Naming of Cox to SEC Gets Mixed Reception

WASHINGTON — At the height of the Enron scandal, as Congress moved ahead with sweeping corporate-reform legislation, the normally pro-business Rep. Christopher Cox stepped forward to embrace stiff new regulatory measures.

The Newport Beach Republican likened executive cheats to “bacteria” as he sought to rally House colleagues in favor of the landmark Sarbanes-Oxley anti-fraud law of 2002.

But on Thursday, after President Bush nominated Cox to head the Securities and Exchange Commission, some corporate critics said the congressman’s long-term record raised fears that he would seek to roll back regulations that have helped to restore investor confidence in business and markets.

His sponsorship in 1995 of a law aimed at limiting shareholders’ ability to sue companies for alleged securities fraud has quickly become a defining issue for those concerned about Cox’s appointment as SEC chief.

“We consider it one of the most anti-investor pieces of legislation to have been considered in Congress in the last two decades,” said Barbara Roper, head of investor protection at the Consumer Federation of America.

Supporters, however, painted Cox as someone who could strike a delicate balance: preserving the major reforms enacted in the wake of the financial scandals that began with Enron, while defusing the business backlash over some of the rules the SEC pursued in reaction to those scandals.

Introducing Cox at a White House ceremony, Bush suggested that his nominee had the attributes needed to bridge divergent views of the SEC’s role as the nation’s financial regulator.

“He proved that he can bring people together of diverse opinions to get things done. That kind of leadership will be invaluable as the chairman of the SEC,” Bush said.

If confirmed by the Senate, the 52-year-old Cox -- low-key, cerebral and a classically conservative Republican -- would replace William H. Donaldson, who announced his resignation Wednesday after presiding over a stormy two years at the agency.

Donaldson, 74, surprised Wall Street by leading an aggressive rule-making campaign that caused a deep split with his fellow two Republicans on the five-member SEC panel and triggered accusations from business interests that the agency was going too far with reregulation.

If Cox takes a more pro-business approach at the commission, he and the other two Republicans, Paul S. Atkins and Cynthia A. Glassman, conceivably could reverse some of the controversial reforms supported by Donaldson and the two Democrats, Harvey J. Goldschmid and Roel C. Campos.

Cox on Thursday assumed the voice of a regulator, decrying financial misconduct as a threat to the vitality of the U.S. economy. “The natural enemies of this economic marvel are fraud and unfair dealing,” he said, following his introduction by Bush.

Cox added that he looked forward “to carrying out that mandate” of protecting investors.

While some anticipated a tough confirmation process, no one Thursday predicted that he would be blocked. Indeed, Democratic California Sen. Dianne Feinstein, who had held back supporting Cox when he was a possible judicial candidate for the U.S. 9th Circuit Court of Appeals, agreed to introduce him to the Senate Banking Committee, which will consider his nomination.

“I have no reason to oppose him and believe he’s qualified to do the job,” Feinstein said.

A native of St. Paul, Minn., and a graduate of USC and Harvard University’s law and business schools, Cox is a fomer legal advisor to President Reagan. He was first elected to the House in 1988, representing his Orange County district.

His interests have been varied and ambitious: the emerging Internet, technology leaks to China, the deployment of missile systems and, most recently, homeland security.

Earlier in his career, Cox was closely identified with former House Speaker Newt Gingrich and a band of Republicans who sought big reductions in the government’s regulatory apparatus.

He has long been drawn toward financial issues, often working to cut taxes and stymie what he viewed as government intrusion in corporate matters. For example, Cox has energetically opposed the federal estate tax as well as state efforts to tax Internet commerce.

On Wall Street, he is best known for laws he helped author in 1995 and 1998 that limited shareholders’ ability to file securities-fraud lawsuits.

Companies, including many in the technology industry, argued that they were paying huge sums to defend against abusive class-action lawsuits. Typically such suits have been filed when a company stumbles badly and its stock price tumbles. Business interests said they were being victimized by law firms trying to shake them down financially.

Critics of the laws say they have hampered shareholders’ ability to seek redress from corrupt corporate managers. But among business leaders, Cox’s efforts with that legislation have been widely praised.

“His sensitivity to litigation risk and securities class-action risk -- that certainly is positive,” said David Chavern, director of corporate governance at the U.S. Chamber of Commerce. He described Cox as “very well qualified” to lead the SEC.

Cox also has been a leading congressional opponent of plans by the Financial Accounting Standards Board, which sets U.S. accounting rules, to require companies to treat stock option grants as a business expense.

Many companies, particularly technology firms, say formal expensing of options would undermine business’ ability to continue with the programs, which they say give workers a greater stake in their employers.

