"SEC Chair Got Waiver to Oversee Wall Street Law Firm"

"January 14, 2015

Mary Jo White, the head of the Securities and Exchange Commission (SEC), was granted a waiver last year allowing her to vote on agency issues affecting a major corporate law firm that was also a former client of hers.

White was permitted to handle SEC business affecting Simpson Thacher & Bartlett LLP, a firm that has represented some of the biggest names on Wall Street. The waiver was issued in February 2014 but remained undisclosed while various matters involving Simpson Thacher played out before the Commission.  The Project On Government Oversight found the waiver posted online last week by the Office of Government Ethics (OGE).

At a time when Members of Congress are sounding the alarm about the over-representation of Wall Street veterans in government positions, White’s waiver shows how the government must grapple with tough choices when it recruits industry representatives through the revolving door. Should White and other officials be allowed to handle agency business that affects former employers or clients, despite the potential conflict of interest? Or should they be forced to remain on the sidelines, limiting their work as public servants?

...SEC officials’ ties to former clients on Wall Street have at times been so tangled and extensive that they threatened to hamstring the agency on important matters. A 2013 report by The Wall Street Journal found that four of the SEC’s commissioners were “barred from enforcement votes and certain other matters affecting more than 20 companies,” and that one commissioner “didn’t vote in 59 of the agency’s 118 closed-door meetings” over a two-year period.

Over the course of her career, White went from prosecuting financial fraud as a U.S. Attorney to defending financial industry clients as an attorney at Debevoise & Plimpton LLP, a corporate law firm. When President Obama nominated White to lead the SEC, POGO and others took note of the fact that she used to represent powerhouse Wall Street banks such as JPMorgan, UBS, and Morgan Stanley. But those weren’t her only clients. In a 2013 financial disclosure report, White revealed that she also provided legal services to Simpson Thacher, a firm that does plenty of its own work representing big businesses before the government.

Under the ethics pledge signed by President Obama’s appointees, White was required to wait at least two years before handling SEC business that could affect a former employer or client. But the agency’s ethics official decided to waive this restriction for matters involving Simpson Thacher and its clients...

“I understand that for several years prior to your [April 2013] appointment Simpson Thacher was a client for whom you performed attorney services,” the ethics official wrote in the waiver.

...White’s waiver does not say what her “several years” of work for Simpson Thacher entailed, how important it was, or how extensive it was...

In White’s case, the government apparently decided that her past work for Simpson Thacher was significant enough to trigger a recusal under the ethics pledge, but it’s unclear exactly how the ethics officials made that determination or why they decided to waive the “cooling off” rule last year...

As previously reported, White also received an ethics waiver last year because she used to provide direct legal services to one of Simpson Thacher’s clients, Credit Suisse. White, Simpson Thacher, and the SEC declined POGO’s requests for comment.

...In May 2014, for instance, Simpson Thacher wrote to the SEC on behalf of firms that are affiliated with Credit Suisse AG, the giant Swiss bank. (The letter was signed by Peter Bresnan, a former official in the SEC’s enforcement division who began representing clients before the agency shortly after he left...)

...White also received an ethics waiver in February 2014 that allowed her to handle SEC matters affecting Credit Suisse, which she used to represent directly. But unlike the Credit Suisse ethics waiver, which POGO highlighted at the time, the Simpson Thacher waiver is only now coming to light...

...Some of the potential conflicts that have ensnared White have also tied the hands of Andrew Ceresney, the SEC’s enforcement chief. Like White, Ceresney was an attorney at Debevoise & Plimpton and represented some of the same powerhouse Wall Street firms, including Credit Suisse, JPMorgan, and UBS...

Before White’s tenure at the SEC, Simpson Thacher represented defendants in a number of high-profile cases, such as when the agency alleged that senior employees from Citigroup made misleading statements about the bank’s exposure to subprime mortgages in a case tied to the 2008 financial crisis. More recently, Simpson Thacher itself came under scrutiny when the SEC accused a managing clerk at the firm of participating in an insider trading scheme...

Simpson Thacher caters to corporations and executives in a variety of matters, including investigations by Congress and financial regulators. On its website, the firm touts its roster of government alumni who have traveled through the revolving door: “Our team includes former federal prosecutors, former SEC officials (including the first Chief of the SEC’s FCPA Unit) and former members of the [Department of Justice] Securities and Commodities Fraud Task Force.”

Now it appears Simpson Thacher can offer another selling point: one of Wall Street’s top watchdogs is a lawyer who used to represent the firm, and she doesn’t have to wait any longer to oversee its clients."


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