Scalia on tap to replace scandal-tainted Acosta at DOL

President Donald Trump's choice of Eugene Scalia to serve as secretary of labor would put in charge an accomplished litigator and administrative law expert with deep knowledge of some of the agency's biggest issues, including a fiduciary rule now being reworked.

Mr. Trump said in a pair of tweets July 18 that he intends to nominate Mr. Scalia, a partner in the Washington office of Gibson, Dunn & Crutcher LLP and son of late Supreme Court Justice Antonin Scalia, to replace Alexander Acosta, who resigned effective July 19.

Deputy Secretary Patrick Pizzella will serve as acting secretary until Mr. Scalia can be confirmed by the Senate after Mr. Trump formally submits the nomination.

Mr. Scalia's DOL experience includes serving as solicitor, the chief legal officer responsible for all Labor Department litigation and legal advice on rule-making and administrative law. He began that position in January 2002 following a recess appointment by President George W. Bush in April 2001. Gibson Dunn represented Mr. Bush before the Supreme Court in Bush vs. Gore.

Mr. Scalia also served as a special assistant to the attorney general where he successfully challenged numerous federal agency actions. In private practice, he helped MetLife Inc. remove its designation as a non-bank systemically important financial institution by the Financial Stability Oversight Council.

His firsthand experience with the Department of Labor's fiduciary rule-making includes being part of the legal team representing the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable, the Insured Retirement Institute and other leading trade associations in their successful challenges to its latest version. He presented oral arguments in the case before the 5th U.S. Circuit Court of Appeals in New Orleans, which vacated the DOL's fiduciary rule in March 2018, saying it represented regulatory overreach. DOL's latest regulatory agenda said it is "considering regulatory options in light of the (5th) circuit opinion," with a final rule expected by September.

DOL officials are now looking to harmonize their new fiduciary rule-making with the Securities and Exchange Commission's new standards-of-conduct package, known as Reg BI, for its centerpiece best-interest standard that was approved June 5. The SEC rules do not affect retirement plans except some small 401(k) plans served by brokers, but financial professionals who provide advice to retirement plan participants, including rollover recommendations, are subject to the new rules.

Jeanne Klinefelter Wilson, Employee Benefits Security Administration deputy assistant secretary for policy, said in June that while the two agencies have two different statutes, "the goal is to proceed under a raw common framework and propose Department of Labor rules (that) track as closely as possible with SEC's best-interest regulations." One possibility is that the DOL could change the definition of what constitutes investment advice.

The DOL will be led by Mr. Pizzella as the acting secretary until Mr. Scalia is confirmed. He has a political history as a longtime bureaucrat and Republican lobbyist, but sources in retirement and benefits-focused organizations in Washington don't expect him to lead a dramatic change of course for the Labor Department.

Mr. Acosta stepped down on July 12 following fallout from his handling of plea deal negotiations with billionaire sex offender Jeffrey Epstein in 2007-'08. Mr. Acosta's announcement, made outside the White House alongside Mr. Trump, came two days after Mr. Acosta had defended his conduct during his time as the U.S. attorney for Southern Florida.

Mr. Pizzella, who previously served as assistant secretary of labor for administration and management from 2001 to 2009 during the administration of President George W. Bush, is regarded as more business-friendly, said an attorney who asked not to be named due to the political sensitivities of the resignation.

Labor Department enforcement actions were up significantly under Mr. Acosta last fiscal year while guidance has been almost non-existent. Under the current administration, the agency has filed three advisory opinions in nearly 30 months. In the preceding eight years under Mr. Obama, 28 advisory opinions were issued; during Mr. Bush's eight years in office, the Labor Department filed 102 advisory opinions.

Sources said they expect the Labor Department's regulatory agenda to continue as planned, including movement on a proposal that would narrowly expand the use of open multiple-employer plans and the unveiling of a new fiduciary rule.

"The resignation of Secretary Acosta may slow down the process a bit, but I don't envision full stoppage or any significant delay," said Will Hansen, chief governmental affairs officer at the American Retirement Association, a retirement industry trade group in Washington.

Jason Hammersla, vice president of communications for the American Benefits Council in Washington, echoed similar sentiments. "Most of the pending employee benefit regulatory issues have been under way for some time, or will be a result of changes in the law or executive orders," he said. "The (Employee Benefits Security Administration) team — both the political leaders and the career staff — are experienced and dedicated, so Secretary Acosta's departure is therefore unlikely to lead to a dramatic change of course. If Congress is able to pass retirement reform legislation this year, DOL will have a lot more work to do."

With a presidential election looming next year, it's unlikely that any new regulatory efforts will be unveiled, the attorney said.

Moreover, because of the time it will take for Mr. Scalia to receive Senate confirmation, it's possible that Mr. Pizzella will lead the Labor Department into next year.

Mr. Trump, who had publicly backed Mr. Acosta, said he did not call for the resignation and applauded the job he's done as labor secretary. "He's doing this not for himself, he's doing this for the administration," Mr. Trump said.

Mr. Epstein sexually abused more than 30 girls from about 1999 to 2007 at his home in Palm Beach, Fla., according to court documents. Following the plea deal in Florida, Mr. Epstein served 13 months in jail and registered as a sex offender.

Mr. Acosta has been widely criticized for his role in the negotiations.