Washington, DC – U.S. Senator Catherine Cortez Masto (D-Nev.), member of the Senate Banking Committee, sent a letter to Jay Clayton, the Trump Administration’s nominee for Chairman of the Securities and Exchange Commission (SEC), regarding concerns about Clayton’s ability to effectively serve as SEC Chair, citing Clayton’s numerous conflicts of interest and work on behalf of corporations with ties to Russia and Iran.
“Based on publicly available information, I am concerned that you will have to recuse yourself frequently to avoid potential conflicts in matters involving your former clients or those of Sullivan & Cromwell,” wrote Cortez Masto. “Your recusals could leave the Commission deadlocked and unable to act expeditiously in a number of enforcement matters, undermining the Commission’s ability to hold those companies accountable.”
Cortez Masto also raised concerns about Clayton’s representation of TeliaSonera, a “Swedish telecom company with links to Russia and Iran.”
Cortez Masto requested that Clayton provide details on the exact nature of his work with TeliaSonera, as well as a full list of clients Clayton has represented before his confirmation hearing before the Banking Committee on March 23, 2017, writing, “the Senate and the public deserve to know more about the extent of your potential conflicts so they can assess your suitability to serve as SEC Chairman.”
Full text of the letter can be viewed here and below:
Dear Mr. Clayton,
Congratulations on your nomination to serve as Chairman of the Securities and Exchange Commission (SEC).
I am concerned that your long career representing companies regulated by the SEC will require you to recuse yourself from a wide variety of SEC enforcement matters, which may, in turn, limit the SEC’s ability to resolve cases in an expeditious manner. Therefore, I write to ask you to publicly disclose information relating to your current and former clients so that the Senate – and the public – can assess the extent of your potential conflicts and the possible effect on the SEC’s enforcement activities.
Congress created the SEC in response to widespread loss of confidence in public markets following the stock market crash of 1929. Each aspect of the SEC’s mission – “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” – relies on consistent enforcement of securities laws. If market participants can evade SEC accountability, markets and investors will suffer.
The tenure of the outgoing SEC Chair, Mary Jo White, demonstrates how routine recusals can stifle the Commission’s enforcement work. Like you, Ms. White represented corporate clients at a large law firm before being nominated. President Obama’s Executive Order on ethics for political appointees required Ms. White to recuse herself for two years from any matter involving her former firm or its clients.
After Ms. White was confirmed to lead the SEC, the Commission routinely struggled to resolve enforcement matters because Chair White had to recuse herself from participating in dozens of SEC enforcement decisions. Indeed, because of Chair White’s client list – and her husband’s continuing employment at a large law firm – Chair White had to recuse herself from nearly fifty enforcement investigations. That often left the Commission deadlocked on decisions relating to enforcement actions, “delaying settlements and opening the door… to a lighter punishment” in at least one instance.
I fear that the SEC may face similar struggles under your leadership. President Trump’s Executive Order on ethics requires that you refrain from participating for two years “in any particular matter involving specific parties that is directly and substantially related to [your] former employer or former clients.” As a long-time partner at Sullivan & Cromwell you represented “a virtual who’s who list of industry titans.” Neither you nor your firm has publicly disclosed your full client list, but the Sullivan & Cromwell website contains a sample of 20 corporate clients that you represented during your tenure at the firm. This list includes a number of publicly traded firms that are regulated by the SEC. Four of your clients have been charged with violations of SEC rules in the last five years.
I am particularly concerned about your involvement with TeliaSonera “in connection with various transactions involving Turkcell and Megafon.” Telia is a Swedish telecom company with links to Russia and Iran that may be in the midst of negotiating a massive settlement with the U.S. government related to violations of the Foreign Corrupt Practices Act (FCPA), a law prohibiting U.S. companies from bribing foreign officials which is enforced by the U.S. Department of Justice and SEC.
Telia holds a 25.2% share in MegaFon, Russia’s second largest mobile operator. In 2012, TeliaSonera negotiated a deal to sell 8.2% of its stake in MegaFon to Russian oligarch Alisher Usmanov, an associate of Vladimir Putin, for $1.45 billion.The disclosures on the Sullivan & Cromwell website indicate that you may have represented TeliaSonera in this transaction. Mr. Usmanov is also a major investor in Alibaba, another company you have represented.
Telia also holds a 38% ownership stake in Turkcell, a Turkish mobile provider. Turkcell has a “longstanding interest in Iran” and reportedly sought to invest in Iran as sanctions were lifted. The SEC has previously contacted TeliaSonera to clarify its involvement with state sponsors of terrorism such as Iran.
The SEC has also investigated Telia for an incident involving a bribe paid to the daughter of Uzbek dictator Islam Karimov in exchange for access to the Uzbek market. In September 2016, U.S. and Dutch authorities proposed a $1.4 billion settlement with Telia in this matter It is not clear whether this and other potential matters involving Telia have been resolved.
Based on publicly available information, I am concerned that you will have to recuse yourself frequently to avoid potential conflicts in matters involving your former clients or those of Sullivan & Cromwell. Your recusals could leave the Commission deadlocked and unable to act expeditiously in a number of enforcement matters, undermining the Commission’s ability to hold those companies accountable. The Senate and the public deserve to know more about the extent of your potential conflicts so they can assess your suitability to serve as SEC Chairman.
Accordingly, I ask that you please provide me with the following information prior to your hearing before the Senate Committee on Banking, Housing, and Urban Affairs:
- Please describe the precise nature of your representation of TeliaSonera or Telia Company, including:
- the dates during which you represented TeliaSonera or Telia Company;
- your involvement with sale of TeliaSonera’s stake in MegaFon to Mr. Usmanov;
- any work conducted on behalf of TeliaSonera or Telia Company related to inquiries from U.S. government agencies regarding TeliaSonera or Telia Company’s contacts with countries identified as state sponsors of terrorism by the U.S. State Department; and
- any work conducted on behalf of TeliaSonera or Telia Company related to U.S. government agency investigations into alleged bribes paid to the daughter of Uzbek dictator Islam Karimov in exchange for access to the Uzbek market.
- A list of every client you currently represent or have represented while a partner at Sullivan & Cromwell, and a brief description of the nature of your representation and outcome in each instance.
- A list of every current client of Sullivan & Cromwell that is either regulated by the SEC or may be directly and substantially impacted by any decision made in your capacity as SEC Chairman, if confirmed (including as a voting member of the Financial Stability Oversight Council) consistent with President Trump’s Executive Order on ethics.
- A list of your current or former clients that currently have open and publicly disclosed investigations with the SEC.
- A list of every client of Sullivan & Cromwell that currently has open and publicly disclosed investigations with the SEC.
- A list of every current or former client that has been charged with violating SEC rules in the last five years.
- A list of every client of Sullivan & Cromwell that has been charged with violating SEC rules in the last five years.
- A list of any other potential recusals you will face as SEC Chairman, and the reasons for these recusals.
If you have any questions, please contact my office.