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June 16, 2010 4:46 PM

Law Firm at the Center of SEC Revolving Door Investigation

Posted by Zach Lowe

Right smack in the middle of this Wall Street Journal story about the Securities and Exchange Commission's revolving door problem comes this nugget: The agency's inspector general is investigating a law firm that has hired a number of former SEC lawyers. Specifically, the WSJ reports that the IG is eyeing whether connections between the lawyers hired by the firm in question and their former SEC colleagues helped cut short a particular agency investigation, according to a letter the IG's office sent to Sen. Chuck Grassley. 

The big question, of course, is: Which firm is it? The WSJ couldn't nail it down, and so far, we've got lots of sources making educated guesses, but nothing more than that. The inspector general's office is mum, and nobody from Grassley's office has responded to our inquiries yet.

When you think about it, the list of firms with prominent ex-SEC attorneys in their partnership ranks is almost endless. Less than two months ago, the inspector general's office issued a report criticizing the SEC for cutting short an investigation into Allied Capital because the SEC attorney in charge of the investigation encouraged subordinates to look elsewhere. That lawyer left the SEC in 2004, joined Venable and immediately registered as a lobbyist for...Allied Capital, the report found.

The agency picked up the investigation years later but cut it short again because agency staffers decided to give Allied "the benefit of the doubt," the IG's report concluded. Why? Because Allied once again hired lawyers with deep connections to the SEC. The star was William McLucas of Wilmer Cutler Pickering Hale and Dorr, a former SEC director of enforcement whose mere presence unnerved SEC staffers working on the case. When agency lawyers saw McLucas, they remarked that Allied was "heavily, heavily armed," and that McLucas only "gets brought down from on high for certain events." McLucas declined to comment when we caught up with him today, but two sources at the firm tell us they are not aware of any inspector general investigation into the firm.

Meanwhile, in 2008 the SEC's inspector general's office looked into ties between two Arnold & Porter lawyers (both former SEC staffers) and a company that was the target of an agency investigation that led to no charges. The IG found no evidence of impropriety or undue influence in that case, records show

We'll keep you posted when we know more.

Contact the author of this post at zlowe@alm.com

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