A potential conflict of interest could leave labor secretary nominee Eugene Scalia out of the fiduciary rule rewrite process.
Ethics rules prevent government officials from involvement in issues in which they participated while in the private sector, and as The Wall Street Journal notes, Scalia, a Washington lawyer, handled a legal challenge to the Obama administration’s version of the fiduciary rule.
As President Trump’s pick to be the next secretary of labor, his recusal would, therefore, be required.
“Mr. Scalia’s likely recusal suggests that his ties to the financial-services industry could complicate his tenure on high-profile initiatives should he win Senate confirmation to lead the Labor Department in the coming months,” the paper writes. “At issue is an Obama-era regulation concerning retirement advice that a federal appeals court struck down last year in a legal challenge led by Mr. Scalia, the son of the late Supreme Court Justice Antonin Scalia. Mr. Scalia handled the challenge and argued on behalf of the financial-services industry before a circuit court that threw out the rule.”
The reliably conservative Scalia previously served as chief legal officer for the Labor Department during the George W. Bush administration, a position he took following a 2001 recess appointment by the former Republican president after the Democrat-controlled Senate failed to confirm him.
He also worked as a special assistant to William Barr, now the attorney general.
Scalia’s role in killing Fiduciary Rule
On March 15, 2018, the Fifth Circuit Court of Appeals, based in New Orleans, vacated the fiduciary rule in a 2-to-1 decision, saying it constituted “unreasonableness,” and that the DOL’s implementation of the rule constitutes “an arbitrary and capricious exercise of administrative power.”
The case had been brought by Scalia’s client, the U.S. Chamber of Commerce, among other parties.
Investopedia noted three lawsuits have been filed against the rule, but the one that drew the most attention was Scalia’s, filed in June 2016 on behalf of the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Roundtable in the U.S. District Court for the Northern District of Texas.
The basis of the suit was that the Obama administration did not have the authorization to take the action it did in endorsing and fast-tracking the legislation. Some lawmakers also believed the DOL itself was reaching beyond its jurisdiction by targeting IRAs.
In May 2019 the DOL said it was working with the Securities and Exchange Commission (SEC) to reintroduce a new version of the rule in December of this year.
Tough road to confirmation?
Many Republicans had expected Acosta’s temporary replacement, Patrick Pizzella, to get the DOL Secretary nomination from Trump, according to Politico.
Pizzella was called “a polarizing figure beloved by conservatives for his pro-business views and disliked by unions and Democrats for a history of opposing worker protections.”
But several conservatives including Arkansas Senator Tom Cotton were pushing Trump to nominate Scalia instead.
Democrats and labor unions are expected to contest Scalia’s nomination because of his long record of representing corporations in cases against labor laws and financial regulations.