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Dechert partner Arthur Gabinet has been appointed by outgoing Securities and Exchange Commission Chairman Harvey Pitt as district administrator of the SEC’s Philadelphia office. The securities litigator will start his job Jan. 6. And when he arrives, he could have a new boss as President Bush nominated 71-year-old Wall Street investment banker William H. Donaldson on Tuesday to succeed Pitt as SEC chairman. As district administrator, Gabinet will manage the enforcement and inspection programs within the Philadelphia office’s jurisdiction, which includes Pennsylvania, Delaware, Maryland, Virginia, West Virginia and the District of Columbia. The district office is part of the commission’s northeast region, which has offices in New York, Philadelphia and Boston. Joy Thompson has been the acting district administrator since mid-June. She will return to her position as associate district administrator when Gabinet starts his new role. Though he joins the SEC after a year of corporate implosions and the resignation of Pitt, Gabinet said he is energized by the move into public life. “I’m doing this because it’s a terrific opportunity, not because I want to advance my private practice,” Gabinet said. “I was looking for a way to expand my skill sets and personality, and I think this will help me do that. When you work at a firm, unless you have one of those big Phillip Morris cases, you are working with six or seven people, not 40 or 50 people. With the SEC, I will be managing a staff of 84 very dedicated people and I’m really looking forward to that kind of responsibility.” With Bush promising to double SEC funding, Gabinet is hoping to add significantly more staff that will enhance the effectiveness of his office’s enforcement capabilities. SEC enforcement officials are often outspent by defense counsel. The flirtation with the SEC began in early summer. Gabinet received a call from former Dechert partner Paul Roye, who is now director of the SEC’s division of investment management, suggesting that he apply for the opening created by Ron Long’s resignation. Long has moved on to an executive position with Wachovia in Richmond, Va. After filling out an application, Gabinet endured a months-long interview process that ended in late November with an interview with Pitt in Washington, D.C. At Dechert, Gabinet concentrated on corporate and securities litigation, including class actions arising from the purchase and sale of securities, proxy contests and tender offers. He has also handled cases involving contested takeovers, derivative claims, dissenters’ rights and valuation issues, accountant liability and post-closing disputes. He also has experience in general commercial litigation, including intellectual property, patents, lender liability, corporate and employee restrictive covenants, real estate contract and foreclosure cases. Gabinet, a 1982 graduate of the University of Pennsylvania Law School, spent three years practicing at a New York firm before moving to Philadelphia so his wife could accept a teaching position at Princeton University. Gabinet leaves Dechert, the firm he joined in 1985, where he has been a member of the litigation department, specializing in corporate and commercial litigation, with his chief focus being in the securities area. His mentor from day one was partner Steven Feirson, chairman of Dechert’s financial services and securities litigation practice. Dechert chairman Barton Winokur said Gabinet was a perfect choice for the SEC post. While there cannot be a commitment for a lawyer to return once he completes his public service, Winokur said, Dechert has a good record for retaining those who leave for the government posts. As for the securities litigation practice, Winokur said that because it feeds off other practices, Dechert would not have much difficulty filling Gabinet’s void. In addition to Feirson, partner David Howard — who is currently defending an Enron executive in a white-collar matter — and several partners from other offices handle securities litigation. As for the appointment of Donaldson, co-founder of investment bank Donaldson Lufkin & Jenrette Inc., many securities lawyers view it as a victory for Wall Street that eventually could be a victory for Main Street, which is seeking someone to clean up corporate America through tough enforcement. Donaldson comes to the agency at a particularly rocky time. The SEC is conducting a record number of investigations — more than 600 — in the wake of a painful decline in the stock market and a rash of accounting scandals. To ease the agency’s workload, the president said he would propose funding for the SEC’s 2004 budget year of between $800 million and $850 million, or double the agency’s budget in 2002. Pitt, who left a partnership with New York-based law firm Fried Frank Harris Shriver & Jacobson to join