SEC pick could face conflicts
Ethics rules could force Mary Jo White, if confirmed, to sit out of some decisions.
NEW YORK — As a lawyer in private practice, Mary Jo White worked for Wall Street all-stars: banking giant JPMorgan Chase & Co., auditor Deloitte & Touche, former Bank of America Corp. chief Ken Lewis.
White, President Obama’s pick to lead the U.S. Securities and Exchange Commission, even did legal work for former Goldman Sachs Group Inc. director Rajat Gupta, the highest-profile catch in the federal government’s crackdown on insider trading, according to disclosures White filed ahead of her U.S. Senate confirmation hearing.
If she wins approval to lead the country’s top financial watchdog, government ethics rules could force White to sit out of some SEC decisions. Potential conflicts of interest — or the appearances of conflicts — could arise from her work at the high-powered New York law firm Debevoise & Plimpton, and that of her husband John White, a partner at the prestigious firm Cravath, Swaine & Moore.
Obama’s appointment of White, a former U.S. attorney in Manhattan known for high-profile prosecutions of mobsters and terrorists, was seen as a signal the administration was getting tougher on Wall Street. Her confirmation hearing in the Senate has not yet been scheduled but is expected in the next several weeks.
“She would have quite a minefield to navigate,” said Robert Kelner, an attorney who is an expert in government ethics rules at the law firm Covington & Burling in Washington. “But this is not unusual for a senior-level appointee coming out of a law firm.”
White could have to abstain from votes on matters involving former clients at a time when the SEC has been struggling to regain investor confidence among regulators and financial markets.
Government ethics rules generally prevent commissioners from participating in matters in which they or their spouses have any financial stake, or have any interest that could raise questions about their impartiality, Kelner said.
These rules generally restrict commissioners from taking part in cases they worked on while in the pri- vate sector — whether to bring a securities fraud lawsuit against a former client, for example, Kelner said.
White could still be involved in other matters dealing with former clients, just as long as she hasn’t previously worked on the other side of particular cases before the SEC, Kelner said.
What could also complicate White’s tenure at the SEC is an ethics pledge Obama has required executivebranch appointees to sign since he took office.
Aiming to limit the effects of the “revolving door” between government officials and the private sectors they regulate, the ethics pledge precludes appointees from participating in any matter involving “specific parties that is directly and substantially related” to their “former employer or former clients.” Kelner said the pledge generally would not apply to broad regulations or policies.
The White House could grant White a waiver from the ethics pledge.
White did not respond to an email request for comment. Nominees typically do not speak publicly ahead of their confirmation hearings.
White would take over the SEC at a time when the agency faces major regulatory issues, aside from enforcement issues. The fivemember commission, under former Chairwoman Mary Schapiro, failed to pass a sweeping overhaul of money-market funds, which federal officials say remain a weak link in the financial system.
Also before the SEC are rules governing high-speed stock trading and how the increasingly fragmented stock market is structured. The agency still must mete out myriad regulations called for by the DoddFrank financial overhaul of 2010.
John Coffee, a securities law expert at Columbia University in New York, said White has no apparent conf licts involving the marquee regulatory matters facing the SEC.
“There is just a forest of bayonets waiting out there if she looked like she was protecting a former client from an enforcement action,” Coffee said. “I think she’s also too smart to put herself in that kind of position.”