SEC Nominee's Corporate Ties Could Pose Conflicts -- WSJ

By Dave Michaels 

WASHINGTON -- President Donald Trump's nominee to lead the U.S. Securities and Exchange Commission faces a range of possible conflicts of interest due to the long list of banks and public companies he has represented as one of Wall Street's top lawyers.

Jay Clayton, a partner at Sullivan & Cromwell LLP whose Senate confirmation hearing is scheduled for March 23, has done legal work for Ally Financial Inc., Barclays PLC, Goldman Sachs Group Inc., Deutsche Bank AG, Tudor Investment Corp. and its co-chairman Paul Tudor Jones, and Pershing Square LP, according to a federal ethics report made public Wednesday.

Under SEC ethics rules, Mr. Clayton likely wouldn't be able to participate in agency business -- such as enforcement cases -- that directly involves his former clients. Mr. Clayton has represented Valeant Pharmaceuticals International Inc., a firm that is currently under SEC and criminal investigations. He has counseled two other corporate clients whose identities were withheld from his ethics report because they face a "nonpublic investigation," according to the disclosure.

A spokesman for Mr. Clayton declined to comment.

Mr. Clayton's connections to Wall Street aren't uncommon for an incoming SEC chairman, but some Senate Democrats are still likely to question his ties to banks such as Goldman Sachs, where his wife, Gretchen Butler Clayton, works as a financial adviser. Ms. Clayton plans to resign if her husband is confirmed by the Senate, a person familiar with the matter has said.

A coalition of liberal groups, including Public Citizen and Our Revolution, has launched an effort to oppose Mr. Clayton's confirmation. Our Revolution was founded by former staffers and volunteers for Sen. Bernie Sanders's 2016 presidential campaign.

If Mr. Clayton's past work hampers his ability to vote on agency business, that could open the door to partisan gridlock between the agency's two other commissioners, one Republican and one Democrat.

Under former Chairman Mary Jo White, several high-profile enforcement cases took longer to settle because past clients of Ms. White or those of her husband interfered with her ability to participate.

A Democratic lawmaker, Sen. Catherine Cortez Masto of Nevada, told Mr. Clayton in a March 3 letter that she was concerned his past legal ties would lead to the sort of conflicts that caused "Chair White to recuse herself from participating in dozens of SEC enforcement decisions." Ms. Cortez Masto's letter posed a list of detailed questions, including one asking Mr. Clayton to clarify his work for TeliaSonera AB, a Swedish telecom provider with investments in Russia, and in a Turkish mobile operator with business ties to Iran.

Mr. Clayton's spokesman declined to comment on the letter.

The disclosure report, which all nominees for Senate-confirmed jobs must file with the U.S. Office of Government Ethics, also reveals the extent of the wealth Mr. Clayton has amassed over more than two decades at Sullivan & Cromwell, a legal powerhouse among the firms that cater to Wall Street.

Mr. Clayton and his wife hold assets valued between $12 million and $47 million, excluding trusts that benefit only Ms. Clayton and their children, according to the ethics report.

He earned more than $7.6 million in the past year and could receive as much as $1 million more in partnership income if the Senate confirms him and he cuts all ties with the law firm, according to the report.

Through investment funds available to Sullivan & Cromwell partners, Mr. Clayton has exposure to various private-equity funds, including ones managed by Warburg Pincus LLC, Bain Capital, J.C. Flowers & Co. and TPG Capital. He plans to redeem his holdings in those funds, which are valued between $215,001 and $550,000, within 90 days of his Senate confirmation, the report states. Federal financial disclosure forms only require officeholders to report the value of their assets as a range.

The form doesn't reveal Mr. Clayton's wife's income, but says she owns between $100,001 and $250,000 in restricted Goldman shares and between $50,001 and $100,000 in common shares that were awarded as part of her compensation. She will likely be eligible to sell the restricted shares immediately once Mr. Clayton takes office, the report says.

Write to Dave Michaels at [e-mail]

(END) Dow Jones Newswires

March 09, 2017 02:48 ET (07:48 GMT)

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