Welcome!
2017-03-08 18:35:07
Trump’s S.E.C. Nominee Disclosure Offers Rare Glimpse of Clients and Conflicts

After spending years cultivating an elite roster of Wall Street and corporate clients, Jay Clayton will now be responsible for policing some of those same types of companies.

Mr. Clayton, a longtime partner at the law firm Sullivan & Cromwell who is President Trump’s pick to lead the Securities and Exchange Commission, has represented big banks like Goldman Sachs and Barclays as well as prominent hedge funds and corporate executives, according to a financial disclosure form made public on Wednesday by the Office of Government Ethics.

Some of the clients were listed on Sullivan & Cromwell’s website — and Mr. Clayton kept nine others confidential — but the filing reveals a number of previously unadvertised assignments, including work he has done for companies facing intense government scrutiny: Deutsche Bank, UBS and Volkswagen. Other well-known clients represented by Mr. Clayton, whose given name is Walter, include the Japanese conglomerate SoftBank, the film studio the Weinstein Company, Reid Hoffman, a founder of LinkedIn, and William C. Erbey, former head of the mortgage firm Ocwen.

In the hedge fund sector, Mr. Clayton, 50, has represented William A. Ackman’s Pershing Square as well as Paul Tudor Jones. He has also represented Valeant Pharmaceuticals International, a company in which Mr. Ackman is a major investor and which is being investigated by the S.E.C. over potential accounting irregularities.

Mr. Clayton, who says he will recuse himself from certain cases involving former clients, has also personally invested in a number of hedge funds and private equity firms through special Sullivan & Cromwell investment vehicles, according to the filing. He earned $7.6 million from Sullivan & Cromwell over the past year or so and has investments in portfolios managed by Apollo Global Management, Bain Capital, J.C. Flowers and Perry Partners. His wife, Gretchen, who works at Goldman Sachs, has a number of investments in Goldman-managed funds as well as a small amount, described in his filing as being less than $1,001, with a retirement account once managed by Omega Advisors, a hedge fund now fighting S.E.C. charges.

Mr. Clayton’s disclosures offer a rare glimpse into his client list and family wealth — a sum of at least $50 million, his filing shows — and may reinforce a view among consumer groups and Democratic lawmakers that he could have conflicting interests as a Wall Street regulator. Although he is expected to broadly support the agency’s enforcement efforts, he has made statements suggesting that he will probably move to ease at least some of the Obama-era regulations weighing on Wall Street clients.

Some of those clients are well represented in the new administration, perhaps none more than Goldman. The Trump administration has become a virtual magnet for former Goldman executives: Steven Mnuchin, the Treasury secretary; Gary D. Cohn, the chairman of the national economic council, and Stephen K. Bannon, Mr. Trump’s chief strategist, have all worked at Goldman.

The addition of Mr. Clayton, who represented Goldman during the 2008 financial crisis, will most likely fuel concerns that the bank has outsize influence in the administration.

But one Democrat is scrutinizing more than just Mr. Clayton’s ties to Wall Street. In a previously unreported letter, Senator Catherine Cortez Masto, Democrat of Nevada and one of the newest members of the Senate Banking Committee, questioned him on his representation of the Nordic telecommunications company TeliaSonera.

The letter, a copy of which was reviewed by The New York Times, notes that TeliaSonera has had business ties to Russia and Iran. One of the deals Mr. Clayton worked on for TeliaSonera, for example, involved another company controlled by a Russian oligarch.

“I am particularly concerned about your involvement with TeliaSonera,” Ms. Cortez Masto writes in the letter, in which she asks that he clarify “the precise nature of your representation.”

A spokesman for Mr. Clayton said, “In both business and litigation, Jay has been on the opposite side of Russia in resolving disputes.”

Mr. Clayton, whose nomination must clear the banking committee and then the full Senate, is expected to be confirmed. A committee hearing is scheduled for March 23.

One former colleague said in an op-ed article that while “the natural tendency of Democrats will be to criticize this pick as a ‘Wall Street insider,’” in fact “the good guys should have nothing to worry about and the bad guys should be concerned.”

