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May 31, 1999

SEC Chairman Draws Criticism Over Job Pitch for Subordinate: Levitt Recommended Official for Bear

By John A. Byrne

Richard Lindsey, the former SEC official, and chief architect of the order handling rules, has been stung by criticism over how Arthur Levitt helped place him in a private sector job.

The matter erupted when Sen. Carl Levin, a Michigan Democrat who oversees government ethics programs, questioned Levitt about a telephone call the SEC Chairman made to brokerage industry giant, Bear Stearns Cos. The call was placed to let the firm know about Lindsey's interest in working there.

Earlier, Lindsey had informed Levitt he was seeking a private sector job, an SEC official, speaking on Levitt's behalf, was quoted as saying. He asked the SEC Chairman if he would call about six securities firms he had identified. Levitt first called Bear Stearns, speaking to chief executive James Cayne, the SEC official said.

In January, the SEC said that Lindsey, then the director of market regulation at the SEC, was stepping down, to assume the No.2 post at the Bear Stearns Securities Corp., the clearing unit of Bear Stearns & Co.

At the time, the career move surprised people on Wall Street, largely because the SEC and the New York District Attorney's office were investigating Bear Stearns' role in processing business for A. R. Baron & Co. a reputedly corrupt brokerage firm.

Damaging Publicity

The current flat is clearly damaging publicity for Lindsey, the former SEC pitchman for regulatory reform on Nasdaq.

John Heine, a spokesman for the SEC, said the agency had no comment, beyond what was earlier reported about the matter. Hannah Burns, a spokeswoman for Bear Stearns, would only say the firm was very pleased to hire Lindsey, citing his invaluable experience and ability.

Loyal Lieutenants

While it is not unusual for Levitt to recommend loyal lieutenants for lucrative jobs on Wall Street, Sen. Levin, who raised the matter in a meeting with Levitt, thinks the current case raised troubling questions. Sen. Levin's office says that Levitt's call created the appearance of a potential ethics violation.

Levitt is off the hook, however. The SEC Chairman, prior to essentially endorsing Lindsey's credentials on Wall Street, received clearance from the watchdog agency's ethics officer, clearing him of possible wrongdoing, Levin's office said.

But the matter has not stopped there. Sen. Levin plans to seek changes in government ethics rules to make it illegal for governmental agency heads to make calls similar to Levitt's.