortly after the meeting by Mr. O'Kelly. In putting the pieces together, the media took the excerpt to mean the purpose of the meeting was to discuss a possible enforcement action against KPMG — a subject that clearly would have been inappropriate for private discussion.
The purpose of the meeting, explained Mr. O'Kelly in a prepared statement, was not to discuss the enforcement action, but rather, "to introduce myself to Chairman Pitt as KPMG's new chairman, and to ensure that Mr. Pitt was aware that my number one priority was for the firm to take a leadership position in helping advance reform for the industry."
As for the memo, KPMG explains it was devoted primarily to a description of the firm's dealings with former client Xerox Corporation and its public positions with regard to Xerox. The memo ended with a brief mention of the SEC meeting. "I referenced a potential proceeding against KPMG at the very end of our meeting and [said] that KPMG would take all necessary steps to protect our firm and its reputation." explained Mr. O'Kelly. Chairman Pitt's account of the meeting, which lasted only about ten minutes, confirmed there was no specific discussion of Xerox or any other enforcement actions.
Next time, Chairman Pitt says, he'll think twice about setting up private meetings. "There can be a perception problem," explained SEC spokeswoman Christi Harlan, and he's going to be extra careful in the future ... When there can be a misperception, he's not going to take the meeting."