President Obama's appointment of Mary Jo White to head the SEC raised questions about the proverbial revolving door between government and the private sector. White, a former partner at the prestigious white shoe law firm, Debevoise Plimpton, and the former U.S. Attorney for the Southern District of New York, has had an unquestionably accomplished career. Her supporters highlight her qualifications, which included tenure as a tenacious prosecutor fighting terrorists and the mob.
However, some rightfully wonder whether her past associations with the finance community will affect her zealousness as the SEC Commissioner. Exacerbating those concerns are new reports that White will name her long-time lieutenant, Andrew J. Ceresney, as co-head of the SEC's enforcement arm. Ceresney worked with White at both the U.S. Attorney's Office and Debevoise, where he represented Bank of America, Merrill Lynch and J.P. Morgan Chase. Concerns about the integrity of our markets and the impact fraud had on the most recent financial meltdown raise questions about whether White should appoint someone with a parallel background.
While it is customary for high-profile prosecutors to be aggressively recruited by elite law firms and for accomplished people in the private sector to be appointed to top government posts, the tradition increasingly raises issues. White's position that she will recuse herself from all potential conflicts at the SEC doesn't necessarily allay those concerns, particularly since her husband, John W. White, is co-chairman of the corporate governance practice at Cravath, Swaine & Moore, another prestigious Wall Street firm.
Mr. White has offered to change his status from equity to non-equity partner and not to participate in matters that affect his compensation. It is difficult, however, to dismiss the likelihood of pillow talk about sensitive matters. Moreover, with Mr. Ceresney at the helm of enforcement, he too may very well need to recuse himself in many sensitive matters, leaving the obvious question: who is left to do the enforcing?
In 2005, I was dealing with a criminal matter as a result of a gambling addiction and I sought Ms. White's representation. She declined because her firm had a conflict. In the course of our discussions, she explained that sometimes a lawyer may not have a technical conflict but an emotional one that could conceivably compromise counsel's advocacy and force a recusal.
The legal world is not the only place where conflicts arise or are unavoidable, just one of the more sensitive. Teachers, police, and coaches try to influence people as well. Every parent has heard a story about a kid being chosen because of who they are and not what they do. But the mission of the SEC is to protect investors and maintain "fair, orderly, and efficient markets," Therefore, it is imperative that White and Ceresney quickly demonstrate that their past affiliations with Wall Street do not impair their ability to fulfill in the SEC's mission in a meaningful way.
Our economy has shown great resilience in the face of a dire balance sheet, fraud, and lack of regulatory oversight. However, if we want to create a sustainable and authentic recovery, we need confidence in the SEC's ability to police capital markets. Ms. White, like few before her, possesses the skill-set to ensure that. The question is whether she and her new head of enforcement have the stomach.
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