Finance, Government

SEC Enforcement Chief's Departure Shows Need For Deeper Recruiting Pool

Coming straight from a big white collar defense firm to the SEC, long a solid career path, proves disastrous.

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There’s a new sheriff in town at the Securities and Exchange Commission, and it’s Chairman Gary Gensler, who we all learned a little more about a couple weeks ago when he was sworn in.

At any organization, hiring decisions are among the first things new leaders need to tackle, and the SEC is no exception. One of Gensler’s first new hires at the SEC was Alex Oh. Oh was tapped to lead the Division of Enforcement at the SEC.

Oh was a commendable choice in some ways. She was the first woman of color to lead the SEC’s enforcement division, and diversity is important. But there are many kinds of diversity, and when it came to diversity of background, Oh looked very similar to the same pool the SEC has been drawing on for years to find its lawyers.

Before her very brief stint at the SEC, Oh was a partner at Paul, Weiss, Rifkind, Wharton & Garrison. In other words, she was a private defense attorney at a very large, very expensive white-shoe law firm. For 17 years at the firm, Oh defended numerous Fortune 100 companies and other corporations from a variety of regulatory efforts targeting them.

Within the system we all inhabit, there is not necessarily anything wrong with working for a big private law firm and making a lot of money doing it. But the revolving door that separates private corporate lawyers who represent the companies that are supposed to be being regulated from the SEC staff attorneys who are supposed to be doing the regulating is problematic. It has been problematic for a long time, and Oh’s recent departure starkly highlights this rather obvious issue.

Alex Oh didn’t even last a week at the SEC. She resigned on April 28, with the previous Acting Director of the Enforcement Division, Melissa Hodgman, set to take over her duties. The resignation has to do with one of Oh’s cases from her very recent past as a white-collar defense attorney.

Oh helped defend ExxonMobil from a lawsuit filed by Indonesian villagers. The villagers said that the company should face liability for murder and torture that took place some years ago within their country after ExxonMobil hired soldiers — well, mercenaries, let’s call them what they were — to guard its natural gas facilities in Indonesia.

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Now, believe it or not, none of that was apparently any problem for Oh or the SEC. The problem was that within that case, the villagers’ lawyers recently told a U.S. federal district judge that Oh, as part of ExxonMobil’s legal team, had called her opposing counsel “agitated, disrespectful and unhinged” during a deposition, without providing evidence, and on April 26, the federal judge ordered Oh to demonstrate why she should not be sanctioned for this.

Let’s recap: It’s perfectly acceptable to represent a giant fossil fuel company to help them get away with allegedly hiring mercenaries to torture and kill people in the course of protecting their bottom line, but you better not dare say some mean things about opposing counsel, because that could get you in some real trouble. Pretty much tracks with my experience in the legal profession.

Oh’s former firm issued the standard lavish praise of her integrity and ethics which is, of course, what a white-collar defense firm would say. Oh herself did not admit any wrongdoing, instead stating in her resignation letter that she did not want her role in “this development” to become “an unwelcome distraction” from the work of the SEC division she was supposed to lead. Progressive groups, who questioned Oh’s hiring in the first place, cheered her departure.

In the wake of Alex Oh’s days-long tenure at the SEC, several progressive groups renewed their calls to curb the longstanding practice of hiring Wall Street defense lawyers as SEC enforcers. Indeed, the propensity of government regulators to zealously enforce laws against the companies they once represented, and often return to representing after they leave the SEC, has long been questioned, including during a semi-humorous poolside scene in the 2015 hit film “The Big Short.”

At least Gary Gensler’s hiring of Alex Oh to lead the SEC’s Enforcement Division was a short-lived mistake. Hopefully he learned to look a bit further than the nearest white-shoe corporate defense firm for his next SEC division head.

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Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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