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Is Nominee Ideal for SEC or Too Nice to Business?

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Times Staff Writers

To Christopher Cox, it seemed like a classic taxpayer boondoggle: a federally supported helium stockpile, created for World War I blimps, that somehow had survived into the 1990s.

So the conservative House Republican from Newport Beach turned to a liberal Democratic colleague, Barney Frank of Massachusetts, and suggested legislation to sell the cache to private enterprise. Frank agreed.

For the record:

12:00 a.m. July 27, 2005 For The Record
Los Angeles Times Wednesday July 27, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 51 words Type of Material: Correction
Christopher Cox -- A fact box with a profile of Rep. Christopher Cox in Saturday’s Section A said he was a partner at the law firm Latham & Watkins from 1978 to 1982. In fact, he was an associate at the firm during that period and became a partner in 1984.

It took three years, but the rest of Congress finally went along in 1996.

The helium initiative says a lot about Cox, according to people who know him: He took a relatively obscure issue, sought bipartisan support and was patient in finding a solution.

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“Those are the best issues to tackle,” Cox, 52, said of problems that don’t fall neatly along party lines. “The well-worn partisan rut is not a place where you are going to get a lot of work done.”

After 17 years in Congress, the brainy Minnesota native is on tap for what has become one of the highest-profile jobs in government: chairman of the Securities and Exchange Commission, a role that would make him the top cop over corporate America and chief protector of the nation’s shareholders.

He would be the first sitting congressman ever brought in to run the SEC since its creation in 1934.

His supporters say Cox’s political background would be an asset at a time when the five-member SEC panel has been rocked by deep discord between Republican and Democratic commissioners over the agency’s regulatory reach.

Cox has “proved that he can bring people together of diverse opinions to get things done,” President Bush said last month in nominating Cox for the job.

In his private life, the father of three who maintains a buttoned-down image on Capitol Hill has been known to don leathers and hop on a Harley-Davidson motorcycle for charity rides.

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Despite his affable reputation, however, Cox is expected to face tough questioning at his Senate confirmation hearing scheduled for Tuesday.

A disciple of President Reagan, Cox has followed a largely business-friendly agenda in Congress. Critics fear that his views foreshadow a retreat from the stricter market and business oversight the SEC has pursued in the wake of a series of corporate and Wall Street scandals since 2000.

Indeed, one of Cox’s biggest legislative victories was a 1995 law that made it harder for shareholders to sue corporations for alleged fraud, a measure detractors say helped pave the way for debacles such as Enron Corp. and WorldCom Inc.

More broadly, Cox’s well-known aversion to government red tape and deep faith in the wisdom of the marketplace have prompted concerns that he would bring an inherently anti-regulatory philosophy to the office.

“This is an enormously disquieting choice,” said Bill Patterson, director of investments at the AFL-CIO in Washington. “It looks like Bush is trying to turn back the clock.”

The focus on Cox’s record has been intensified because his predecessor, William H. Donaldson, resigned in June amid heavy fire from business groups and from his two fellow GOP commissioners. Donaldson was attacked for his aggressive efforts to impose tighter supervision over business and markets. Critics said his moves were overkill.

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Some of Cox’s supporters say he is being unfairly characterized by opponents as a sort of anti-Donaldson.

John Moorlach, treasurer of Orange County and a longtime friend of Cox’s, said his critics had failed to grasp how his savvy in business and finance could benefit the public.

Cox, Moorlach said, was among the few elected officials who knew that the county risked disaster with its investments in the early 1990s. A portfolio blowup led to the county’s bankruptcy filing in 1994.

“I see him more like an Eliot Spitzer, but with more decorum,” Moorlach said, referring to the New York attorney general who has prosecuted an array of financial misdeeds. “Chris has that litigator’s instinct when something’s not right.”

Even before his confirmation hearing, Cox has shown a political sensitivity to his critics, hinting that he plans no rollback of Donaldson’s quest to prevent a new round of Enrons.

For Cox, a move from Congress to the SEC would not be the first unexpected turn in his life. He nearly died as a young man in a Jeep accident in Hawaii, which left him paralyzed from the waist down for more than three weeks. Although his recovery was dramatic, some believe the ordeal left a lasting mark on his psyche.

