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In confirmation hearings, Eugene Scalia should have to answer for his aggressive conduct in the HSBC case.
Anyone who has covered financial reform had a flash of recognition when Donald Trump nominated Eugene Scalia, son of the late Supreme Court justice, as the next Labor Secretary. Scalia, a partner at the white-shoe law firm Gibson Dunn, has been the hired gun of the financial industry in its often successful attempts to soften the blow of Dodd-Frank.
Scalia was the lead attorney challenging the “position limits” rule meant to rein in speculation on oil contracts. He got the courts to throw out the “proxy access” rule that enabled shareholders to propose alternative candidates for corporate boards of directors. He led the fight to toss Dodd-Frank’s “extractive industries” rule, which would have required oil, gas, and mining companies to disclose all payments above $100,000 made to foreign governments. He represented MetLife in the company’s successful effort to shed a designation as a “systemically important financial institution.” And most recently, he was the lead counsel against the Department of Labor—the agency he’s poised to run— in the case that killed the “fiduciary rule,” which would have forced investment advisers to operate in the best interest of their clients.
He also helped block the Labor Department’s workplace ergonomics rule in the 1990s, which Democratic Senators held against him when they blocked George W. Bush’s effort to install him as the Labor Department’s solicitor general. Eventually, Scalia got a recess appointment.
Putting the most prominent legal challenger to agency regulations in charge of an agency that makes regulations is bad enough. But Scalia's lower-profile work for a big bank might prove just as relevant to his confirmation. In 2015, Scalia briefly represented mega-bank HSBC in a sexual harassment case involving several of its current and former employees. In a deposition with the harassment victim, Scalia repeatedly brought her to tears, not so subtly accusing her of promiscuity and scheming to extract money from the bank.
Amazingly, the woman deposed by Scalia wasn't even the subject of the litigation. She had already settled her case; the deposition was for a lawsuit brought by Mike Picarella, the banker who reported her harassment and was allegedly retaliated against at HSBC. “He was belligerent toward her, abrasive.” Picarella told me when I interviewed him a couple years ago.
An independent federal agency, the Equal Employment Opportunity Commission, handles rulemaking and investigates cases of workplace sexual harassment. However, the Labor Department does have some equal employment opportunity jurisdiction over federal contractors and programs that obtain federal financial assistance. Former Labor Secretary Alex Acosta’s kid-gloves handling of a sexual abuse case against hedge fund manager Jeffrey Epstein contributed to his downfall. Will Acosta be replaced by someone with another disturbing history in sexual misconduct cases?
Some backstory is needed here. I reported a long feature for HuffPost Highline last year about Picarella, who in 2011 joined a three-person team at HSBC and almost immediately discovered that his boss, Eileen Hedges, was harassing a young analyst, who in the story I called Jill. Hedges would persuade Jill to accompany her to a nearby bar after work, using her as flypaper to attract senior executives and major clients. The next day, Hedges would gossip to co-workers about Jill’s sexual adventures.
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Jill would routinely break down into sobs at the office, enough that Picarella—her seatmate—would notice. Eventually he decided to go to HR to report Hedges's behavior. This led to Jill getting fired (for lying to HR about a relationship with a fellow employee) and Picarella losing all his responsibilities at work. Picarella thought his sidelining served two purposes: It punished him for raising the profile of a damaging sexual harassment situation at the bank, and it prevented him from doing his job of raising compliance issues at a time when HSBC faced heightened scrutiny after a federal settlement for facilitating money laundering for terrorists and drug lords.
Picarella sued HSBC over the retaliation, and that’s where Eugene Scalia comes in: HSBC hired him as defense counsel. One of Scalia’s more high-profile actions was the deposition of Jill, which took place on May 29, 2015. HSBC, after firing Jill, did conduct an investigation of one aspect of the harassment claim, and it resulted in a settlement with Jill rumored to be in the low seven figures. Hedges was eventually fired, though she landed with a good job at a vendor of HSBC’s.
While she was not a litigant in the case, HSBC considered Jill relevant to Picarella's retaliation claims, so Scalia deposed her. I have a copy of that 311-page deposition and have read it in full.
Scalia kicked off the deposition asking what depression and anxiety medications Jill was taking and where she received treatment, which gives you a flavor of the tenor of the inquiry. Scalia proceeded to intimate that Jill was encouraging Picarella's litigation in violation of her settlement terms, and questioned how she had $250,000 that she used for a down payment on a house. The strategy seemed to be to accuse Jill of colluding with Picarella to win a payday from the bank.
For much of the deposition, Scalia asked probing questions about Jill's romantic relationships. Scalia intimated that Jill was stalking a former HSBC colleague, asked if others in the office had nude photographs of her, and queried about various other sexual partners. At one point Scalia used the fact that Jill told a colleague about a senior HSBC executive grabbing her behind, but not her leg, as some proof that she wasn't being wholly truthful.
The line of questioning ventured close to the experiences Jill cited at HSBC as harassment. And the goal was obvious—to depict Jill as a slut and effectively dismiss her claims, as a bank shot to discredit Picarella's retaliation case.
Scalia also focused in on Jill's then-current relationship with a former HSBC trader who was also suing the bank over retaliation. He showed Jill a document where the boyfriend described their relationship as “convenient,” which didn't seem to have any connection to the cases. Other emails displaying personal fights between the two partners were discussed at length.
Jim Hubbard, Picarella's attorney in the case, finally had enough. “You're just twisting at windmills and you've got a third-party witness here who has no involvement in these events that you're talking about,” he said. “You're trying to get some drama on tape.”
Scalia replied, “This woman who has alleged sexual harassment and misconduct in the workplace of a sexual nature…”
But Hubbard interjected, “She is not a plaintiff in this case, counsel. I think these questions are harassing, I just want to make that observation on the record.”
Eventually, Scalia drew out of Jill precisely why she felt she was sexually harassed at HSBC. Jill gave several examples: her boss Eileen Hedges pulled Jill's top down in public, “tried to offer me up to clients sexually;” encouraged her to sleep with top executives; and then spread rumors of her sexual behavior to others at the firm. “I couldn't believe Scalia was asking questions like how she was sexually harassed,” Picarella said. “She was crying the whole time.”
Scalia did not end up litigating the case against Picarella; HSBC went with other counsel. But the deposition reveals a particularly retrograde attitude toward sexual harassment, a couple years before the explosion of Me Too cases. Like any attorney, Scalia is entitled to vigorously represent his client. But in this case, he depicted a sexual harassment victim —someone who already had received a settlement from HSBC—as a philandering liar. This “blame-the-victim” strategy as a way for corporations to escape blame for sexual misconduct on their watch is all too typical. So are portrayals of victims as gold-diggers seeking a handout, a ploy Scalia also attempted.
In confirmation hearings, Scalia should have to answer for his aggressive conduct in the HSBC case. Given that the Labor Department has some responsibility over sexual harassment cases, his work here should be of special concern. Was Scalia merely representing a client, or did his considered views on sexual harassment victims tumble out? And whom would he seek to protect as Labor Secretary: victims, or the companies that might be liable for creating a harassing environment?
