The Revolving Door Between Government and the Law Firms
Jenkins, John A.
The Revolving Door Between Government And the Law Firms by John A. Jenkins Federal Trade Commissioner Stephen A. Nye was in the job market. A San Francisco antitrust lawyer, Nye was...
...Caplin essentially founded a law firm on the basis of his service as a commissioner," said a colleague who didn't want to be identified...
...The way we manage to compensate them [for lower government salaries] is by enabling them to use these jobs as a useful step in their upward mobility: Treasury can offer useful inducements to . upward mobility...
...The abuses are not of low visibility, they're absolutely invisible...
...If a firm didn't hire ex-agency lawyers, it might lack anyone with the necessary expertise— or clout—to handle cases before that agency...
...During his 1961 FCC confirmation hearing, a senator asked Minow why he was qualified to become the commission's chairman...
...I've never seen anything like it," says Freedman...
...Agency alumni who become Washington lawyers continue to be part of the agency's inner circle, enjoying easy access to their successors in government...
...Take the situation at the Federal Communications Commission, where Dean Burch's law firm was challenged...
...Caplin's successor at IRS was Sheldon S. Cohen...
...And the Justice official who accompained Lee that day called Freedman a "self-appointed vigilante...
...Agencies have sidestepped this sensitive issue by permitting others in the firm to continue handling a case as long as the disqualified attorney is "screened" from participation...
...Again, no clients...
...This frequent turnover can be murderous for the agencies, killing continuity, stalling important programs, and generally making it more difficult for them to fulfill their missions...
...Even the lawyers themselves don't trust one another...
...It wanted the FTC to reopen the case and amend its divestiture order, and had retained Adair in an effort to achieve that result...
...They acknowledged that they couldn't justify a switch intellectually, but were reacting to the pressure they were getting" from Washington lawyers...
...You can't get these people to take the job otherwise...
...He started there yesterday...
...A to ugh disqualification rule would also be disastrous for any Washington law firm with a substantial practice before one federal agency...
...At the outset, there would be a postgraduate indenture at, say, the Securities and Exchange Commission or the FTC...
...Shortly before Nye left the FTC last year, I examined his phone and appointment logs, as well as those of his fellow commissioners...
...I have had calls from several different committee staff members, expressing concern about the action...
...At mid-career, he might move back into the commission as a general counsel or a senior official, later to grab the brass ring—a partnership in a major law firm, with an accompanying six-figure income...
...Consider the case of William Ruckelshaus, who was the first director of the Environmental Protection Agency from 1970 to 1973...
...At the center of this controversy are the means by which the conflicts of interest that arise when a government attorney departs federal service and joins the other side can be avoided...
...Nye sympathized, but the other Commissioners wouldn't budge...
...Adair's office," the law firm's receptionist added cheerfully when I called...
...The issue was, and continues to be, one of improper appearances...
...I had a conversation with Lloyd Cutler [a highly respected Washington lawyer who adamantly opposes the disqualification proposal] . He was trying to persuade me to change my mind, and he said, 'Look, you have a meeting coming up...
...then a term as a law firm associate...
...The 1962 federal conflict-of-interest law clearly prohibits this—it says that a former government attorney is disqualified from representing anyone else in matters that he "personally and substantially" worked on while with the government...
...Five commissioners ruled that Dean Burch's law firm should not be disqualified...
...Washington law firms claim they hire so many ex-government types that the blanket disqualification rule would make this city a legal ghost town...
...A lawyer could take with him a wealth of knowledge about the government cases he's been prosecuting and use that knowledge against the government, to the advantage of his clients in private industry...
...Congressional action would trump everything else, and might be the last thing that the opponents want, because that likely would be phrased in criminal terms...
...In any event, the agency received the value of Hutt's considerable legal expertise in the food and drug field, and Hutt got an insider's perspective on how the FDA operates...
...Engman's minority view would have relatively few lawyer adherents inside government (and none outside), because officials realize that the clearance decisions they make now will be applied to them later...
...There isn't a single lawyer in Washington who will tell you there are not abuses...