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“When you’re near death, you can go two ways,” said Kathy Hammer, an older sister who is a writer in Indianapolis. “You can say how short life is and you stop and smell the roses, or you can say how short life is and you seize the moment and try to pack everything in. I think Chris did a hybrid.”

On a blustery December day in 1987, Cox decided to seize the moment. At the time, he was working as a lawyer in the White House of Ronald Reagan, his hero. Cox and another White House aide, Dana Rohrabacher, were walking to lunch in the West Wing, talking about the looming vacancies in their home congressional districts in California.

Later that day, Cox hired a consultant, a pollster and a fundraiser and jumped into the race. He went on to prevail in a 16-candidate field of Republicans, raise record levels of cash and handily defeat his Democratic opponent in the general election.

“I had literally no idea or inkling as recently as that morning that it would even be possible,” Cox said in a recent interview, recalling his decision to run.

Colleagues often use words such as smart, creative and polite to describe Cox -- traits that have boosted him into the House leadership and helped him as chairman of the Committee on Homeland Security.

Yet higher office has eluded him. His bid to become House speaker in the late 1990s collapsed after an initial burst of attention. He dropped a quest to become a federal judge after he was blocked by Sen. Barbara Boxer (D-Calif.). His name has been mentioned for other possible posts, including director of central intelligence, but he has been passed over.

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Twice in the 1990s, Cox considered running for the Senate but backed away in the face of high costs and the prospect of divisive primary battles.

Rohrabacher, now a Republican congressman from Huntington Beach who calls Cox his best friend, views the SEC post as a chance for Cox to finally vault beyond the might-have-beens: “Both Democrats and Republicans would like to see the Whiz Kid get his shot,” he said.

Cox grew up in Minnesota, where he was one of five kids in a close-knit family. His sister recalls a traditional Midwest childhood: mandatory family dinners, sleigh riding at the park and visits to the winter carnival.

She said her brother excelled at Friday night board games in the St. Paul household and was drawn to the off-center humor of Monty Python. The fact that he later found it relaxing to read books about mathematicians came as no surprise.

“He likes seeing things from different angles,” Hammer said.

Cox’s father owned a local printing shop but had another skill that made an impression on his only son: Charles Cox was a race-car driver and a national champion of the Sports Car Club of America in 1965.

For a long time, Chris wanted to speed down his father’s path. Reality sank in later.

“When I was 13 years old and meeting some of the greatest drivers in the world, without question there was a great allure,” he recalled. “It was also very sobering to discover that by the time I was in college, many of them were dead.”

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Cox left Minnesota in 1970 for USC, his father’s alma mater, and graduated with honors three years later. The next stop was Harvard University, where he would earn degrees in law and business. It also is where Cox gained a political education.

At the time, much of the campus exalted such leftist icons as Ho Chi Minh and Fidel Castro, Cox recalled. He said he responded by slapping a Reagan bumper sticker on his 1973 Volvo. The car “was aggressively vandalized,” he said.

“The campus climate was not the sort that was going to leave you alone,” he said. “You were going to be confronted.”

Cox does not point to one galvanizing moment when he embraced conservative ideals. Various events led him to view government actions with great wariness, he said.

During the energy crisis of the mid-1970s, he said, “I remember being in class in law school in the middle of winter, and in the classroom students had to have their winter coats, hats and gloves. And when a student spoke, you could see their breath.... This struck me as very much a man-made crisis.”

His first job out of Harvard was in Orange County with law firm Latham & Watkins. His career thrived, and he was a partner at the age of 32.

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Meanwhile, as a side venture in the 1980s, Cox and his father launched an English-language edition of Pravda, to give Americans “a glimpse of Soviet propaganda designed for the Russians,” Cox later explained. The project did not make money and was shut down after four years.

It was also in the ‘80s that Cox did legal work for William E. Cooper, a man who would later land in prison for investment fraud at a firm known as First Pension. That link continues to haunt Cox, who may face questions on the matter during his confirmation hearing.

Cooper became a supporter, hosting a 1991 political meeting for Cox and making campaign donations that Cox later returned to victims of Cooper’s fraud.

Cox has said he was astonished to learn of Cooper’s misdeeds. In an interview, he declined to answer questions on the matter, or any other that could come up during his confirmation, under instructions from the White House.

