Securities and Exchange Commission (SEC) Chair Mary Jo White should recuse herself from the selection of the next chair of the Public Company Accounting Oversight Board (PCAOB) due to an apparent conflict of interest created by the decision’s impact on White’s household income, a national coalition of 14 organizations said in a letter today.
Mary Jo White’s husband John White sits on the PCAOB’s Standing Advisory Group (SAG), selected by the members of the PCAOB, who are in turn chosen by Mary Jo White and the SEC.
John White’s role on the SAG has been marketed extensively by his law firm Cravath Swaine & Moore, LLP, where he practices securities law. His employment as a partner at Cravath forms the large majority of Mary Jo White’s family income, noted the groups.
“SEC Chair White should insure that her household income, which largely derives from her husband’s work as a Cravath attorney, doesn’t compromise her critical decisions affecting Cravath-represented clients,” said Bart Naylor, financial policy advocate for Public Citizen.
Scrutiny of Mary Jo White’s conflict of interest in PCAOB staffing was elevated in early September, when Bloomberg reported that White was considering potential candidates to replace PCAOB Chair James Doty. Doty – whose tough proposed accounting reforms have drawn industry ire and a fierce lobbying effort – has signaled he would like to return for another term.
After ensuing media coverage noted Cravath’s marketing of John White’s role on the SAG, Cravath quickly removed references to White’s position on the SAG from its website by the following day, as reported by MarketWatch.
“If there were any doubts about the improper link between Mary Jo White’s official actions and John White’s financial gain, Cravath’s frantic attempt to scrub its website put them to rest,” said Kurt Walters, campaign manager at Rootstrikers. “Mary Jo White should immediately announce her recusal from all further personnel decisions at PCAOB while her family income is so clearly at stake.”
The groups also called for the public release of any ethics guidance Chair White has relied on to date to continue her involvement in personnel matters at the PCAOB. They highlighted her previous written commitment to obtain ethics waivers before taking any action with a “direct and predictable effect” on her husband’s employment at Cravath.
“Chair White publicly swore to rely on waivers when her actions might have a ‘direct and predictable effect’ on John White’s role at Cravath, and her role helping select the PCAOB creates an appearance of just such an effect,” said Jeff Hauser, director of the Revolving Door Project at the Center for Effective Government. “The public is entitled to review the ethics guidance by which she reached the conclusion that she not only could go forward, but could do so without a waiver. Moreover, given the multiplicity of conflicts the Chair brought with her to the SEC and the absence of any 18 U.S.C. § 208(b)(1) or (b)(3) waivers, complete transparency in ethical guidance (with appropriate redactions) is necessary to restore public confidence in the SEC.”
The coalition letter was signed by Alliance for a Just Society, American Family Voices, Campaign for America’s Future, Center for Effective Government, Center for Popular Democracy, Community Organizations in Action, Communications Workers of America, Democracy for America, Main Street Alliance, MoveOn.org Civic Action, The Other 98%, Public Citizen, RootsAction, and Rootstrikers, and is available at https://s3.amazonaws.com/new.