Labor pick attempts to ease concerns

Eugene Scalia, President Donald Trump’s nominee for Labor secretary, takes his seat for his nomination hearing Thursday in Washington with Transportation Secretary Elaine Chao.
Eugene Scalia, President Donald Trump’s nominee for Labor secretary, takes his seat for his nomination hearing Thursday in Washington with Transportation Secretary Elaine Chao.

WASHINGTON -- President Donald Trump's pick for Labor Department secretary sought to quell concerns among Democrats that he's too close to the corporate world, telling lawmakers Thursday that if confirmed he'll ask ethics officials if he can participate in the crafting of a conflict-of-interest rule for stockbrokers.

As a private-sector attorney, Eugene Scalia helped undo a regulation adopted during President Barack Obama's administration to put stricter requirements on financial professionals who dispense advice for retirement planning and other investments. The Labor Department is expected to propose a fiduciary rule that aligns with a new Securities and Exchange Commission measure backed by the financial-services industry but criticized as too lax by consumer groups.

During testimony before the Senate Health, Education, Labor and Pensions Committee, Scalia tried to assure lawmakers that his years of legal work for corporate clients would not influence his actions as a Cabinet member. He emphasized the "public trust" he embraced during the year he spent as the Labor Department's top lawyer during the George W. Bush administration.

"I'm not necessarily my clients," Scalia said. "I will seek to defend them, to vindicate their rights but that doesn't mean that I necessarily think what they did is proper."

But the possibility he may have to recuse himself from the department's fiduciary rule-making was a reminder that most of his career has been spent as a partner in the Washington office of the Gibson, Dunn and Crutcher firm, where he has run up a string of victories in court cases on behalf of business interests challenging labor and financial regulations.

The government's fiduciary rules could affect how hundreds of billions of dollars in Americans' retirement and other investments are handled by brokers. Critics of the current system say investors lose billions of dollars a year because of advice from brokers with conflicts of interest.

Obama's more stringent fiduciary duty rule required all financial professionals, not just registered investment advisers, to act as trustees obligated to put their clients' interests before their own. It was targeted for watering-down by Trump in early 2017, and Scalia, representing the Chamber of Commerce and other industry clients, persuaded a federal appeals court to throw the rule out.

Scalia, who called the Obama rule "controversial," told Sen. Patty Murray of Washington, he agreed that families that are seeking professional investment advice about their retirement savings should get advice in their interest, and not the brokers'.

"We just need to look at the arguments he's made in court and what he's advocated for," said Micah Hauptman, financial-services counsel at the Consumer Federation of America. "That counts more than what he said in a job interview."

Scalia's nomination is opposed by the AFL-CIO, which has described him as a union-busting lawyer who has eroded labor rights and consumer protections. Murray, the committee's top Democrat, called Scalia "an elite corporate lawyer who has spent his career fighting for corporations and against workers."

But the committee chairman, Sen. Lamar Alexander, R-Tenn., praised Scalia, son of the late Supreme Court Justice Antonin Scalia. Alexander said lawyers often have clients who are unpopular or have done unsavory things, recalling that Founding Father John Adams defended British soldiers after the Boston Massacre.

"There are certain ethical responsibilities lawyers have, but you represent people who have a right to be heard, to get justice before the bar," Alexander said.

Business groups are squarely behind Scalia, viewing him as a reliable opponent of regulatory overreach and red tape. If Scalia is confirmed by the Senate, he'll be the seventh former lobbyist to hold a Cabinet-level post in the Trump administration.

On his financial disclosure form filed with the Office of Government Ethics, Scalia listed 49 clients who paid him $5,000 or more for legal services, including e-cigarette giant Juul Labs, Facebook, Ford, Walmart and Bank of America. Disclosure records show Scalia was registered in 2010 and 2011 to lobby for the U.S. Chamber of Commerce.

Scalia told the committee he personally believes gay and transgender employees are entitled to equal protection under the law, but several Democrats pressed him how high a priority this will be for him as secretary.

Sen. Chris Murphy of Connecticut raised an article Scalia wrote as a college student in 1985 under the title, "Trivializing the Issues Behind Gay Rights." Murphy said Scalia wrote: "I do not think we should treat it as equally acceptable or desirable as the traditional family life" and concluded by saying he wasn't sure where he stood on the basic issue of gay rights.

"My worry is that your views have not matured as the country's have," Murphy said. "Have your views changed since you wrote that article?"

Scalia said they had.

"I would not write those words today, in part because I have friends and colleagues to whom they would cause pain," he said.

Business on 09/20/2019

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