By Thursday, like-minded lawmakers already were hoping that Cox would resurrect that fight at the SEC, which oversees the accounting standards panel.

“Rest assured, when I see him, following the word ‘congratulations’ is this issue,” said Rep. Anna G. Eshoo, a Silicon Valley Democrat. She said she would urge Cox to push the SEC to take a “fresh new look” at the options-expensing rule.

The Democratic National Committee had a far more critical take on Cox, with a release headlined: “Right-Winger Chris Cox -- Who Repeatedly Favored Corporate Interests Instead of Investors and Retirees -- Tapped to Head the SEC.”

But former SEC Chairman Arthur Levitt said those already lining up to criticize Cox “are going to be pleasantly surprised.”

Levitt said that although he has disagreed politically with Cox on issues over the years, “I know he will put an emphasis on investor issues. He’s smart enough not to polarize the diverse constituencies the commission deals with, and he knows the securities business. He’s not a blind ideologue.”

Roper, of the Consumer Federation, said that although Cox’s legislative record was of “some very considerable concern,” she still felt that “he has the capacity to be a very effective SEC chairman.”

Times staff writer Josh Friedman contributed to this report.

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Profiles

Charles Christopher Cox

Age: 52

Party: Republican

Personal: Married to the former Rebecca Gernhardt, a vice president at Continental Airlines. They have three children.

Education: BA, University of Southern California, 1973; MBA, Harvard Business School, 1977; JD, Harvard Law School, 1977

Career highlights

1978-82: Partner, law firm Latham & Watkins

1982-83: Lecturer on business administration, Harvard Business School

1984-86: Co-founder, Context Corp.

1986-88: Senior associate counsel to President Reagan

1988-present: U.S. Republican congressman from Newport Beach

1997-2000: Chairman, Select Committee on U.S. National Security and Military/Commercial Concerns With the People’s Republic of China

January 2005-present: Chairman, Committee on Homeland Security

Highlights of voting record in Congress

1993: Votes against bill to grant workers extended family and medical leave

1993: Votes for North American Free Trade Agreement

1994: Votes for General Agreement on Tariffs and Trade global trade treaty

1995: Writes a law that limits the ability of investors to sue companies over allegations of securities fraud

1995: Votes to relax Clean Water Act regulations

1996: Votes against raising the minimum wage

1999: Votes against imposing steel import quotas

2000: Votes against raising the minimum wage

2000: Votes for granting China permanent normal trade status

2001: Votes to nullify Labor Department ergonomics rule

2002: Votes for Sarbanes-Oxley corporate reform act

Other Commissioners

If the Senate approves Cox as SEC chairman, he would join two other Republicans and two Democrats on the panel.

Cynthia A. Glassman

Age: 58

Party: Republican

Education: BA in economics, Wellesley College, 1967; PhD in economics, University of Pennsylvania, 1975

Career highlights

1977-86: Economist, Federal Reserve Board

1986-88: Works for Economists Inc.

1988-97: Works for Furash & Co., a management consulting firm

1997-2002: Holds various positions at accounting firm Ernst & Young

2002-present: SEC commissioner

Paul S. Atkins

Age: 47

Party: Republican

Education: AB, Wofford College, 1980; JD, Vanderbilt University School of Law, 1983

Career highlights

1990-94: Executive assistant and counselor, respectively, to SEC Chairmen Richard C. Breeden and Arthur Levitt

1994-98: Partner, accounting firm Coopers & Lybrand

1998-2001: Partner, accounting firm PricewaterhouseCoopers

2002-present: SEC commissioner

Roel C. Campos

(if renominated by President Bush when his term expires this year)

Age: 56

Party: Democrat

Education: BS, Air Force Academy, 1971; MBA, UCLA, 1972; JD, Harvard Law School, 1979

Career highlights

1985-89: Federal prosecutor, Los Angeles

1990-95: Attorney in private practice

1995: Co-founds El Dorado Communications

2002-present: SEC commissioner

Annette L. Nazareth

(if nominated by Bush, as recommended by leading Democrats, to replace Democrat Harvey J. Goldschmid, who plans to step down this summer)

Age: 49

Party: Democrat

Education: AB, Brown University, 1978; JD, Columbia University, 1981

Career highlights

1994-97: Senior vice president, brokerage Lehman Bros.

1997-98: Works in brokerage Salomon Smith Barney’s capital markets legal group

1998: Joins the SEC as senior counsel

1999-present: SEC director of market regulation

Sources: Associated Press, Who’s Who in America, Bloomberg, Congressional Quarterly, Times research

Los Angeles Times