As the White House casts about for commissioners to fill two soon-to-be vacant spots in the Securities and Exchange Commission, one name has risen to the top: Keir Gumbs. But government watchdogs are expressing growing concerns that Gumbs, who left a previous SEC stint for corporate law, would further the so-called revolving door trend among federal regulators.
In recent years, the SEC has become ground zero in the revolving door debate. Staffers leaving the agency often find themselves working for the same companies they had just overseen, while new hires are drawn from the corporate pool. Critics including Sen. Elizabeth Warren, D-Mass., have slammed Chair Mary Jo White for perceived conflicts of interest stemming from her work at the law firm Debevoise & Plimpton, whose roster is chock-full of Wall Street clients.
If Gumbs ends up winning the White House nod, his nomination could become a lightning rod for critics who decry close ties between regulators and the corporations they regulate. As an esteemed corporate lawyer, Gumbs has counseled companies around some of the most hot-button issues facing the SEC, including shareholder activism and disclosure of political giving.
“The SEC would broadly benefit from people whose prime interest is the public interest,” says Jeff Hauser of the Center for Effective Government. “We would have concerns with any nominee whose primary background is corporate law.”
Hauser’s concerns are shared by advocacy groups like Credo Action, which has attracted nearly 90,000 signatures on a petition encouraging President Barack Obama to consider potential commissioners with fewer industry ties.
Covington And Burling
Gumbs joined the SEC as a legal adviser in 1999. By 2004, he was an adviser to Commissioner Roel Campos, a George W. Bush nominee who would later leave for private practice.
In 2005 Gumbs departed and joined the practice of Covington & Burling, one of Washington’s highest-profile white-shoe law firms. He wasn’t the only Covington attorney with a government pedigree. The firm boasts of snagging former officials from the SEC, the Treasury Department and the Justice Department -- including the DOJ’s former Criminal Division head Lanny Breuer.
At Covington, Gumbs began advising private companies and nonprofits on a diverse array of issues, ranging from shareholder proposals to stock buybacks to mergers and acquisitions. He was a rising star, winning Fortune 500 clients in pharmaceuticals and the energy industry. This year Gumbs was named one of Savoy magazine's Most Influential Black Lawyers. He could not be reached for comment Friday.
Gumbs’ work repeatedly has brought him face-to-face with former colleagues. He represented the American Petroleum Institute, for instance, as it met with SEC officials on rulemaking around disclosing payments to foreign governments, measures meant to stem corruption. Final rules are expected to be hashed out in 2016 -- after the new commissioners will have arrived.
In another case, when the online peer-to-peer lender Prosper was hit with an SEC cease and desist order in 2008, Gumbs stepped in to smooth things out. “We thought it was DOA,” the attorney told the National Law Journal in 2014. Prosper eventually won a reprieve from the SEC and has become a leading online lender.
The area where Gumbs has made some of his most salient contributions involves shareholder proxy activism, a contentious field over which the Securities and Exchange Commission holds unique jurisdiction.
Every year, investors, including public pensions and private citizens, bring a flurry of proposals to corporate annual meetings on issues ranging from executive pay to political giving. Other proposals might come from activist hedge funds looking to extract returns. Corporations, in turn, try to bat down as many of these campaigns as they can, enlisting the help of law firms to do so.
The SEC stands between the warring parties. When a publicly traded company wants to dismiss proposals it deems pesky or invasive, it must petition the SEC, which can either grant the firm’s rejection or let the proposal through.
The issue piqued some corporate managers in the most recent shareholder meeting season. Given the complexity and diversity of corporate structures, many investors rely on so-called proxy advisers to help make sense of voting decisions. This year, some of the top advisers suggested voting against several CEO pay resolutions, including one that came close to delivering JPMorgan Chase CEO Jamie Dimon an embarrassing pay cut.
Dimon responded by calling the investors who heeded the advice “lazy” and casting doubt on their investing abilities.
Gumbs has become a vocal presence on the corporate side of this perennial battle. In 2011, he advised Apache Corp., an oil and gas company, to execute an innovative method of blocking shareholder activists: Sue them. Gumbs has written articles on managing shareholder campaigns, and his name appears on numerous corporate SEC filings of corporations looking to swat away proxy proposals.
But at the same time Gumbs has helped corporations deflect proxy votes, the SEC has charted a more permissive course for shareholders. Under White, the SEC has responded to criticisms that it rubber-stamps corporate requests and moved to allow more such proposals.
That could put Gumbs in conflict with fellow commissioners. “The job of the SEC is to protect shareholders from management that use corporations for the interests of management rather than the broader well-being of the company,” says Hauser. “It’s concerning when corporate management tries to rein in shareholder advisers.”
Disclosure And Recusal
Gumbs’ work with Covington has touched on other controversial subjects.
As the Intercept first reported, Gumbs has emerged as a specialist in helping corporate clients minimize their disclosure of political donations. He has offered “one-hour primers” on pushing back against shareholder demands for political spending transparency and co-authored a comprehensive guide around “grappling with disclosure issues.”
Gumbs’ co-author later appeared on CNBC arguing that “corporate political disclosure has utterly nothing to do with the SEC.”
At one point, the SEC considered passing rules outlining how companies must disclose their political spending, but in 2013 the agency dropped the proposal. Still, investors have continued to push for transparency in how corporate managers use company cash to influence politics.
Gumbs’ potential nomination also would likely revive concerns about recusals at the SEC. In February, the New York Times reported that Mary Jo White, whose husband works for the law firm Cravath, Swaine & Moore, had to recuse herself from at least four dozen enforcement actions due to potential conflicts of interest with her former clients or those of her husband.
Critical votes around enforcement issues languished as White, often the tie-breaker for deadlocked Republican and Democratic commissioners, waited on the sidelines. In a letter earlier this month, Sen. Warren told White she was “particularly concerned about both the potential for conflicts of interest and the potential that regular recusals could disrupt the Commission’s work.”
Some worry that SEC ethics rules could pose similar barriers for Gumbs. “If he has to recuse himself with former clients, it could make him less effective as a leader,” says Michael Smallberg, an investigator with the Project on Government Oversight, a public interest organization founded in 1981.
Luis Aguilar, the outgoing commissioner whose spot Gumbs may be tapped to fill, will see his term expire this month. Nonetheless, he could choose to stay in office until a successor is named. Given the contentious atmosphere surrounding current possible nominees, that could take a while.