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It’s a dilemma that every corporate executive dreads. Your industry’s top regulator falsely and publicly suggests that your business has done something wrong. Do you quietly absorb the blow to your company’s reputation? Or do you fight to clear its name, and antagonize the official in the process? That’s the nightmare that Scott Univer, general counsel at the accounting firm of BDO Seidman LLP, faced this past fall. Ultimately he was able to restore his company’s reputation after deploying a bold legal strategy. He also managed to avoid the wrath of angry regulators — because they resigned. As a result of Univer’s actions, not only did William Webster quit as chairman of the new Public Company Accounting Oversight Board, but Harvey Pitt also ended his turbulent tenure as SEC chairman. The skirmish was one that Univer tried hard to avoid. “A lot of people would have to think we were nuts, trying to pick a fight with Webster,” the GC says. But, in the end, Univer had no choice: “We just wanted to clear the record.” The problem started on Oct. 25, when the SEC confirmed Webster — a former federal judge who had also headed both the Central Intelligence Agency and the Federal Bureau of Investigation — to be the new accounting board’s first chairman. Six days after Webster’s controversial selection, The New York Times disclosed that he had once headed the audit committee of U.S. Technologies, a troubled Internet company accused of accounting chicanery. Pitt, it turned out, knew this, but failed to mention it to his fellow commissioners before they voted on Webster’s appointment. BDO Seidman immediately got dragged into the exploding scandal, because it had been outside auditor to U.S. Technologies for three years until getting the boot in August 2001. In the weeks before and after it was fired, BDO Seidman had warned the directors of U.S. Technologies, including Webster, about serious accounting problems at the company. BDO Seidman’s actions were subsequently reported in SEC filings by both the accounting firm and U.S. Technologies. WHAT DID WEBSTER KNOW, AND WHEN? But that wasn’t what Webster was telling the media. In fact, he initially claimed not to have known about the accounting woes at U.S. Technologies while he was a director. Those comments put Univer in a bind. He wasn’t keen on engaging in a “he said, he said” debate with the person who was now the accounting industry’s top overseer. The GC was also worried that if BDO Seidman released materials to defend itself, it would violate client confidentiality. At first Univer, 51, tried to work behind the scenes. Along with other BDO Seidman representatives, he directed reporters to the SEC filings that would show Webster had to have known about the accounting firm’s warnings. But that covert strategy didn’t work. Webster backpedaled and told The Washington Post that he had learned of BDO Seidman’s concerns only after the firm was fired. What’s more, Webster said that BDO Seidman had gotten the boot because its audits took too long and cost too much. Univer decided that he couldn’t hide behind the curtain anymore. The demise of Arthur Andersen LLP had shown that an accounting firm that lost its reputation could eventually lose everything. “Especially in today’s environment,” the GC explains, “it’s very easy to point fingers at accountants and say, ‘Oh, they dropped the ball again.’” So Univer switched to a more aggressive defense. He told his outside lawyers at Piper Rudnick to file a suit against U.S. Technologies that would seek court permission to release private communications between the two companies. Where softball had failed, hardball now succeeded. U.S. Technologies agreed to the release of redacted documents that proved BDO Seidman’s case. Among the materials that the accounting firm made public were notes from a July 2001 meeting — attended by Webster — in which the auditors had discussed weak financial controls at U.S. Technologies. The information not only cleared BDO Seidman’s name, but also put another nail in the coffin of Harvey Pitt. The SEC chairman resigned, finally bringing his stormy 14-month tenure to an end. A week later, Webster quit the oversight board. Univer, for one, isn’t gloating. “We never wanted to posture this as a dispute between us and Webster,” he says. In fact, no sooner had the matter ended than Univer was back on the road, pushing a concept that many skeptics think is a casualty of the recent corporate scandals: one-stop shopping for professional services. Univer has spent the last year and a half encouraging law firms to team with BDO Seidman. So far, five small firms have allied themselves with the accountants. While the idea may be a tough sell, Univer argues that clients want it. Right now the odds seem to be against him on this issue. But given his handling of the Webster imbroglio, Univer may yet be proven right.

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