Questions Surround Mary Jo White as the Next SEC Chairman

Michael Teague |

Mary Jo White, President Obama’s nominee to head the Securities and Exchange Commission, appeared before a hearing of the senate banking committee Tuesday promising tougher enforcement in the event of her confirmation.

White’s legal career has spanned both ends of the Wall Street-Main Street dichotomy. The past 10 years of private practice has seen her as the chair of the litigation department at Debevoise & Plimpton, where she has done work defending a variety of financial clients such as Deutsche Bank (DB), HSBC (HBC), UBS (UBS), JP Morgan (JPM), Goldman Sachs’ (GS) Rajat Gupta, and the infamous Ken Lewis of Bank of America (BAC).

Perhaps the most notorious case in which White was involved in her capacity as a private defense litigator was one of the most recent, when she was hired by News Corp. (NWS) to defend some of the company’s independent directors against accusations of involvement in the News of the World phone hacking scandal.

This recent past, in addition to her husband John White’s work for another powerful defense firm, Cravath, Swaine & Moore, have many commentators talking about the possibility for conflicts of interest, recusals, and the revolving door that seems to connect government regulators and private sector interests. This apprehension from some quarters is sharply delineated by the fact that the SEC still has yet to apply many of the provisions of the Dodd-Frank Act of 2010, and is set to look in to high-frequency trading as well as the overall structure of markets in the U.S. in the near future.

In front of the Senate Banking Committee, White promised tougher enforcement, and responded to skepticism by saying, “If, in this instance, I’m confirmed, the American public will be my client.”  She continued later by stating that strong enforcement and accountability were essential components of investor confidence and an overall healthy market system, saying that “proceeding aggressively against wrongdoers is not only the right thing to do, but it also will serve to deter the sharp and unlawful practices of others who must be made to think twice – and stop in their tracks – rather than risk discovery, pursuit, and punishment by the SEC."

Her past 10 years defending accused white-collar criminals, and the worst-case-scenario assumptions regarding the potential for conflicts of interest, is offset to no negligible degree by her work as U.S. attorney for the Southern District of New York, a position she occupied from 1993 to 2002. As the first woman ever to hold this job, she prosecuted a number of non-white collar cases, from mob boss John Gotti, to the masterminds of the first Trade Center bombing in 1993, to the U.S. embassy bombings in Africa, as well as drug trafficking.

But White also prosecuted white collar cases as a New York state attorney, and has some experience in pursuing a variety of financial crimes. The list of her accomplishments in this connection includes Daiwa Bank, who in 1996 plead guilty to fraud charges and paid a fine of $340 million; Republic Securities (a division of Republic Bank), who were forced to pay $600 million in restitution for improperly valuing client accounts; and a handful of Ponzi schemes perpetrated by small advisory or investment houses.

Still, objections have been raised from some quarters over the fact that in her capacity for New York’s Southern District, she and her colleagues did in fact turn away or otherwise not prosecute on several instances that involved large financial institutions usually on Main Street’s preferred list of bêtes noires.  This could be especially significant in the wake of the sub-prime mortgage crisis and the bursting of the housing bubble that has wreaked havoc on American families and businesses. Furthermore, from a legal standpoint, she could potentially have to recuse herself from cases in a manner that would be more or less analogous to Supreme Court Justice Sonia Sotomayor since her appointment to that office.

Seeking to explicitly contradict Attorney General Eric Holder’s somewhat flat-footed admission last week that some of the banks were not only too big to fail, but also too big to jail, White confidently proclaimed that, “At the SEC, there’s no institution that is too big to charge”, and played down lawmakers’ concerns about conflicts of interest and recusals.

[Image via YouTube]

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Symbol Name Price Change % Volume
BAC Bank of America Corporation 16.72 -0.05 -0.30 49,134,459
DB Deutsche Bank AG 14.27 -0.21 -1.45 6,592,684
GS The Goldman Sachs Group Inc. 175.55 0.43 0.25 2,420,436
JPM JP Morgan Chase 68.80 -0.07 -0.10 9,874,235
NWS News Corporation 13.00 -0.20 -1.52 772,987
UBS UBS Group AG Registered 13.80 -0.05 -0.36 1,202,843


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