...They are flailing away, doing all they can to kill it...
...through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise...
...The bold language drafted by the D.C...
...The United States has more lawyers per capita than any other nation, and as their numbers increase, our trust in them declines...
...Who the hell does he think he is...
...He was a former chairman of the FCC...
...If a firm hired away even one of an agency's lawyers, its partners would risk disqualification, and that would mean a loss of clients...
...A perusal of the richly bound volumes of the Martindale-Hubbell Law Directory can tell us a great deal about the Washington lawyers who switch sides...
...They are saying in essence, 'Although the memoranda sent to the official's office are non-public, take it from us, those memoranda really are not sensitive.' This is not very convincing to me...
...Benjamin Rosenthal said Hutt "should not be appointed to a job of supervising his former clients...
...Katzenbach was attorney general during 1965 and 1966, when the Justice Department commenced a major antitrust investigation of IBM...
...The Commission has a duty to the public not only to assure it of absolute scrupulousness, but to convince it of that fact," he wrote...
...That, it seems to me, illustrates the unwholesome relationship— or interrelationship— between the law firms that represent those who are regulated, and the government agencies that do the regulating...
...The Times said the largest number of contacts, 37, were made for the Society of the Plastics Industry, a trade association vitally interested in air pollution controls that EPA is considering placing on manufacturers of polyvinyl chloride...
...The conflict-of-interest law underlying the agency rules is so loosely administered that Justice has sought to prosecute only six individuals in the past ten years for violating it...
...Every one of those commissioners, for practical purposes, was deciding his own case for next year...
...rarely were they disqualified from participation in agency proceedings...
...I would deny clearance whenever a former employee acquired, or was in a position where he typically would have acquired, non-public information which either is in fact sensitive or belongs to a class which typically is sensitive...
...In effect, the majority is asking the public to believe the Commission on blind faith...
...When Lloyd Cutler sends a represen tative, he sends someone from the Justice Department...
...In fact, the general counsel's offices at Treasury and IRS must have been severely depleted by the time Caplin got through combing them for law partners...
...Could I send a representative to be heard on the issue at that meeting?' I said, 'Okay.' "So at the next meeting, not one but two representatives of Lloyd Cutler showed up—both from the Justice Department, and one was an assistant attorney general of the United States...
...They are advocates for hire, and their frequent shuttles between public and private practice attest to that fact...
...It's almost expected" that government tax lawyers will use federal service as a stepping stone to a lucrative private practice," says an experienced tax lawyer who did that himself...
...The turnover problem...
...What will happen if the ethics committee's disqualification gambit fails...
...The government's number-one tax man set up his own law firm (Caplin and Drysdale) in 1964 to counsel corporate clients on the intricacies of avoiding Uncle Sam's tax bite, and today his firm is the country's most prestigious for tax work...
...Two thirds of those who leave have been there less than three years...
...Not yet...
...He's probably in Mr...
...Waivers are routinely granted in private litigation, and even though the federal conflict-of-interest law says nothing about the government's prerogative to waive disqualification, agencies regularly do so...
...Someone had to remind the poor fellow he had resigned two years previously and belonged at the counsel table on behalf of a trucking firm...
...A former FTC executive director had asked permission to represent some auto dealers being sued by the Commission, and the Commission had given its approval—even though that same official had responsibility for the lawsuits while at the FTC, and "probably" had seen three confidential memoranda discussing the cases...
...Tax attorneys are there only to advance their own personal careers...
...Martindale-Hubbell says five of the firm's seven other senior partners left government with, or shortly after, Caplin...
...The conflict is compounded by having it decided in the very agency where you're worried there is a conflict...
...They simply said Burch should be screened...
...Of the outsiders who were listed as having visited Nye to discuss Commission matters (a perfectly legal practice), the name of Wallace Adair stood out...
...You might as well call the firm 'Former Commissioner of the IRS and Drysdale.' On the other hand, they are very good...
...The government filed its lawsuit against the giant corporation in 1969—about the same time Katzenbach became IBM's general counsel...
