SEC criticized over IBM’s acquisition

WASHINGTON: In yet another blow to the besieged U.S. Securities and Exchange Commission, Democratic Rep. Ed Markey on Wednesday branded the regulator "inconsistent" and "dead wrong" in its handling of IBM’s bid to buy PricewaterhouseCoopers Consulting. The Massachusetts congressman said PricewaterhouseCoopers should not have been allowed to serve as the computer giant's auditor while the two companies were negotiating the purchase of PwC's consulting arm.

"This ... is contrary to the 'get tough' attitude coming out of the SEC and only deepens investors' skepticism about the integrity of the financial information they receive," Markey said in a statement. The SEC, under pressure to soothe frayed market nerves after a raft of accounting meltdowns including Enron Corp. and WorldCom, has vowed to crack down on corporate wrongdoers and conflicts of interest.

But Markey said the agency had undermined its own efforts, just one day after President George W. Bush signed into law a bill limiting the range of consulting services auditors could offer their clients. "Today we learn the SEC allowed an auditor to offer its client an entire consulting company. The SEC's decision was dead wrong," the congressman added.

A SEC spokesman declined to comment and no one at PricewaterhouseCoopers or IBM could be immediately reached for reaction. In buying the consulting arm of the world's largest accounting firm for $3.5 billion in cash and stock on Tuesday, IBM made its largest ever acquisition.

But Armonk, New York-based IBM is paying only a fraction of what its competitor Hewlett-Packard Co. bid in 2000 for the unit -- $18 billion -- before pulling out of talks. Markey noted that PricewaterhouseCoopers was Hewlett-Packard's accountant during the 2000 maneuverings but in that case both companies had decided the audit firm could not be considered independent.

"The SEC's recent decision is inconsistent with the position the Commission took when PwC was negotiating with ... Hewlett-Packard, which calls into question its intention to aggressively monitor accounting industry practices," he said.



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