The Talent

May 13, 2011 1:29 PM

Citing Revolving Door, Watchdog Report Questions SEC's Independence

Posted by Brian Baxter

A report released Friday by the Project on Government Oversight (POGO), a nonpartisan, good-government group, analyzes hundreds of internal Securities and Exchange Commission documents obtained under the Freedom of Information Act and questions the agency's ability to remain independent given the frequency with which its employees jump between the public and private sectors.

The Washington Post had a preview of the POGO report this morning, noting that the group expresses concern about a "revolving door" through which SEC staffers leave the agency for jobs at law and accounting firms that advise the public companies they once regulated.

"The financial meltdown of 2008 brought renewed focus to the integrity and aggressiveness of federal government oversight of the financial system," the report's executive summary states. "One of the most important agencies overseeing financial markets and investor protection is the [SEC]."

In preparing the report, POGO obtained 789 disclosure statements submitted to the SEC over the past five years by individuals intending to advise clients on matters before the commission. According to POGO, more than half of those statements were filed by former employees of the SEC's enforcement division. All told, 219 former SEC staffers notified the commission of their intention to advise clients on SEC matters during the period in question. (Former SEC employees must file disclosure statements during the first two years after leaving the agency. Some individuals filed multiple disclosures, according to POGO.)

POGO says that its findings lend credence to the concerns of SEC critics wary of the commission's ability to remain independent and notes that the troubling traffic moves two ways. (Note: The New York Times reported on Friday that former SEC official Spencer Barasch, now head of the corporate governance and securities enforcement group at Andrews Kurth, was the subject of a criminal inquiry over his work for alleged Ponzi-schemer R. Allen Stanford.)

"The revolving door also operates in the opposite direction, where individuals come from entities regulated by the SEC to work for the Commission," states the POGO report. "The general concern is that a conflict of interest could bias SEC oversight and undermine public confidence in the SEC's work, as acknowledged by the current SEC chairman."

As one might expect, the names of dozens of Am Law 200 firms appear throughout POGO's report, including a revolving door database put together by the watchdog group. The firms with the most current and former lawyers appearing in POGO's database are DLA Piper, Greenberg Traurig, Jenner & Block, K&L Gates, McDermott Will & Emery, Morrison & Foerster, O'Melveny & Myers, Paul, Weiss, Rifkind, Wharton & Garrison, Sidley Austin, and Wilmer Cutler Pickering Hale and Dorr.

David Hunter, an associate professor at American University's Washington College of Law, serves as chair of POGO's board of directors. Another lawyer, Henry Banta of Washington, D.C.-based public interest firm Lobel Novins & Lamont, also serves on the organization's board. Scott Amey serves as POGO's general counsel. The methodology behind the POGO report can be found here.



Law Firm at Center of SEC Revolving Door Investigation
The Am Law Daily, 6/16/10

Securities Lawyers and the Revolving SEC Door
The Am Law Daily, 6/14/2010

Report Spotlighting Venable Lawyer Spawns Larger Debate on SEC's "Revolving Door"
The Am Law Daily, 4/5/2010

Blistering SEC Watchdog Report Criticizes Ex-Venable Partner
The Am Law Daily, 3/24/2010

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