SEC Chair Faces Conflict of Interest Claims in Choosing Next PCAOB Head
(Bloomberg) U.S. Securities and Exchange Commission Chair Mary Jo White is facing pressure to recuse herself from picking the next head of the regulator that polices accountants because of a potential conflict with her husband’s legal work.
White is in the midst of weighing candidates to head the Public Company Accounting Oversight Board, whose chairman makes more than $670,000 a year and has great sway over the industry.
The Center for Effective Government, an advocacy group, said White should step aside because her husband, John White, sits on an official advisory group to the audit board. While the position is unpaid, it gives John White regular access to top PCAOB officials. His law firm, Cravath, Swaine & Moore, highlights the role in marketing materials.
“The White family has to deal with this conflict,” said Jeff Hauser, who runs the Revolving Door Project at the Washington-based center that promotes government transparency and accountability. “It makes Mary Jo White’s role choosing PCAOB officials problematic.”
Hauser said he is concerned that White will help pick the chairman of the board who is then ultimately responsible for John White’s job on the advisory panel. There is at least the appearance of a conflict of interest, Hauser said.
John White declined to comment through a firm spokeswoman. Mary Jo White also declined to comment through an SEC spokeswoman, who added that agency ethics lawyers approved White’s participation in selecting a PCAOB chairman after determining it didn’t pose a conflict.
The PCAOB’s Standing Advisory Group includes auditors, investors and company executives. Its mission is to help the regulator set auditing standards that accounting firms must follow.
Sitting on the advisory group provides frequent interactions with the five PCAOB board members and the regulator’s top staff, including phone calls and an open door for meetings in Washington.
The issue of potential conflicts between SEC Chair White and her husband’s law practice isn’t new. When Mary Jo White became head of the agency in 2013, John White stepped down as an equity partner at Cravath in an effort to minimize potential problems.
Still, the SEC chair has had to recuse herself from a number of enforcement actions where Cravath has been involved as a legal counsel. That has delayed some settlements at the agency.
The accounting-board appointment is shaping up to be another politically dicey situation for SEC chair White, who has been criticized in recent months by Democratic lawmakers over claims that she hasn’t been tough enough on financial firms. Liberals have urged White to re-appoint the board’s current chairman, James Doty.
All five SEC commissioners, including White, vote on the chairman position. A list of candidates circulating inside the agency includes Doty, Lewis Ferguson, a sitting PCAOB board member, and William Duhnke, the top Republican staff member on the Senate Banking Committee, two people with knowledge of the matter told Bloomberg News last week.
The PCAOB was created by Congress in 2002 as the centerpiece of the Sarbanes-Oxley law, passed in the wake of massive accounting scandals at Enron Corp. and WorldCom Inc.
John White has been a member of the PCAOB advisory group for five years; he was just reappointed this year to a term that expires in 2017.
Cravath often plays up John White’s role with the PCAOB. The firm’s description of its white collar crime defense practice, posted online, touts the credential, as does White’s own biography.
“We have represented a variety of companies and accounting firms in investigations” at agencies including the PCAOB, Cravath notes on its website.