...Ruckelshaus' firm (he resigned his practice last year) quietly contacted his old agency 178 times in 1974 and 1975 on behalf of 20 different clients...
...Rex Lee, the assistant attorney general (in charge of Justice's Civil Division) that Freedman spoke of, insisted "the views I hold are mine—I have no personal interest in this thing...
...The very corporations Ruckelshaus regulated when he headed EPA were paying him handsomely to use his considerable influence at the agency on their behalf...
...We'll soon have a chance to see whether Jimmy Carter will make good his promise to end the "sweetheart arrangement" (his words) between the regulators and the regulated...
...No one disputed Hutt's expertise in the field...
...It was just another demonstration of the way Washington lawyers gain power from government service, and then use it to their clients' advantage...
...Without having any "direct decisionmaking involvement" at Justice with regard to the IBM antitrust investigation, Katzenbach could have been advised of it, could have discussed or rendered advice on the case, or could have been completely familiar with it...
...Adair had made frequent visits to Nye's office while the case was before the Commission, in order "to make sure my vote was still a sure vote," Nye said at the time...
...To prevent that conclusion from being a cynical one, I would adopt a stringent standard...
...It's as if the officials had a vested interest in keeping clearance actions secret, and clearance standards purposely vague...
...He's not here," said the voice at the other end of the line...
...Traditionally, lawyers have recognized that when one member of a law firm is disqualified from working on a case, his other partners are also disqualified unless the opposing party "waives" disqualification and permits the firm to screen out only the disqualified lawyer...
...Had there been overtures from other firms...
...Bar's ethics committee is calling into question...
...Weaker controls would be cheaper...
...Hutt recently returned to C & B, and that has been the cause of still more controversy...
...It compounds the conflict of interest...
...It happens in almost every government agency...
...Kennecott had been dragging its feet...
...He insisted that Adair had received no special treatment...
...Well over half the firm's initial partners were former EPA officials," said a recent New York Times article, "and at least in the beginning, a substantial number of its clients were those who had problems with the agency...
...This means he may not discuss the matter with his colleagues, and he may not share in fees his firm receives from the case...
...The panel's draft opinion says, essentially, that the process is a sham—an unenforceable scheme cooked up by lawyers who want their economic pipelines to the agencies to remain open regardless of the potential for abuse...
...The division's "comfort letter" was unusual, a recent study by the Washington-based Center for Law and Social Policy pointed out, because the expression "direct decision-making involvement" is narrower in scope than the statutory standard for attorney disqualification...
...You can reach him at Howrey & Simon...
...Nye would take a West Coast vacation, then start looking around...
...and second, I don't want to be reappointed...
...One of the most successful was Mortimer Caplin, Commissioner of Internal Revenue in the Kennedy Administration...
...Copper Corporation, which was under an FTC order to sell off its $1.2-billion Peabody Coal subsidiary...
...Because those in government and the private bar feel equally threatened by the committee's proposal, they have sometimes joined forces to lobby against it...
...But these agencies almost never disclose the standards they apply in deciding whether to permit participation by a former agency attorney or his law firm...
...nor has anyone alleged that Hutt carried out his FDA duties with anything less than complete dedication and diligence...
...It's been astonishing...
...That's the problem...
...More than 18 per cent of the FTC's 600 attorneys leave the commission each year—and two thirds of them for private law firms...
...He represents AT&T...
...There have been abuses of the screening process, I don't think there has been any question of that," says Hofstra University Law School Dean Monroe Freedman, prime mover of the proposal and until recently the ethics committee's chairman...
...When time came for the proceedings to resume, he instinctively sat down in the hearing examiner's chair and gaveled for order...
...The resulting series of articles pressured the Commission into making all future clearance decisions public—an action without bureaucratic precedent...
...Once obtained, they showed haphazard and inconsistent application of the clearance rules...
...Sometimes, it's as if they had never left...
...Two things," he replied...
...Congress might not be the only interested party...
...It would be unfair to suggest that Nye's partnership in Howrey, Simon was a quid pro quo for prior favors Nye may have granted the firm...