And in a statement, Cyrus R. Vance Jr., the Manhattan district attorney and a Democrat, said, “Jay will be a balanced and thoughtful leader at the S.E.C., with great experience in the agency’s regulatory and enforcement practices.” Mr. Vance added, “Jay will call it as he sees it, will have no bias in his new role either for business or against it.”

Still, Mr. Clayton’s client list highlights a practical challenge that awaits him. When top corporate lawyers take over the S.E.C., they must recuse themselves from certain matters involving former clients to avoid the appearance of a conflict of interest.

In addition to disclosing his client list and law firm wealth, Mr. Clayton filed an ethics letter providing a broad explanation of how he plans to navigate such potential conflicts. While his recusal plan is in line with other similar nominees, it appears to offer him leeway in handling Wall Street cases.

In the letter, he promises not to participate “personally and substantially” in a matter involving a former client for a period of one year “after I last provided service to that client, unless I am first authorized to participate.” The same one-year restriction, which complies with federal ethics rules, will also apply more broadly to Sullivan & Cromwell clients, he writes.

In the letter, Mr. Clayton says he would divest himself of his interest in some 175 investment funds and stock holdings that either he or his wife hold. .

The challenge of recusals is not unique to Mr. Clayton. His predecessor, Mary Jo White, had been a partner at the law firm Debevoise & Plimpton, a relationship that forced her to step away from a number of important cases.

If confirmed, Mr. Clayton would be the latest millionaire to join the Trump administration. And his ties to Wall Street underscore how Mr. Trump, despite campaigning against the wealthy global elite, has stocked his administration with Wall Street lawyers and bankers, particularly from Goldman.

At the height of the financial crisis, Mr. Clayton advised Goldman on a $5 billion investment by Warren E. Buffett’s Berkshire Hathaway, a critical deal for the bank. Mr. Clayton’s wife works as a private-wealth adviser at Goldman, though she will resign once he is confirmed, the ethics letter says. And Mr. Clayton is just one of many Sullivan & Cromwell lawyers who have done work for Goldman.

For Democrats, Mr. Clayton’s relationship with TeliaSonera could raise its own concerns.

On his Sullivan & Cromwell bio, Mr. Clayton has said he represented TeliaSonera in “various transactions.” Those deals include one in which the company, among other things, combined its ownership interests in MegaFon, a Russian mobile phone operator, with another Russian company, Altimo, that has long been controlled by a Russian billionaire, Mikhail Fridman.

It is not unusual for United States law firms to advise corporate clients doing business in Russia, and Mr. Clayton is not thought to have any ties to the Russian companies. Yet, as investigations into the Trump campaign’s dealings with Russia dominate the early days of Mr. Trump’s presidency, the TeliaSonera deals could provide Democrats with some ammunition.

Ms. Cortez Masto, the Nevada Democrat, also points in her letter to TeliaSonera’s ties to Iran, which stem from the company’s stake in Turkcell, a Turkish mobile phone provider. And last year, she notes, the company disclosed that it had received an offer from authorities in the United States and the Netherlands to settle investigations into bribery accusations for $1.4 billion.

That case, which Mr. Clayton did not have a role in, involves potential violations of the Foreign Corrupt Practices Act, a crucial component of the S.E.C.’s enforcement arsenal. Mr. Clayton spoke out against the bribery law in a 2011 report by a New York City Bar Association he led as “unilateral and zealous enforcement of the F.C.P.A” that may “exacerbate the problem of overseas corruption.”

Ms. Cortez Masto also noted in her letter that “four of your clients have been charged with violations of S.E.C. rules in the last five years,” including the giant hedge fund Och-Ziff Capital Management.

The hedge fund’s African unit pleaded guilty to bribery charges in September, with the firm paying a $413 million fine as part of a deferred prosecution agreement to settle both criminal and civil charges.

Mr. Clayton’s wife’s modest investment in the Omega fund could also raise questions. The S.E.C last year filed an insider trading complaint against the hedge fund’s founder, the billionaire investor Leon Cooperman.

Omega had managed the investment for Goldman’s retirement plan, and the Wall Street bank pulled its employees’ $300 million from the account in October, several months after the S.E.C. filed its suit.

Mr. Cooperman, 73, is fighting the S.E.C. charges, saying that he is “not going to let these people destroy my legacy.”