After more than 24 months of waiting, Senator Alfonse D’Amato has finally won a seat for his protégée, Laura Unger, on the Securities and Exchange Commission. It has been a difficult two years for Ms. Unger, a New York lawyer who has been serving as the securities counsel to the Senate Banking Committee, which Mr. D’Amato chairs. She has cooled her heels while her powerful patron attempted to secure her nomination to the quasi-independent Federal agency, which regulates the stock market, mutual funds and related industries.
Ms. Unger’s problem was not a lack of qualifications, but a lack of friends in the White House. She had, after all, personally poked into the financial dealings of First Lady Hillary Rodham Clinton during the Senate Whitewater hearings, and S.E.C. nominations must be approved by the President himself. But if in politics, timing is everything, Ms. Unger’s time has come, because Bill Clinton and Mr. D’Amato are suddenly dealing instead of feuding.
One reason is that the President now has another S.E.C. nominee of his own: Paul Carey, a former Democratic Party fund-raiser and White House aide who is also a son of the former Governor of New York, Hugh Carey. Both his and Ms. Unger’s nominations must be approved by the Senate Banking Committee, which Mr. D’Amato chairs.
And so must the nominations of at least three other important officials, which Mr. D’Amato has held up pending action on Ms. Unger. So as memories of the Whitewater hearings have faded, the President has found more reasons than not to send over Ms. Unger’s name to the Senate, which he finally did on Sept. 18.
In a different respect, the time also appears to be right for Mr. D’Amato. On Sept. 22, the Senate Governmental Affairs subcommittee held hearings on penny-stock fraud. “The problem is with the really bad actors,” S.E.C. chairman Arthur Levitt Jr. told the subcommittee. “These are dishonest, crooked people. We’ve got to kick them out of the industry and keep them out. We have to send them to jail.”
Two of the worst actors, according to Joseph Borg, director of the Alabama Securities Commission, who headed a two-year investigation of stock fraud, are Stratton Oakmont Inc. and D.H. Blair & Company. And, it just so happens, both of those firms have been particularly kind to Mr. D’Amato.
In 1993, the junior Senator made $37,000 in one day in an insider deal at Stratton. D.H. Blair & Company was built by J. Morton (Morty) Davis. Mr. Davis and his associates have contributed at least $368,000 to hard and soft money accounts associated with Mr. D’Amato (ranking Mr. Davis among the Senator’s top donors).
Both firms have encountered serious trouble with regulators: Stratton has been shut down, and Blair is undergoing a lengthy investigation by the S.E.C.
But now Mr. D’Amato will have a former close aide-Ms. Unger worked for him for six years-in a powerful position at the S.E.C., which oversees both of those firms, and many others which have been generous to Mr. D’Amato over the years. Ms. Unger herself declined to be interviewed, referring questions to the Senate Banking Committee press officer, who did not return calls.
“Even if the nominee is great,” commented Charles Lewis, executive director of the nonpartisan Center for Public Integrity, “in politics as in life, it’s not what you know, it’s who you know.”
D’Amato Nominee Widely Admired
Whatever observers think of her sponsor, Ms. Unger does have a stellar reputation. Democrats and Republicans alike describe her as “solid,” “terrific,” “very capable” and “very well liked.” After graduating from New York Law School, she worked for several years as an enforcement attorney at the S.E.C., where she earned the respect and admiration of fellow staff members. “If you look at Senator D’Amato’s record on securities issues, he has a good public-policy record,” one Congressional source told The Observer , “and that is in large part due to [Ms. Unger’s] influence and abilities.”
Complimentary mentions of “integrity” came up in connection with Ms. Unger, and that’s a word not frequently linked to her patron from Island Park. “Laura is a super-high-integrity person,” said one Federal official. She also appears to have the support of Mr. Levitt, who is particularly concerned about the S.E.C.’s relations with a Congress that is in a most anti-regulatory mood.
Nevertheless, others Mr. D’Amato has appointed have had uninspiring records in Federal office. In 1989, when the Housing and Urban Development scandals broke, it emerged that Joseph Monticciolo, the head of the New York regional office of H.U.D. who had been appointed at Mr. D’Amato’s recommendation, had a speed-dial button on his phone with Mr. D’Amato’s number on it. According to an aide, The Washington Post reported, Mr. Monticciolo generally “cleared” decisions with Mr. D’Amato.
