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More than half the high-ranking SEC officials who left the agency since January 2016 landed at law and financial firms, with Debevoise & Plimpton LLP leading the pack.
Debevoise, private equity manager Blackstone Group LP and other firms hired 15 of the 26 Securities and Exchange Commission officials Bloomberg BNA tracked since their departures were announced in 2016 and 2017.
Firms tout the expertise their recently acquired colleagues gained at the agency. Government watchdogs, however, cite concerns about the possible influence these individuals have over their former co-workers, their commitment to the agency’s mission during their SEC tenure and the possible misuse of government employment as a stepping stone to a bigger paycheck in the private sector.
“There are huge problems with the revolving door at the SEC,” Craig Holman, progressive advocacy group Public Citizen’s government affairs lobbyist, told Bloomberg BNA.
Bruce Yannett, Debevoise’s deputy presiding partner and chair of the firm’s White Collar & Regulatory Defense Practice Group, told Bloomberg BNA he doesn’t “buy the revolving-door argument at all.” Two of the firm’s three new attorneys from the SEC—former Chairman Mary Jo White and enforcement director Andrew Ceresney—returned to partnerships they held before joining the commission.
Yannett said he doesn’t know anyone who took a senior position in government as part of a plan to make more money later. Although he declined to state how much White and Ceresney are paid, Debevoise partners make about $2.6 million a year on average, according to financial figures in The American Lawyer from 2016.
He also dismissed the idea that White and her former SEC colleagues at the firm weren’t committed to the agency when they worked there or have improper influence over the commission now. Both SEC staffers and the Debevoise lawyers who worked at the agency are sensitive to revolving-door concerns, Yannett said.
“The career staff bend over backwards not to show favoritism to anyone who worked at the SEC,” he said.
The firm also recently hired Winston M. Paes, the chief securities fraud prosecutor in the U.S. attorney’s office in the Eastern District of New York.
Besides Debevoise, Latham & Watkins snagged two former officials. Cleary Gottlieb Steen & Hamilton LLP, K&L Gates LLP, Sidley Austin LLP, Phillips & Cohen LLP and Simpson Thacher & Bartlett LLP each picked up one SEC alumnus. All but one of the new hires are partners at their firms.
Other private sector employers that hired recent alumni include brokerage Citadel Securities, economic and financial consulting provider Cornerstone Research, private equity firm Silver Lake Management LLC and asset management company T. Rowe Price Group Inc.
Not all headed to firms: Four took jobs at Brooklyn Law School, the Financial Industry Regulatory Authority, the Financial Stability Board and the University of Florida, and two former officials retired. The post-agency plans of the remaining five officials couldn’t be determined by Bloomberg BNA.
White, Ceresney and at least some other SEC alumni are barred from communicating with their former co-workers or appearing before the commission on behalf of a client for a year after their departure, according to federal ethics rules. All former commissioners, senior officers and other officials who made more than $161,755 in the past year at the agency must take part in the cooling-off period under revised regulations in effect since 2014.
In a previous effort to make SEC employment more attractive, only the agency’s most senior officials had to abide by the timeout period, which generally applies to executive branch employees who surpass the pay threshold. The exemption ended in 2014 in the wake of a 2011 report from then-SEC Inspector General H. David Kotz.
Kotz issued the report as part of an investigation into whether any conflict-of-interest rules were broken by an attorney who stepped down as associate director of the SEC’s Trading and Markets Division to join high-frequency trading firm Getco LLC. Despite pressing to end the exemption, Kotz didn’t find any evidence the official acted improperly. She hadn’t represented Getco before the agency and quickly recused herself from work involving the firm after she began job talks, according to the report.
A year earlier, however, Kotz concluded that Spencer Barasch, the former enforcement chief in the SEC’s Fort Worth Regional Office, may have overstepped ethical boundaries in his representation of former Texas entrepreneur R. Allen Stanford’s brokerage upon leaving the commission. According to a report from Kotz, Barasch “played a significant role in multiple decisions over the years” that quashed investigations into Stanford’s business dealings. Stanford ultimately received a 110-year prison sentence for running a massive Ponzi scheme.
In the wake of the report, Barasch was charged with violating ethics rules by representing Stanford’s firm. In 2012, he settled Justice Department civil charges and agreed to a one-year ban on practicing as an attorney before the commission.
Watchdog Project on Government Oversight in 2013 released a study that found the revolving door played a role in the SEC’s regulatory and enforcement decisions—including to drop then-Chairman Mary Schapiro’s plan to reform money market mutual funds—a charge the commission denied. “Former SEC employees lobbied to block the plan, and an SEC Commissioner who previously worked for an investment firm played a pivotal role in derailing it,” POGO claimed. The organization recommended a two-year cooling-off period for former agency officials.
In a telephone interview, Kotz told Bloomberg BNA he doesn’t think more restrictive ethics rules are the solution to revolving-door concerns. Instead, he said, the SEC should aggressively investigate reports of improper influence.
“You don’t want to make it so onerous that you can’t recruit people” for the agency, said Kotz, a Berkeley Research Group LLC managing director.
Former SEC Office of Market Intelligence chief Vincente Martinez, who is subject to the ban until August, told Bloomberg BNA the cooling-off period presents challenges in his job as a partner at K&L Gates, hindering his ability to take on new work that brings clients before the SEC.
He isn’t letting the cooling-off period keep him down, however. Martinez still can advise clients on issues that don’t involve contact with the commission and can represent them before other agencies. He also can provide general insight on the SEC.
“A year goes by before you know it,” Martinez said. “It’s been fine.”
The revolving door isn’t just a portal from the commission to the private sector—law firms and investment banks also are attractive recruiting grounds for future SEC officials. Sullivan & Cromwell LLP partner Jay Clayton currently is awaiting Senate confirmation of his nomination to chair the agency. He hasn’t ruled out a return to the firm following his SEC tenure.
At Debevoise, Yannett said that when White and Ceresney departed for the commission in 2013, he didn’t know whether the two had left the firm for good.
“They left here with no strings attached,” Yannett said.
For this report, Bloomberg BNA used interviews, work biographies, LinkedIn profiles, public records and news reports to trace the career moves of officials whose departures were announced by the SEC beginning in January 2016.
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