By Emily Glazer
J.P. Morgan Chase & Co. named a relative newcomer to the
bank to be its top lawyer, succeeding the executive who led the
firm through a series of bruising clashes with regulators.
Stacey Friedman, the senior lawyer for J.P. Morgan's investment
bank since she joined the firm in 2012, will succeed Stephen Cutler
as general counsel early next year, the bank said Monday. Mr.
Cutler, a former regulator, is moving into an advisory role after a
roughly nine-year run leading the bank's legal efforts and will
hold the title of vice chairman.
The executive change will take place as the nation's largest
bank by assets works to turn the page on a series of clashes with
regulators. Under Mr. Cutler and Chairman and CEO James Dimon, the
bank agreed to pay $13 billion to settle allegations regarding
mortgage securities and settled a civil case over a roughly $6
billion trading loss known as the "London whale." In May, J.P.
Morgan and other banks pleaded guilty to criminal charges that they
had colluded to move foreign-currency rates for their own
benefit.
Ms. Friedman, 47 years old, could bring a new tack to dealing
with regulators. While both she and Mr. Cutler are known as
hard-nosed negotiators, the 53-year-old Mr. Cutler cut a larger
public profile as a former enforcement chief at the Securities and
Exchange Commission. He also publicly criticized regulators just
days after J.P. Morgan's $13 billion fine was announced, asking a
conference audience in New York: "At what point does this
stop?"
His successor is expected to bring a more disarming style and a
tendency to operate behind the scenes, said people who know both
lawyers. Ms. Friedman shows "inexhaustible intellectual curiosity"
and finds creative ways to avoid costly litigation, said H. Rodgin
Cohen, senior chairman at Sullivan & Cromwell LLP, where Ms.
Friedman worked from the late 1990s to 2012. Another colleague
noted Ms. Friedman's preference to refer to co-workers informally
by nicknames.
Mr. Dimon said in a statement: "Steve recruited Stacey to our
firm and highly recommended her to me and our Board as a great
successor. We couldn't agree more."
When her new role begins, Ms. Friedman will be the sole female
general counsel among the largest U.S. banks. She also will join
the operating committee of the bank. Mr. Cutler will act as a
senior adviser to Mr. Dimon, other executives and the board, the
bank said. He will continue to assist on complex legal issues,
including matters already in progress. Before Mr. Cutler steps down
from his role, Ms. Friedman will work as his deputy.
"It's an honor and privilege to take on this new role," Ms.
Friedman said in a statement.
The bank still has a relatively full legal plate, despite
settlements already in the books. Investigators are probing whether
J.P. Morgan's hiring activities in Asia violated the U.S. Foreign
Corrupt Practices Act. The Securities and Exchange Commission also
is discussing a settlement with the bank over whether J.P. Morgan
inappropriately steered private-banking clients to its own
investment products.
Mr. Cutler is the latest senior J.P. Morgan executive to vacate
his role, creating opportunities for younger executives but also
testing Mr. Dimon's ability to rotate key lieutenants. In the past
18 months, former co-Chief Operating Officer Michael Cavanagh and
former Chief Financial Officer and later Vice Chairman Douglas
Braunstein both left the firm. Then, in June, one of Mr. Dimon's
top advisers and former vice chairman, James B. Lee Jr.,
unexpectedly died.
When Mr. Cutler raised the issue of stepping down as general
counsel around 2014, Mr. Dimon tried to persuade him to stay,
people familiar with the matter said.
But the long hours and the stress of being the top lawyer for
the nation's largest bank had taken a toll. Mr. Cutler has
typically worked 12-hour days, people close to Mr. Cutler have
said. He served during some of the "most trying times" in the
financial-services industry, said Brad Karp, chairman of Paul,
Weiss, Rifkind, Wharton & Garrison LLP, which has worked with
J.P. Morgan and other large banks.
Next year "is the right time...to try something different," Mr.
Dimon recalled Mr. Cutler telling him.
The decision to name Mr. Cutler vice chairman of the bank became
official in recent weeks, some of these people said, adding that
Mr. Cutler wanted to ensure that there is work to do and it isn't
purely a symbolic role.
Ms. Friedman joined J.P. Morgan three years ago from Sullivan
& Cromwell, where she worked with the bank for more than a year
on matters ranging from mortgage-backed securities to its purchase
of the banking operations of Washington Mutual, the bank said.
Unlike Mr. Cutler, who in the early part of the last decade led
SEC investigations of financial-reporting matters, including those
at Enron and WorldCom, Ms. Friedman has argued some of her most
important cases on issues far from finance.
While at Sullivan & Cromwell, one of her marquee pro bono
cases was Cole v. Arkansas, a lawsuit challenging the
constitutionality of an Arkansas statute prohibiting unmarried,
cohabiting couples from serving as adoptive or foster parents. The
court ruled in favor of her team's clients.
"That case was one of the best experiences I've had as a
lawyer," Ms. Friedman said in an interview on Sullivan &
Cromwell's website.
Before joining Sullivan & Cromwell, Ms. Friedman, a graduate
of Duke Law School, was a clerk for U.S. District Judge Gary L.
Taylor of the central district of California. Before law school she
worked for Sen. Dianne Feinstein of California. She lives in Park
Slope, Brooklyn, with her wife and two children.
Mr. Cutler has been grooming Ms. Friedman for the new job over
the past 12 to 18 months, including her in all of the bank's major
legal cases and meetings with regulators, people familiar with the
moves said. In her most recent role working with J.P. Morgan's
investment bank, Ms. Friedman was responsible for more than 600
staff lawyers. The bank hasn't named a successor to Ms. Friedman in
that role.
Write to Emily Glazer at emily.glazer@wsj.com
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