For the second time in two years, a key member of the team at the New York state attorney general's office that uncovered major conflicts of interest on Wall Street and extracted a $1.4 billion settlement from 10 large investment banks has gone over to the other side.
Bear Stearns Cos. announced Wednesday that it had hired Beth L. Golden, head of special projects for Attorney General Eliot L. Spitzer, to head the firm's global compliance department.
Last year, Eric R. Dinallo, head of investor protection in Spitzer's office, left to head the regulatory unit at Morgan Stanley.
Golden played a key role in 2002 in drafting changes in how Wall Street firms, including Bear Stearns, separate their research and investment-banking divisions.
Bear Stearns and nine other firms agreed to enact the changes and pay the $1.4 billion to settle charges that they misled investors with biased research reports intended to generate investment-banking fees.
Golden also worked on settlements with several mutual fund companies accused of allowing professional investors to trade in and out of individual funds in ways that harmed long-term investors. Bear Stearns still faces investigations into whether it helped hedge fund Canary Capital Partners LLC make illegal fund trades.
Golden is barred for two years from having any professional dealings with Spitzer's office; she will be barred for life from working on cases she handled there.
Jacob S. Frenkel, a former Securities and Exchange Commission lawyer who is in private practice, said that despite the restrictions it makes sense for Wall Street to recruit lawyers from Spitzer's staff because the lawyers understand the attorney general's approach and can help explain the Martin Act, the tough New York anti-fraud statute that Spitzer has used to great effect.
"Any time Wall Street firms have a shot at adding senior regulators to their staff, they jump," Frankel said. "Mr. Spitzer's unprecedented level of involvement in the securities industry makes the state law enforcement credential an added premium."
In an interview, Golden said Bear Stearns hired her not for her knowledge of Spitzer and New York state law but for her ability to think creatively about complex problems.
"I think the appeal of [lawyers from Spitzer's office] is that we have proven track records as intelligent, capable lawyers who can work with people in industry," she said. "We put out a good product and people have seen it."
Through a spokesman, Bear Stearns General Counsel Michael S. Solender declined to be interviewed. In a prepared statement, he said Bear Stearns "has always placed a priority on hiring the most talented and capable people in the marketplace. We are committed to setting the highest standards for compliance and Beth is the perfect candidate to lead this effort."
Spitzer also declined to comment. Darren Dopp, a spokesman for the attorney general, said Spitzer wished Golden well. Dopp described Golden as head of a "SWAT team" that would descend on major cases. He also said she played a crucial role in communicating with the SEC.
Golden said she will get a substantial salary increase but she declined to be specific. (Spitzer earns about $150,000 a year; how much his deputies make was not available yesterday.)
Golden said she was attracted to the Bear Stearns job in part because it entails ensuring compliance with an evolving regulatory framework rather than mounting a defense after charges are lodged.
"You can defend people when they get in trouble or you can try to keep them from getting in trouble in the first place," she said.
Golden graduated from Harvard University and the University of Chicago Law School and has worked in private practice and as a federal prosecutor. She also served as associate independent counsel under Robert B. Fiske Jr. during the Whitewater investigation.
Golden said she found Bear Stearns particularly appealing because of its relatively small size compared with other Wall Street firms: "It was actually the closest I could come to replicating the kind of access I have here, where I'm three feet from Eliot."