By EVAN PEREZ
Goldman Sachs Group Inc. retained one of Washington’s most prominent Democratic lawyers as it gears up to defend itself from civil charges of defrauding investors. At the same time, the company deregistered the employee charged in the case.
Greg Craig was White House counsel under President Barack Obama until January, serving as the president’s top lawyer and a key player in the administration’s efforts to close the Guantanamo Bay prison for terror detainees.
Mr. Craig is now in private practice at Skadden, Arps, Slate, Meagher & Flom’s Washington office. Goldman said it brought in Mr. Craig to assist in regulatory and legal affairs and declined to say what specific work he would do. Mr. Craig didn’t respond to a request for comment.
Goldman may have retained Mr. Craig for more than the immediate case, which would pit him against his former employer. Goldman’s problems in the capital go beyond the charges by the Securities and Exchange Commission. Many lawmakers have attacked the company and other Wall Street banks for their roles in the alleged excesses that led to the financial crisis.
Mr. Craig, a former aide to late Sen. Edward Kennedy, was a prominent corporate attorney at Williams & Connolly, a Washington law firm, before joining the Obama campaign. President Bill Clinton tapped him in 1998 to lead his defense during congressional impeachment proceedings. His work for Goldman was first reported by Politico.
Under an ethics executive order issued by Mr. Obama and federal law, Mr. Craig is barred from lobbying before any part of the executive branch for two years. That doesn’t cover Congress. Under the terms of the ethics order, Mr. Craig could lobby lower-level SEC career officials but couldn’t contact senior people at the SEC, such as the five commissioners, who are political appointees.
White House spokesman Bill Burton said Tuesday Mr. Craig is expected to abide by the rules established by the president. Mr. Burton said the White House wasn’t consulted beforehand about Mr. Craig’s new job.
Also, Goldman deregistered Fabrice Tourre, the employee charged with fraud by the SEC, with the U.K.’s main financial regulator.
A Goldman spokeswoman said the company decided to deregister Mr. Tourre with the Financial Services Authority because the London-based employee is on indefinite paid leave, and therefore won’t be interacting with Goldman’s clients. Employees of financial institutions need to be registered with the FSA in order to speak with clients and conduct other business.
Goldman’s deregistration of Mr. Tourre came the same day that the FSA announced it was launching “a formal enforcement investigation” of Goldman’s U.K. subsidiary “in relation to recent SEC allegations.” Goldman said it plans to fully cooperate with the FSA in its investigation.
Some questioned whether Goldman is distancing itself from him. Thomas Ajamie, a defense lawyer in Houston, said “it’s too soon to know” how the relationship between Goldman and Mr. Tourre will progress, but that placing someone on leave “is sometimes the first step” to a company distancing itself from an employee also accused of wrongdoing. A spokesman for Goldman declined to comment on the relationship.
On Tuesday, a Republican House member raised other questions over the relationship between the SEC and Democratic activists.
In a letter to SEC Chairman Mary Schapiro, Rep. Darrell Issa (R., Calif.), the top Republican on the House Oversight and Government Reform Committee, said the timing of the case raises “serious questions” about the regulator’s independence and impartiality. He said activity by Democratic activists after the SEC announcement suggests the agency’s action might have been timed to help Democrats.
According to the letter, after the suit was announced, Organizing for America, a spinoff group from President Barack Obama’s campaign, sent millions of supporters an email message from the president urging “support for ‘Wall Street Reform.’ ” In addition, the Democratic National Committee purchased advertising that would appear whenever a Google user searched for the phrase “Goldman Sachs SEC.” The ad read: “Help Pres. Obama Reform Wall Street and Create Jobs. Families First!” according to the letter.
“The events of the past five days have fueled legitimate suspicion on the part of the American people that the [SEC] has attempted to assist the White House, the Democratic Party, and Congressional Democrats,” Mr. Issa says in the letter.
SEC chairman Ms. Schapiro said following congressional testimony Tuesday that the Goldman charge was “absolutely not” motivated by political concerns. The White House has said it had no advance knowledge of the announcement. The DNC rejected suggestions that it had tried to coordinate its political advertising with the SEC. A DNC official said the vendor the party uses to purchase Google ads bought terms related to Goldman after news had broken about the SEC charge.
SEC spokesman John Nester said: “We will respond as appropriate to the letter, but the Commission doesn’t coordinate its enforcement actions with the White House, Congress or political committees.”
Lawmakers also are exploring ways to alter the Obama administration’s proposed bank tax to increase its impact on firms such as Goldman Sachs. At a hearing on Tuesday, Sen. Bill Nelson (D., Fla.) said it is an “outrage” that Goldman and others reaped billions from the federal bailout of American International Group Inc.
—David Enrich and Ashby Jones contributed to this article.
Write to Evan Perez at evan.perez@wsj.com