...only now, in the wake of the D.C...
...There has been intensive lobbying on a personal level...
...It is time that we in Washington say that the in-and-out incestuousness between industry and the regulatory agencies has to end...
...Together, law firms and federal agencies have reacted to the D. C. Bar's proposal like matrons confronting a cockroach...
...in no cases were reasons given for clearance decisions...
...Would C & B clients unfairly benefit from Hutt's FDA work...
...But Nye's is not an isolated case...
...For a Washington lawyer, this is simply business as usual...
...Cutler, who wields as much power as any Washington lawyer, doesn't dispute the essential elements of Freedman's story, although he denies there was anything improper in what he did (Freedman doesn't allege impropriety...
...And that's the conflict of interest in the screening device...
...And that's disastrous from the government's point of view...
...But if one lawyer is disqualified, what about the other members of his firm...
...The Times account about Ruckelshaus alleged no wrongdoing on his part, or on that of his law firm...
...He set up the firm, so it was hardly a situation where he was looking for a job [while commissioner] among law firms who were practicing before him...
...There is a certain irony to Nicholas Katzenbach's postgovernment employment record...
...Agencies made 40 recommendations for such prosecutions during that period...
...The Revolving Door Between Government And the Law Firms by John A. Jenkins Federal Trade Commissioner Stephen A. Nye was in the job market...
...It would be wrong to discuss employment with firms that had cases before the Commission...
...All you have to do is walk into the next office and close the door, or chat over lunch, or at somebody's house at dinner time...
...The appointment raised eyebrows on Capitol Hill...
...The screening device, itself, involves a serious conflict of interest," says Monroe Freedman...
...There is something unsettling about the ease with which lawyers can slip in and out of government...
...The Justice Department, which handles federal conflict-of-interest prosecutions, lacks published clearance standards...
...The D. C. Bar's ethics committee has been considering adoption of a new conflict-ofinterest rule that would prohibit an entire law firm from handling a case if one of the firm's partners worked on it while he was in government...
...Public mistrust of lawyers breeds mistrust of the regulatory agencies they deal with, and, ultimately, mistrust of the government itself...
...Freedman says he knows of two ethics committee members who supported the disqualification rule but who were "feeling so much heat" they were inclined to vote against it...
...Engman said his standard "may disappoint ten worthy lawyers for every scoundrel it deters," but "the sweep of this basic rule is sensible, if, as I suggest, apparent impropriety is related to the broad issue of government accountability...
...Adair, an attorney with the Washington law firm of Howrey, Simon, Baker & Murchison, represented Kennecott John A. Jenkins is a Washington reporter who has cavered the Federal Trade Commission...
...A very interesting thing happened," Freedman says...
...Still later, in a similar case, Engman castigated his colleagues for again siding with a former employee on a close clearance question...
...At the Food and Drug Administration, Washington's regulatory Sisyphus, the revolving door turned smoothly for Peter B. Hutt, who was the agency's general counsel from 1971 to 1975...
...Then, as now, the Commission was giving its former employees every benefit of the doubt...
...The typical tax attorney is knocking down $100,000 a year in private practice...
...His is the leading tax firm in the country, and he is their business getter," said another lawyer...
...Several years ago, a reporter who wanted access to the FTC's clearance records was forced to file a Freedom of Information Act request, wait six months, and then pay hundreds of dollars in "search fees" before the Commission finally produced the records...
...A San Francisco antitrust lawyer, Nye was cleaning out his desk at the FTC without any assurance, he told me, that a law firm would take him on...
...Freedman says, "If the legal ethics committee does not take some responsible position on this—if, for example, the committee were to wash its hands and not meet objections that groups like Common Cause have—the most important next battle is going to be before a committee of Congress...
...In 1974, shortly after leaving the government, Ruckelshaus set up his own law firm...
...Bar ethics committee— language imputing a lawyer's disqualification to his entire firm—could bring this interchange to a halt...
...First, I'm not looking for a job in the communications business...
...There is at least one palpable benefit to Washington lawyers who were government officials," writes Mark Green in The Other Government...
