Mary Jo White: At the SEC, No Institution Too Big to Charge

Former Debevoise & Plimpton partner Mary Jo White, President Obama’s nominee to be chair of the Securities and Exchange Commission (SEC), made it through her Senate Banking Committee confirmation hearing today unscathed.

White’s questioning was handled delicately by Senators from both sides of the aisle.

She was not asked about some of the most controversial issues surrounding the SEC’s enforcement program — most notably, high profile criticism by federal judges — including Judge Jed Rakoff and Judge Richard Leon —  that the SEC should revamp it’s neither admit nor deny settlement policy and require major corporations to admit wrongdoing in egregious cases as a condition of settlement.

But the question of prosecuting and bringing charges against too big to fail corporations was raised a number of times during the two hour hearing.

Senator Bob Menendez (D-New Jersey) said that he gets many letters from constituents about the “lack of prosecution of wrongdoers.”

Menendez quoted from Attorney General Holder’s appearance earlier this month before the Senate Judiciary Committee.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” Holder testified. “And I think that is a function of the fact that some of these institutions have become too large.”

“Are these institutions in essence protected against prosecution merely by their size?” Menendez asked. “If the American people believe they can do this with impunity, at the end of the day, how do I know the system is not being rigged at the time I’m making my investments?”

White said that “at the SEC, which doesn’t have the criminal powers, those collateral consequences are not taken into account before charging decisions are made.”

“At the SEC, there is no institution too big to charge,” White said. “On the criminal side, institutions are not too big to charge either. But federal prosecutors are instructed by the Department of Justice to look a long line of factors and one of those is the collateral consequences of a criminal indictment to innocent shareholders, employees and the public. And certainly prosecutors should consider that before proceeding.”

“But that doesn’t necessarily dictate a no decision,” White said.

Senator Sherrod Brown (D-Ohio) said that today, “the largest six banks control some 65 percent of GDP, when only 20 years ago, it was less than a third of that.”

“Arthur Levitt, one of your predecessors, currently a policy advisor to Goldman Sachs, when asked about Attorney General Holder’s comments said — ‘I think he’s right — there is no question that these institutions are unlikely to be the objects of prosecutions.”

“You have said that bringing criminal charges against corporations could harm employees,” Brown said. “Do you agree with AG Holder and Mr. Levitt? And if so, aren’t we creating a two-tiered system where we exempt the biggest banks because they have the most employees and shareholders who could be affected by criminal prosecution?”

“It’s a factor that prosecutors are directed to consider,” White said. “And not just the impact on innocent employees and shareholders, but the public interest as well. We want our prosecutors making decisions in the public interest. Obviously, you don’t want to have a two-tiered standard.”

“But I do think the deferred prosecution instrument, which has been used a great deal on a number of companies, was designed to be tough in terms of monetary sanctions, monitors — everything but the charge itself that might cause what the prosecutor might consider to be negative and undesirable collateral consequences to the public interest.”

“And I don’t consider it to be a rule that therefore you can’t indict anyone. It’s part of your consideration and it should be part of your consideration.”

Brown also questioned whether White’s movement through the revolving door — from private practice, to the U.S. Attorney’s office, back to private practice, and now to the SEC, might affect White’s performance at the SEC.

“Nobody questions your integrity, aggressiveness and toughness,” Brown said. “But we need some reassurance.”

“I’ve been a lawyer over the past ten years,” White said. “And when you are a lawyer, you represent different kinds of clients. And you are ethically bound to represent them to the best of your ability. That doesn’t change me as a person. That doesn’t mean that I agree with the policy thoughts of any of my clients.”

“The investor should know that I am their advocate. I think I was exceptionally aggressive against large institutions, against CEOs, senior executive types. And before prosecuting, I was in the private sector. I was in the private sector for about the same amount of time, I became U.S Attorney and had that track record. I am the same person. In this instance, if I am confirmed, the American public will be my client. And I will work as zealously as possible on behalf of them.”

Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress