SEC’s Director of Enforcement Unexpectedly Resigns Just Days after Taking the Job: Reminiscent of Previous Resignation by former Chairman Harvey Pitt

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

Alex Oh, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler’s pick for the agency’s Director of the Division of Enforcement, unexpectedly resigned on Wednesday amid growing criticism for her decades-long work as a private corporate defense lawyer. Ms. Oh’s hiring was announced on April 22, 2021, less than a week before her resignation.

Ms. Oh’s resignation followed a ruling on Monday from Judge Royce C. Lambeth of the Federal District of Columbia reprimanding ExxonMobile’s legal team, which included Ms. Oh, for their conduct in a class action lawsuit brought by Indonesia villagers against Exxon alleging human rights abuses. According to the ruling, Exxon’s defense team characterized the lawyers for the villagers as “agitated, disrespectful and unhinged” during a deposition. Judge Lambeth ordered Exxon’s lawyers to show why penalties were not warranted for those comments.

Judge Lambeth’s ruling highlighted mounting criticism from progressives about Mr. Gensler’s decision to appoint Ms. Oh, a long-time corporate lawyer with a history defending Fortune 100 companies facing government investigations, to head the agency’s Division of Enforcement charged with overseeing the finance industry. The day before Ms. Oh’s resignation, three leading progressive advocacy groups—Demand Progress, the Progressive Change Campaign Committee, and the Revolving Door Project—delivered a letter to Mr. Gensler voicing their “surprise and disappointment” for Mr. Gensler’s decision to hire Ms. Oh. The letter urged Mr. Gensler to withdraw Ms. Oh’s appointment, due in large part to her work defending corporate clients from the enforcement of securities regulations she was now being asked to oversee, and instead appoint an attorney with a proven track record of public-oriented service.

The backlash against Ms. Oh’s hiring was in contrast to progressives’ relative support for President Biden’s appointment of Mr. Gensler to chair the SEC. Mr. Gensler has a reputation as a tough regulator from his time chairing the Commodity Futures Trading Commission during the Obama administration and was anticipated to usher in a more aggressive regulatory and enforcement climate at the SEC.

Chairman Gensler announced in a news release that Melissa Hodgman would return to the role of Acting Director of the Division of Enforcement, a role she held prior to Ms. Oh’s appointment.

It remains to be seen whether either Ms. Hodgman’s “Acting” role simply becomes permanent or Chairman Gensler finds someone with similar former SDNY credentials who is also now at Big Law (and therefore subject to same potential track record issues of being too close to potential investigative targets) or as some have suggested, someone who is presently in the public sector without a recent track record of corporate defense. This is reminiscent somewhat of the circumstances surrounding former Chairman Harvey Pitt’s resignation in 2002, who was frequently attacked for perceived conflicts of interest in representing accounting firms as the wave of accounting scandals hit Wall Street (e.g., Enron and Arthur Anderson). While that involved the Chairman, what is notable here is the importance placed on the Director of Enforcement (who reports to the Chairman) being exposed to similar scrutiny.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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