Tuesday, April 4, 2017

More (Clients + Government + Politics) = More (Client-Firm Conflicts + Press Risk)




Several updates this week about streams crossing across various domains. First: "Trump’s SEC Nominee Has a Major Conflict-of-Interest Problem: Jay Clayton is tied to big banks and corporations—and that could hold up fraud enforcement." --
  • "The dominant theme of Thursday’s Senate Banking Committee hearing with Jay Clayton, nominee for chair of the Securities and Exchange Commission, was conflict of interest. Not the well-documented conflicts of some of the more notorious members of the Trump administration but the conflicts of Clayton himself. A partner at the high-powered corporate law firm Sullivan & Cromwell, Clayton represented Wall Street banks throughout his career.
  • "But it goes further, because the executive order also forces recusal in any matter in which Sullivan & Cromwell, Clayton’s former law firm, is involved. And the firm’s roster of clients is massive. An analysis of its recent clients published by Allied Progress estimates that Clayton would have to withdraw “from cases involving nearly one-third of the institutions on the Financial Stability Board’s list of ‘global systemically important banks.’” Plus, as Warren points out, “any reasonably strategic company…could simply hire [Sullivan & Cromwell] to represent them before the agency, and you couldn’t vote for enforcement of that company.” Clayton mildly disputed this, but it’s accurate."
  • "Why is this important? Clayton promised at the hearing to “enforce the law strictly” and to “root out any fraud and shady practices in our financial system.” But without Clayton’s input, the committee would be down to an even number of Democratic and Republican appointees. Normally that would be a 2-2 split, but currently, there’s a vacancy on each side. And if those commissioners disagree along party lines, a deadlock would mean not moving forward on enforcement. So putting a chair on the SEC who has to constantly recuse himself on enforcement matters really advantages corporation, as a tie lets them off the hook."
Next: "Florida paid law firm for meeting with House speaker" --
  • "Blurring the lines between his role as an up-and-coming Republican legislator and his job as an attorney, the law firm of House Speaker Richard Corcoran once charged the state for a meeting with Corcoran in his capacity as a lawmaker."
  • "Newly-released billing records show that in October 2014 the firm of Broad and Cassel charged the state's economic development agency ahead of a meeting between its affiliate, the state Division of Bond Finance, and Corcoran — putting the meeting in the crosshairs of a new review by the governor of potential conflicts of interest. At the time Corcoran was not speaker but he already was viewed as one of the most powerful members in the Legislature."
  • "But the administration of Gov. Rick Scott is raising questions about Broad and Cassel's work on behalf of the state as a potential conflict of interest. The firm has earned nearly $300,000 in the last six years representing Enterprise Florida, the agency has said."
  • "The Tampa Bay Times first reported last week that the firm has been working on behalf of Enterprise Florida, which gets the bulk of its money from the state. Kim McDougal, the chief of staff for Scott, on Monday sent a letter to all state agencies demanding that they look at legal contracts with outside law firms, especially with those firms that have legislators on their payroll. 'The employment of a legislator by a law firm that conducts business with the state could easily be perceived as a conflict of interest,' McDougal wrote."
  • "A managing partner of the Jones Day law firm is striking back against Mayor Mike Duggan, calling him a “political hack” concerned only with “self-interest” amid the mayor’s claims the city was misled on assumptions that determined future payments to its pension funds."
  • "In a Feb. 23 letter to an attorney retained by the city and the mayor’s deputy chief of staff, Stephen Brogan of Jones Day called Duggan’s belief that a lawsuit against the global law firm could be viable a “delusion.” Brogan rejected Duggan’s assertion that former Emergency Manager Kevyn Orr and his team made efforts to mislead city officials on negotiated pension assumptions in the historic debt-reduction plan."
Putting a point on the meta-matters in play, Above the Law took its own editorial lens to the situation: "Jones Day Responds To Critics With Standard Petulant Hissy Fit" --
  • "That’s when the state hired Kevyn Orr, a noted Jones Day partner, to take on the mantle of unelected czar of Detroit, tasked with shepherding its bankruptcy to completion. Orr dutifully resigned from the firm before assuming his new responsibilities… and then he hired Jones Day to reap the multi-million dollar legal bills he would ring up during his tenure. Orr has since returned to the firm."
  • "In a purely legal sense, this isn’t a conflict. But there’s a reason we generally employ the maxim “to avoid even the appearance of impropriety.” From the perspective of the people of Detroit, the state threw over their future to a former law partner who sent millions to his old firm and then jumped back to share in that firm’s success. Not exactly endearing to his supposed constituents, and the sort of move that, understandably, puts every deficiency in his tenure under a microscope."
  • "Wow. I just… wow. Seriously, what does this serve? Why “poke the bear” of the potential adversary who has already pulled back? And it’s not just the matter of insulting Mayor Duggan himself — this letter accuses the people of Detroit of electing “a long line of corrupt Detroit politicians.” These people liked this guy so much they elected him as a write-in candidate.[1] When you insult him as incompetent and tell the city that they’re all stupid, it can only intensify the political pressure to take action against the firm, deserved or not. Brogan may spell out sound defenses against Mayor Duggan’s complaints, but the whole tone of this letter underscores the contempt everyone involved with the Emergency Manager process has for the citizenry they are supposed to serve."

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