By Michael Smallberg
The Securities and Exchange Commission (SEC) was in the hot seat once again last week for its $154 million settlement with JPMorgan.
The SEC had charged JPMorgan with structuring and marketing a complex mortgage securities deal just as the housing market was starting to plummet, without informing investors that the hedge fund Magnetar had essentially created the deal and bet against it. Shortly after the settlement was announced, critics started to raise questions about the terms of the settlement, including the lack of charges for individuals at JPMorgan.
Jean Eaglesham at The Wall Street Journal wrote that it was “another instance of the SEC deciding it doesn’t have the evidence to bring cases against individuals at financial firms blamed for triggering or worsening the financial crisis.” Jonathan Weil at Bloomberg observed that “JPMorgan, without admitting or denying the SEC’s claims, gets to say it wasn’t accused of any intentional violations of the law, or even any reckless ones. And aside from the SEC’s unproven allegations, the public has little idea what really went on.”
And Ryan Chittum at the Columbia Journalism Review pointed out that Robert Khuzami, Director of the SEC’s Enforcement Division, had previously worked as a general counsel at Deutsche Bank at a time when the firm was flooding the market and misleading investors about the same kind of risky mortgage deals that got JPMorgan in trouble.
As it turns out, this isn’t the only indicator of the revolving door in the SEC-JPMorgan settlement.
JPMorgan was represented by the law firm Bingham McCutchen, whose “team members include lawyers who have held senior positions with the SEC’s Division of Enforcement, Office of General Counsel and Division of Market Regulation.” A press release posted on Bingham’s website last week identified the partners who worked on the JPMorgan-SEC settlement. This prestigious list includes a former senior official in the SEC’s Enforcement Division, the former Branch Chief of an SEC regional office (who also filed several post-employment statements included in POGO’s SEC revolving door database), and the former chief of enforcement at the Financial Industry Regulatory Authority (FINRA), the securities industry’s self-regulatory organization.
See if you can spot them below!
Michael Smallberg is a POGO Investigator.