At the hearing Tuesday, lawmakers probably will press for details on the kind of corporate cop Cox would be.

His enthusiasm for free enterprise, supporters say, assures that he would clamp down on clear-cut violations of securities laws. It is at the murky edges of business conduct where some fear he would ease the pressure of government oversight.

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John Coffee, a law professor at Columbia University, expects Cox to support aggressive action against classic fraud such as insider stock trading. But how Cox would react to schemes that might require new precedents in enforcement remains “the question on the margins,” Coffee said.

Cox also may be asked about his views on stock options. A new SEC-sanctioned rule requires companies to count the cost of options as a formal expense. Cox has been a strong opponent of the rule, arguing that it could make financial reports less accurate -- the opposite view of those who support expensing.

Although the questioning is expected to be pointed, some say that Cox’s political style, which includes a track record of peaceful dealings with Democrats, will aid his confirmation.

“He doesn’t like to stand there and slug it out,” Rohrabacher said, adding that he sometimes wished his friend was less a philosopher and more a fighter.

Some of Cox’s supporters say he is particularly qualified for the SEC post because of his interest in technical financial issues that many other lawmakers steer clear of.

But he also has used his knowledge to challenge financial regulators outside the congressional mainstream -- especially when he believed the government had strayed into areas best left to the free market.

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In 2000, Cox co-sponsored legislation to derail an obscure accounting rule affecting how companies account for mergers, a regulation that many companies said would hurt their bottom line. Edmund L. Jenkins, then chairman of the Financial Accounting Standards Board, assailed Cox’s effort as “political intrusion” in the regulatory process. Cox did not prevail.

Among some investor advocates, Cox will forever be known as the lawmaker who pushed through a 1995 law imposing tougher hurdles for shareholders to file -- and win -- fraud lawsuits against corporations. It also limited the legal exposure of accountants for wrongdoing by companies they audited.

The bill, sought by the technology industry and others, was another example of Cox’s ability to win some Democratic support for his aims: The legislation was one of only two measures Congress ever passed over President Clinton’s veto.

Cox said the aim was to stop “shake-down” lawsuits. Yet the law is still reviled by plaintiffs’ lawyers and shareholder activists who argue that the threat of investor suits helps keep business honest.

Cox has “clearly demonstrated his bias for the corporations ... that have donated to his campaigns over the years,” said John Graham, a Democratic professor of management who had mounted three unsuccessful election challenges to Cox. “After 17 years on the hill, he seems to have lost sight of what the truth is about important issues.”

The leading industries financing Cox’s campaigns have been legal, real estate, securities, healthcare, accounting and insurance, according to an analysis by the Center for Responsive Politics. To critics, most worrisome are the donations from the securities and investment world ($258,000 over time) and accountants ($209,000), industries that fall closely under the SEC purview.

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But Columbia’s Coffee said, “Many, many SEC chairmen have come from Wall Street, where they can have their own conflicts of interest. People in public life are going to have some prior track record where conflicts can arise. It’s not unique to Congress.”

Many who know Cox say they have no doubt about his suitability for the SEC post.

“I think we should give a great deal of respect and deference to Chris Cox’s tremendous intellectual abilities and political skills,” said Joseph A. Grundfest, a former SEC commissioner who is a law professor at Stanford University. “I’m optimistic that he’s going to do very, very well.”

*

(BEGIN TEXT OF INFOBOX)

Charles Christopher Cox

Age: 52 (born Oct. 16, 1952, in St. Paul , Minn.)

Personal: Married to the former Rebecca Gernhardt, a vice president at Continental Airlines. They have three children.

Education: BA, USC, 1973; MBA,

Harvard Business School, 1977; JD, Harvard Law School, 1977

Career highlights

1978-82: Partner, law firm Latham & Watkins

1982-83: Lecturer on business administration, Harvard Business School

1984-86: Co-founder, Context Corp.

1986-88: Senior associate counsel to President Reagan

1988-present: Republican U.S. representative from Newport Beach

1997-2000: Chairman, Select Committee on U.S. National Security and Military/Commercial Concerns With the People’s Republic of China

January 2005-present: Chairman, Committee on Homeland Security

Source: Times research

Los Angeles Times

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