the SEC, drew criticism throughout his 15-month tenure for his close ties to the accounting industry and a series of public gaffes. He resigned last month on Election Day, when it was discovered that he had withheld important information from the other commissioners on a candidate for a newly created accounting oversight board. The announcement of Donaldson’s nomination came as something of a surprise. His name surfaced only occasionally during the last few weeks’ speculation over who would succeed Pitt as chairman of the beleaguered agency. Still, securities lawyers praised the selection. “I think this was a perfect appointment,” said Morgan Lewis & Bockius securities litigation partner Mark Sonnenfeld, whose brother Jeffrey is assistant dean of the Yale University graduate school of management, founded in 1975 by Donaldson, who served as dean of the school until 1980. “Look at some of the great law enforcement officials. Many of them didn’t have a law enforcement background before taking the job. What’s more important is all of the experience in the industry that he has, the respect he commands and his unquestioned integrity. When you look at his resume and see all of the jobs that he’s had, that’s impressive in itself. But what’s even more impressive is that everywhere he’s gone is better for his being there.” Schnader Harrison Segal & Lewis corporate securities partner Albert Dandridge, who once served as the SEC’s associate director of its small-business division of corporate finance, said those who wanted an SEC insider or someone with an enforcement background might not be pleased with Donaldson’s selection. But he said Bush’s first priority might have been to pick someone who would soothe the mood on Wall Street. “One would have thought in the wake of all the scandals and the emergence of Sarbanes-Oxley that the new chief would have an enforcement background,” Dandridge said. “But if you look at the appointments to Treasury [department secretary], economic adviser and SEC chair, the one trait they all have is the ability to calm down Wall Street. But I don’t view this appointment as being much different than that of Arthur Levitt [appointed SEC chairman by President Clinton in 1994], who was also a Wall Street guy with no enforcement background. But by the end of his term, he was viewed as the ultimate champion of the little guy.” Ballard Spahr Andrews & Ingersoll corporate securities partner Justin Klein, who spent nine years with the SEC, said Donaldson has a reputation as a talented, team-building leader who brings other skills to the table despite not being a lawyer or someone with enforcement experience. “While he doesn’t have a lot of hands-on experience, it’s important to remember that the New York Stock Exchange is a self-regulatory organization,” Klein said. “So he has been head of an organization with the responsibility to uphold SEC laws.” Donaldson does bring an impressive set of credentials to the job. A former chairman and chief executive of the New York Stock Exchange, he started his career on Wall Street in 1958 after earning an MBA at Harvard University. His first job was at the brokerage house G.H. Walker & Co., headed by George H.W. Bush’s uncle Herbert Walker. In 1959, he founded Donaldson Lufkin & Jenrette with classmates Dan Lufkin and Richard Jenrette, with a focus on stock research. The firm later expanded into investment banking and other financial services. It was bought by Credit Suisse First Boston in 2000 for $13.4 billion. Before his time with Yale’s management school, Donaldson served as undersecretary of state to Henry Kissinger from 1973 to 1975. Most recently, he was chairman and chief executive of Aetna Inc., the nation’s largest health insurer, from 2000 to 2001. He stepped down after directing the sale of Aetna’s financial services and international units to ING Group for $7.7 billion. He now heads his own Manhattan-based firm, Donaldson Enterprises, which he started in 1981. Donaldson is known for his frank and colorful remarks. Shortly before he became chairman of the NYSE, he described the great bull market of the 1980s as a “somewhat ribald party” that left the securities industry with a severe hangover. Although his nomination must be confirmed by the Senate, if early indications are correct, he will not meet with much resistance. President Bush selected Donaldson one day after he tapped railroad executive John Snow to replace Treasury Secretary Paul O’Neill. White House economic adviser Larry Lindsey, also dismissed in the widely anticipated economic purge, is expected to be replaced by Stephen Friedman, former co-CEO of Goldman Sachs & Co., although a final decision on that position is still pending. Reporter Tamara Loomis of the New York Law Journal , an affliate of The Legal Intelligencer and law.com, contributed to this report.

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