By Dave Michaels

The incoming chairman of the Securities and Exchange Commission built a career dealing with regulators -- as their adversary.

When AT&T needed an ally to thwart a 2021 SEC lawsuit, it hired Paul Atkins, a former SEC commissioner who in 2009 began building a profitable yet opaque niche as one of Wall Street's go-to advisers in Washington.

Atkins, nominated as President Trump's next SEC chairman, served as an expert witness for the telecom giant, telling a court that AT&T hadn't violated a law that forbids companies from selectively disclosing nonpublic information to Wall Street analysts. A judge in pretrial proceedings said there was formidable evidence that the company had. AT&T settled soon after for a $6.25 million fine without admitting or denying wrongdoing.

Companies have hired Atkins to serve as an expert witness in at least 15 cases, according to his court disclosures, where he sometimes argued that law enforcers stretched the bounds of the law to target permissible corporate practices.

If his Senate confirmation proceeds as expected, Atkins will be in a position to bring that mentality to the commission, which could result in a retreat from enforcement actions that target regulatory gray areas.

David Rosenfeld, a former SEC enforcement lawyer, said the SEC under Atkins will likely pull back from filing lawsuits over disclosures that aren't indisputably important to investors.

"Historically the SEC would not bring those cases, but they pushed further than they had under Gary Gensler," Rosenfeld said, referring to the Biden-era chairman known for his aggressive enforcement streak.

Areas that became priority targets for enforcement during the Biden administration, including cryptocurrency trading and environmental disclosures, are already on the chopping block.

Atkins, a lawyer, first worked at the SEC in the 1990s as an adviser to former Chairman Richard Breeden. He rejoined the SEC as a Republican commissioner in 2002 and stayed until 2008, when he left and formed consulting firm Patomak Global Partners.

Patomak's services include helping companies implement systems to comply with new regulations and preparing them for regulatory examinations. The firm also offers litigation support and help dealing with government investigations.

Atkins has never registered as a lobbyist and avoids formal meetings with SEC commissioners over pending matters, which would trigger disclosure of his clients. He has recently charged clients $1,450 an hour to serve as an expert witness, according to court records. He didn't return messages seeking comment.

Such witnesses are a common feature of corporate litigation. Their input, while plainly designed to help the party that hired them, can help judges and juries sift through complicated facts about financial practices or economic projections.

His clients have included SAC Capital, the hedge fund firm that pleaded guilty to criminal insider-trading charges in 2013. Atkins was a witness for the firm, now called Point72, in a class-action filed by investors who blamed SAC Capital for their trading losses.

Atkins told a court that SAC Capital had a compliance program that was "in accordance with industry norms and best practices" for hedge funds. SAC Capital settled the lawsuit for $135 million in 2016, saying it did so "solely to eliminate the uncertainty, burden and expense of further protracted litigation."

Atkins also served as an expert witness in 2013 for Chinese affiliates of the Big Four accounting firms when they faced an SEC enforcement action. Citing Chinese laws that governed information sharing with foreign law enforcement, the firms rebuffed the SEC's evidence requests tied to a series of accounting fraud investigations. The firms eventually settled the case, agreeing to comply in the future and each paying fines of $500,000.

Atkins wrote in his expert witness report that it was "troubling and inconsistent with the historical policy of the SEC" for the agency to punish the Chinese firms for withholding records.

At the SEC, Atkins would likely have to recuse himself from enforcement cases in which he previously assisted the defendant. He already stepped down in January as an expert witness for electronic-trading firm Virtu, citing his SEC nomination.

Regulators in 2023 accused Virtu of misleading clients about a potential gap in one of its controls for safeguarding clients' trading data. The failure could have allowed Virtu employees who were unauthorized to see the information to exploit it for profit. But that didn't happen, Virtu said.

Since no one at Virtu misused the trading data, regulators can't credibly argue that Virtu misled clients, the firm argued. Atkins resigned as Virtu's expert witness before testifying. The company declined to say what he was hired to argue.

Regulators and other plaintiffs have sometimes challenged Atkins's expert claims. In 2016, a court-appointed receiver, working on a case stemming from an SEC enforcement action, alleged Atkins had violated a federal ethics law by assisting an investor caught up in a Ponzi-scheme case.

The receiver alleged that Atkins had voted to approve an investigation of the Ponzi scheme when he served as an SEC commissioner. That disqualified him from later working on a matter related to the SEC's case, the receiver said.

Atkins resigned his role in the case, although he insisted he didn't recall voting on the investigation, according to a court filing submitted in September 2016.

In the AT&T case, Atkins disputed the entire basis for the SEC's lawsuit. The agency alleged the company leaked material nonpublic information to Wall Street analysts to prompt them to lower their revenue estimates. AT&T had been worried about missing Wall Street's expectations for a third consecutive quarter, the SEC said.

The leak was a violation of Regulation FD (for "fair disclosure"), a rule intended to level the playing field between Wall Street professionals and ordinary investors, the SEC said.

Atkins echoed AT&T's arguments that regulators exaggerated the importance of information it shared with analysts. The company had shared information about its device sales, but selling phones was a tiny sliver of AT&T's revenue, meaning it wasn't material to investors, Atkins and AT&T said. The information shared with analysts didn't make its way to traders who could have exploited it for profit, they added.

SEC lawyers asked Judge Paul Engelmayer to exclude Atkins as an expert, arguing he was exceeding his proper role in the case. When a commission lawyer complained about Atkins at a hearing, Engelmayer said he needn't bother. "You don't even have to talk about Atkins. A bad use of everyone's time. Move on."

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

February 25, 2025 10:00 ET (15:00 GMT)

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