Capital Markets

From Enron to Subprime: Campos Departs

As he did when he joined the SEC just before the enactment of Sarbox, the commissioner leaves during a time of turmoil.
Sarah JohnsonAugust 23, 2007

On July 25, 2002, five days before the Sarbanes-Oxley Act became law, the U.S. Senate confirmed Roel Campos’s appointment to the Securities and Exchange Commission. Five years later, after helping construct the SEC rules under the law, Campos is returning to the private sector to help companies deal with Sarbox and other SEC-related compliance issues.

Not long after the SEC wrapped up its eagerly anticipated management guidance on Sarbox’s internal-control provision, Campos called it quits, ending his second term as SEC commissioner three years short — a tenure longer than most commissioners, he contends.

In September, Campos will join the Washington, D.C. office of Cooley Godward Kronish LLP as a partner in charge, the firm announced on Thursday. At the firm, he plans to prep corporate clients for the possibility that his former employer will come knocking with inquiries or even subpoenas.

His loudest message to corporate targets of investigation? Cooperate. “The SEC takes into account all manners of cooperation and information sharing,” he says. “If things have gone wrong, companies do get credit, nonetheless, if they are hugely cooperative — if they turn over the results of their internal investigation and take responsibility to move quickly and remedy the situation.”

Reflecting on his time at the SEC during a family vacation in New York City, Campos told he’s leaving with mixed feelings. “I loved having the chance to contribute to policy making, to implement Sarbanes-Oxley, and help restore the confidence of investors during a really, really bad time in our economic history,” he says. “Things could have really gone south.”

There are issues he wishes he could have seen resolved during his tenure, including the proxy-access controversy that recently split the traditionally unanimous commissioners along party lines. As one of his last votes as commissioner, Campos voted with Annette Nazareth, his fellow Democrat on commission, and SEC Chairman Christopher Cox to propose that shareholders who own 5 percent of a company should be able to propose changes to that company’s bylaws regarding director nominations.

But Cox, along with his two fellow Republicans on the commission, also voted in favor of another seemingly contradictory proposal to allow companies to exclude such bylaw proposals. Says Campos: “I wish we could have brought that to a final vote while I was there.” The proposal he voted against releasing for public comment “would be hugely negative to investors, and investors would be furious and disappointed with the SEC and the chairman and the commissioners if that proposal were to pass. I have every confidence that Chairman Cox would not do something that is so negative to investors. [By doing so] his legacy would be not supporting investors.”

But Campos has also taken a leading role in an area that has up until now been less contentious than might have been expected: the melding of U.S. and global accounting standards. As the SEC liaison to international regulators, he promoted the ongoing convergence of the Financial Accounting Standards Board’s and the International Accounting Standards Board’s rules.

Although the SEC recently raised the possibility of allowing U.S. public companies to use IASB’s International Financial Reporting Standards, Campos isn’t ready to predict whether U.S. businesses would find IFRS any better than U.S. generally accepted accounting principles.

Knowledge of IFRS in the United States is limited, he notes. “I don’t believe it’s being taught — at least to any significant degree — in major schools, universities, or colleges,” he says. “What would it do to the CPA exam? Would it have to include IFRS? A lot of tricky things need to be done if and when IFRS becomes more used.”

Having split his career between the private and public sectors, Campos seems well primed for job that will straddle both worlds. He started out as a U.S. Air Force officer and served as federal prosecutor for the U.S. Attorney’s Office in Los Angeles, but he’s also worked as a securities lawyer and co-founded El Dorado Communications, a radio broadcasting company. As the first Hispanic SEC commissioner, he’s regarded as a Latino role model.

As he did when he joined the SEC, Campos is leaving during a time of upheaval in the financial markets. First it was Enron and WorldCom that demanded a strong regulatory response; now investors are pressuring rule-makers to render the subprime market more transparent following the recent meltdown. “There is never a point where I could say, ‘OK, now everything is settled’ and there will be a peaceful period of time,” he says. “I don’t think that will ever happen again, given the…velocity of things that are happening. There are more complex derivatives, hybrid products, exchange-traded funds — things that no one could have conceived of even three years ago.”