J.P. Morgan Taps New Top Lawyer -- 3rd Update

By Emily Glazer 

J.P. Morgan Chase & Co. named a relative newcomer to the bank to be its top lawyer, succeeding the executive who led the firm through a series of bruising clashes with regulators.

Stacey Friedman, the senior lawyer for J.P. Morgan's investment bank since she joined the firm in 2012, will succeed Stephen Cutler as general counsel early next year, the bank said Monday. Mr. Cutler, a former regulator, is moving into an advisory role after a roughly nine-year run leading the bank's legal efforts and will hold the title of vice chairman.

The executive change will take place as the nation's largest bank by assets works to turn the page on a series of clashes with regulators. Under Mr. Cutler and Chairman and CEO James Dimon, the bank agreed to pay $13 billion to settle allegations regarding mortgage securities and settled a civil case over a roughly $6 billion trading loss known as the "London whale." In May, J.P. Morgan and other banks pleaded guilty to criminal charges that they had colluded to move foreign-currency rates for their own benefit.

Ms. Friedman, 47 years old, could bring a new tack to dealing with regulators. While both she and Mr. Cutler are known as hard-nosed negotiators, the 53-year-old Mr. Cutler cut a larger public profile as a former enforcement chief at the Securities and Exchange Commission. He also publicly criticized regulators just days after J.P. Morgan's $13 billion fine was announced, asking a conference audience in New York: "At what point does this stop?"

His successor is expected to bring a more disarming style and a tendency to operate behind the scenes, said people who know both lawyers. Ms. Friedman shows "inexhaustible intellectual curiosity" and finds creative ways to avoid costly litigation, said H. Rodgin Cohen, senior chairman at Sullivan & Cromwell LLP, where Ms. Friedman worked from the late 1990s to 2012. Another colleague noted Ms. Friedman's preference to refer to co-workers informally by nicknames.

Mr. Dimon said in a statement: "Steve recruited Stacey to our firm and highly recommended her to me and our Board as a great successor. We couldn't agree more."

When her new role begins, Ms. Friedman will be the sole female general counsel among the largest U.S. banks. She also will join the operating committee of the bank. Mr. Cutler will act as a senior adviser to Mr. Dimon, other executives and the board, the bank said. He will continue to assist on complex legal issues, including matters already in progress. Before Mr. Cutler steps down from his role, Ms. Friedman will work as his deputy.

"It's an honor and privilege to take on this new role," Ms. Friedman said in a statement.

The bank still has a relatively full legal plate, despite settlements already in the books. Investigators are probing whether J.P. Morgan's hiring activities in Asia violated the U.S. Foreign Corrupt Practices Act. The Securities and Exchange Commission also is discussing a settlement with the bank over whether J.P. Morgan inappropriately steered private-banking clients to its own investment products.

Mr. Cutler is the latest senior J.P. Morgan executive to vacate his role, creating opportunities for younger executives but also testing Mr. Dimon's ability to rotate key lieutenants. In the past 18 months, former co-Chief Operating Officer Michael Cavanagh and former Chief Financial Officer and later Vice Chairman Douglas Braunstein both left the firm. Then, in June, one of Mr. Dimon's top advisers and former vice chairman, James B. Lee Jr., unexpectedly died.

When Mr. Cutler raised the issue of stepping down as general counsel around 2014, Mr. Dimon tried to persuade him to stay, people familiar with the matter said.

But the long hours and the stress of being the top lawyer for the nation's largest bank had taken a toll. Mr. Cutler has typically worked 12-hour days, people close to Mr. Cutler have said. He served during some of the "most trying times" in the financial-services industry, said Brad Karp, chairman of Paul, Weiss, Rifkind, Wharton & Garrison LLP, which has worked with J.P. Morgan and other large banks.

Next year "is the right time...to try something different," Mr. Dimon recalled Mr. Cutler telling him.

The decision to name Mr. Cutler vice chairman of the bank became official in recent weeks, some of these people said, adding that Mr. Cutler wanted to ensure that there is work to do and it isn't purely a symbolic role.

Ms. Friedman joined J.P. Morgan three years ago from Sullivan & Cromwell, where she worked with the bank for more than a year on matters ranging from mortgage-backed securities to its purchase of the banking operations of Washington Mutual, the bank said.

Unlike Mr. Cutler, who in the early part of the last decade led SEC investigations of financial-reporting matters, including those at Enron and WorldCom, Ms. Friedman has argued some of her most important cases on issues far from finance.

While at Sullivan & Cromwell, one of her marquee pro bono cases was Cole v. Arkansas, a lawsuit challenging the constitutionality of an Arkansas statute prohibiting unmarried, cohabiting couples from serving as adoptive or foster parents. The court ruled in favor of her team's clients.

"That case was one of the best experiences I've had as a lawyer," Ms. Friedman said in an interview on Sullivan & Cromwell's website.

Before joining Sullivan & Cromwell, Ms. Friedman, a graduate of Duke Law School, was a clerk for U.S. District Judge Gary L. Taylor of the central district of California. Before law school she worked for Sen. Dianne Feinstein of California. She lives in Park Slope, Brooklyn, with her wife and two children.

Mr. Cutler has been grooming Ms. Friedman for the new job over the past 12 to 18 months, including her in all of the bank's major legal cases and meetings with regulators, people familiar with the moves said. In her most recent role working with J.P. Morgan's investment bank, Ms. Friedman was responsible for more than 600 staff lawyers. The bank hasn't named a successor to Ms. Friedman in that role.

Write to Emily Glazer at [e-mail]

Access Investor Kit for JPMorgan Chase & Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US46625H1005

Subscribe to WSJ: http://online.wsj.com?mod=djnwires