...The disqualified lawyer could skirt -the law by sharing his knowledge with others in the firm still working on the case...
...Commission chairman Lewis Engman wanted the lawyer disqualified...
...Washington's hottest legal battle these days isn't taking place in a courtroom...
...It is this screening process that the D.C...
...Today, Minow is a Chicago lawyer...
...It is being waged within the District of Columbia Bar's Legal Ethics Committee—a group of lawyers whose job is to regulate other lawyers...
...His predecessor as FDA general counsel became president of the Institute of Shortening and Edible Oils, and his successor, Richard Merrill, was a University of Virginia professor who also served a stint at C & B. At least one other FDA lawyer recently jumped directly to C & B. ("They have a Divine right," Rep...
...We must put aside our personal beliefs about his actual inside knowledge and view the case instead from the public's perspective...
...Three of the firm's four other partners were government tax lawyers who left IRS or Treasury with Cohen, according to Martindale-Hubbell...
...He too set up his own tax law firm when he left IRS in 1969...
...The 1962 federal conflict-of-interest law says former government officials are disqualified from cases in which they participated "personally and substantially...
...Although Congress, the American Bar Association, and the federal agencies have long recognized that conflicts of interest can occur when lawyers switch sides, it is only now, perhaps due in part to a twinge of post-Watergate morality, that the issue is being seriously addressed...
...Before he joined IBM, officials of Justice's Antitrust Division, which had developed the lawsuit, provided their former superior with a memorandum stating that a search of the division's files had not disclosed evidence of "any direct decision-making involvement" by Katzenbach in the IBM case...
...But proponents of such a broad disqualification standard suffered a serious setback in December, when the committee fell two votes short of the ten needed for the rule's approval...
...As a Securities and Exchange Commission lawyer said of a phone call from Manuel (`Manny') Cohen, once SEC Chairman and now a Wilmer, Cutler & Pickering partner: 'You know, I still jump when he calls.' " "The story is told of the lawyer who enjoyed a three-martini lunch during a hearing before the Interstate Commerce Commission," author Joseph Goulden says in The Superlawyers...
...The pollution controls that are ultimately imposed on polyvinyl chloride—which is believed to cause cancer at some stages of production—could cost the industry millions of dollars...
...Weeks later, after Nye left the FTC, I phoned him at home...
...Big firms detected this Catch-22 early, and they have been applying relentless pressure—in a lawyer's gentlemanly way, of course—to scuttle the proposed ethics opinions...
...Every decision he makes is under a cloud...
...Hutt, a specialist in food and drug law, came to the FDA from Covington & Burling, a law firm generally regarded as among Washington's most prestigious, and one that represents many food and drug companies regulated by the FDA...
...A promising attorney actually might pass through the revolving door several times during his career...
...is so acute at the FTC that a Connecticut consulting firm was called in to recommend a solution...
...Only a few agencies, like the Federal Trade Commission and the Federal Maritime Commission, have written their clearance regulations into the federal code...
...The public has no access to the particular facts of these clearance cases...
...Newton Minow is perhaps best remembered for the "vast wasteland" comment he made about television while serving as Federal Communications Commission chairman...
...there is no evidence to support that contention...
...Bar's action, are some beginning to do so...
...Robert Drinan said of Covington's special relationship with the FDA...
...Washington lawyers—be they in government or private practice—are a close-knit group...
...Cynics wonder whether the implicit promise of a lucrative law partnership later on is incentive enough for a government lawyer to do favors for the defense...
...At that rate, the agency must hire 100 extra lawyers each year just to keep fully staffed...
...Unable to read the documents or investigate the employee, the citizen on the outside can look only to the kind of position the employee occupied, and the kind of inside information he was likely to be exposed to in that position, when drawing a conclusion about the propriety of clearance...
...Federal agencies, in turn, contend that the rule would make it impossible to recruit bright new legal talent, because top law school graduates would sign up immediately with private law firms to avoid the disqualification problem altogether...
Vol. 8 • January 1977 • No. 11