That, more than anything about Ms. Unger herself, is what worries some watchdog groups in Washington. “We would prefer that people in powerful regulatory posts be tied in less to politics and tied in more to the consumers whom they should be protecting,” said Bob Schiff, a staff attorney at Public Citizen’s Congress Watch, which was founded by consumer advocate Ralph Nader.
Mr. D’Amato’s less savory friends in the securities business may be depending on political connections to protect them. Stratton Oakmont already has been put out of business by the National Association of Securities Dealers and the S.E.C. for a pattern of letting insiders in on lucrative initial public offerings, and then dumping the same overpriced stocks on unsophisticated retail investors. But that doesn’t necessarily mean that its crooked brokers are no longer active. And now D.H. Blair is under investigation for the same “pump and dump” abuses, according to S.E.C. sources.
The reappearance of bad brokers from a busted firm like Stratton Oakmont is known as “the cockroach factor.” It was illustrated at Senate subcommittee hearings Sept. 22 on charts presented by Mr. Borg of the Alabama Securities Commission. One chart, labeled “Agent to Principal Progression,” showed how brokers with long disciplinary histories simply start their own firms after the brokerages they once worked for are shut down.
Of the six firms at the top of the chart, all have been shut down by regulators except for one: D.H. Blair & Company. The others-Stratton Oakmont, First Jersey Securities Inc., Investors Center, Hibbard Brown and Broadchild Securities Corporation-are all now defunct. (D.H. Blair’s Mr. Davis was an owner of Broadchild Securities when it was shut down in 1986, according to regulators.)
Mr. D’Amato’s most recent favor to the penny-stock business-and specifically to Mr. Davis-was a change in the tax code favorable to investors in small, risky securities, obtained by the Senator as a member of the tax-writing Senate Finance Committee. Friends like those could explain Mr. D’Amato’s unwavering desire to have his own person at the S.E.C., even though confidence in Ms. Unger’s integrity runs so high that one official suggested. “She could set D’Amato straight, if necessary.”
He certainly fought hard on her behalf. The nomination Ms. Unger got would ordinarily be controlled by the Senate majority leader. But back in 1995, when a “Republican” seat opened up on the S.E.C. (by law, the commission can have no more than three members of a single party), Mr. D’Amato had performed yeoman’s service for Robert Dole, the Senate majority leader and Presidential candidate. In gratitude, Mr. Dole gave the choice of an S.E.C. nominee to Mr. D’Amato. At that point, Ms. Unger’s eventual nomination became assured.
“It would have been futile for the President to propose any other Republican,” explained one official. “It would have been worse than William Weld.” Mr. Weld, of course, is the former Governor of Massachusetts who quit his job to become Ambassador to Mexico, only to be denied a hearing by Jesse Helms, chairman of the Senate Foreign Relations Committee and a fellow Republican. (In fact, Ms. Unger’s name was placed into nomination the same day Mr. Weld’s was withdrawn.)
Carey Seen as ‘More Political’
But years after the Whitewater hearings, and even with two appointments to the Federal Reserve, one to the National Credit Union Administration and one to the Office of Thrift Supervision being held up by Mr. D’Amato, only the President’s desire to fill a Democratic spot with his own man finally broke the logjam.
If anything, the Democratic nominee, Paul Carey, has more overt political ties than Ms. Unger. In 1992, Mr. Carey, who is close to former White House deputy chief of staff Harold Ickes, was the Northeast finance director for the Clinton-Gore campaign, raising money from some of the same securities firms he will now regulate.
In December 1992, following Mr. Clinton’s victory, Mr. Carey co-authored a transition memo that listed Arthur Levitt among dozens of Clinton fund-raisers who were “must-considers” for top Federal jobs. Even Democrats who have the highest esteem for Mr. Carey acknowledge that the former banker’s “learning curve” at the S.E.C. will be higher than Ms. Unger’s.
“It’s almost symmetrical,” said Mr. Lewis of the Center for Public Integrity. “One of the President’s own people gets put in”-just as one of Mr. D’Amato’s own people got put in-“and it has the added bonus of pleasing folks in the New York Democratic Party … Bill did Al a favor, and now Al will do Bill a favor” by confirming the nominees.
The exchange of favors with Mr. Clinton apparently has delighted Mr. D’Amato. “I am very pleased the President has made two terrific nominations to the S.E.C.,” Mr. D’Amato said in a statement. “Laura Unger has been a distinguished counsel for the Senate Banking Committee … Paul Carey has served the President with great distinction. I believe both will be speedily confirmed” after the hearings Sept. 30, he added.