Obama's SEC pick wary of zealous Wall Street prosecutions

, Bloomberg


As Manhattan's top federal prosecutor during the 1990s, Mary Jo White could have sought the corporate equivalent of the death penalty: indicting Prudential Securities Inc. for fraudulently marketing $8 billion in ruinous energy partnerships to small investors.

Instead, Prudential's attorneys pressed White, who had earned notice as an aggressive litigator in terrorism and organized crime cases, to consider something less punitive. She ultimately accepted, agreeing to a $330 million fine and placing Prudential on probation, allowing it to avoid criminal charges.

"We persuaded them there was an unacceptably high risk that charging Prudential Securities would lead to significant losses for the innocent shareholders," said Scott Muller, a New York defense attorney who represented Prudential. "What she avoided was inappropriate collateral damage."

How White handled the Prudential case belies her notoriety as a brass-knuckle prosecutor — a reputation stoked by President Barack Obama last month when he nominated her to be chairman of the U.S. Securities and Exchange Commission.

Obama picked her to lead an agency that's been criticized by lawmakers, consumer groups and jurists including U.S. District Court Judge Jed Rakoff for bringing few cases against top executives of major banks in the wake of the 2008 credit crisis and for settling enforcement cases without requiring a defendant to admit guilt. "You don't want to mess with Mary Jo," the president said.

White's record on white-collar cases reveals a more practical streak. Her invention of corporate probation, or deferred prosecution, in the Prudential matter was later copied by scores of U.S. attorneys seeking punishment for a company without going to trial.

'Feeding Frenzy'

Since stepping down as U.S. Attorney for the Southern District of New York in 2002 and returning to practice as a Wall Street defense lawyer, White, 65, has spoken out against what she called a "feeding frenzy" of enforcement after financial scandals.

Defense lawyers and former colleagues in the prosecutor's office say the Prudential case and White's comments don't indicate she would pull punches on corporate wrongdoing.

"She is ethical and smart and she doesn't come with a bias," said Sara E. Moss, who worked with White as a prosecutor during the late 1970s and is now general counsel of The Estee Lauder Cos Inc. "She would be an incredibly zealous public servant for the SEC."

Regulatory Role

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