Trump Plan to Name Scalia DOL Head Stirs Fiduciary Advocate Debate
The Trump administration’s plan to nominate corporate lawyer Eugene Scalia to head the Department of Labor is getting a mixed reaction from investor advocates.Scalia, the son of the late Supreme Court justice Antonin Scalia, led the legal team representing the Chamber of Commerce and other securities and insurance group’s successful effort to overturn the Obama Administration-era fiduciary rule governing retirement accounts. The Wall Street Journal in 2012 called Scalia “one of the industry’s go-to guys for challenging financial regulations,” the website Politico noted after President Trump tweeted his intention Thursday evening to nominate the Gibson, Dunn & Crutcher partner.
“Of course Mr. Scalia comes with a record of representing business interests,” Knut Rostad, president of the Institute for the Fiduciary Standard, said in an e-mail. “He also comes with a powerful intellect that can land him in unexpected places. The best attorneys represent both sides of a legal conflict. Prejudging people is wrong.”
Barbara Roper, director of investor protection at the Consumer Federation of America, was less sanguine.
“I think his record speaks for itself,” she said in an e-mail. “He has been the go-to attorney for the Chamber of Commerce and monied interests fighting regulations designed to protect workers and investors. I would expect senators to question him on his ability to set aside those interests as Secretary of Labor.”
Fred Reish, a specialist in retirement law issues at Drinker Biddle & Reath in Los Angeles, said Scalia will almost certainly be confirmed because of his reputation for being an “ethical and highly competent” lawyer.
“It is not disqualifying for a nominee to have relationships with organizations that are aligned with a particular party,” Reish said in an e-mail.
Alexander Acosta, who resigned as Secretary of Labor last week because of his role in arranging a plea agreement in 2008 with sex offender Jeffrey Epstein, had said that the DOL would repropose a fiduciary rule regarding retirement account sales by yearend. It was expected to conform with the Securities and Exchange Commission’s new Regulation Best Interest that investor advocates say is significantly less stringent than the customer-care standards of the DOL rule that was vacated.
Scalia’s nomination is likely to slow down or even kill the plan for a new DOL fiduciary regulation, according to Reish.
“There are much bigger issues for him to deal with at the DOL and, while the fiduciary rules and related conflict issues are important enough to get his attention, they are not at the top of a Republican ‘to do’ list,” he said.
Joe Peiffer, a New Orleans lawyer who often represents customers suing brokers and their firms over unsuitable investments, said news of the Scalia nomination could drive a fiduciary advocate to drink.
“It’s a bourbon-in-the-coffee kind of morning,” he said on Friday. “The appointment of the main advocate against the fiduciary rule is very disappointing.”
Scalia, who was chief legal officer at the Labor Department during the George W. Bush administration, successfully argued to the U.S. Court of Appeals for the Fifth Circuit in Texas last spring that the DOL overstepped its authority in passing the fiduciary rule. The client consortium he represented included the Securities Industry and Financial Markets Association, the main trade group of the securities industry.
“Mr. Scalia is a gifted lawyer,” said Tamar Frankel, a former Boston University School of Law professor who is the namesake of a prize awarded by the Institute for the Fiduciary Standard. “Having served brokers, he is well aware of their activities. He is no longer their lawyer. He is the American people and their retiree’s lawyer and I am sure he will serve his new clients as effectively as he served his clients in the past.”