• U.S.

A Troubled Double Life

6 minute read
Richard Stengel

The chief of enforcement at the Securities and Exchange Commission seemed the very pillar of rectitude. Hardworking and scrupulous, John M. Fedders, 43, had a reputation as a vigorous prosecutor of disclosure fraud and insider trading. A former partner in the Washington law firm of Arnold & Porter, he was the father of five sons, a member of the high-toned Congressional Country Club and a churchgoing Catholic who idolized General George Patton. In fact, unknown to almost everyone, Fedders was leading a Jekyll and Hyde double life.

Last week the dark side of that life was revealed by the Wall Street Journal in a vivid, 4,000-word expose. The newspaper disclosed not only that Fedders abused his wife, but that he was in financial difficulties for living beyond his means, and that questions still lingered about his role in an alleged cover-up by a former client, Southland Corp., convicted of criminal conspiracy. Fedders acknowledged seven “regrettable episodes” of wife abuse and publicly expressed remorse. But that was not enough to satisfy the White House. At midweek, after 3 1/2 eventful years at the SEC, Fedders stepped down. Said he: “The glare of publicity on my private life threatens to undermine the effectiveness of the Division of Enforcement and of the commission.”

The jolting revelations that Fedders had beaten his wife were contained in court papers in Maryland. Suing for a divorce after 18 years of marriage, Charlotte Fedders, 41, described herself as “a classic abused wife.” An outgoing, statuesque (5 ft. 9 in.) woman, she had once worshiped her husband, a 6-ft. 10-in. former basketball center at Marquette University, and she routinely laid out his suit, socks and underwear in the morning. But barely two years after they were married, she testified, her husband struck her on the side of the head, rupturing an eardrum. Mrs. Fedders recounted that when she was pregnant with her first son, Fedders attacked her with his fists, pummeling her in the abdomen. Said she: “I remember he was yelling he didn’t care if he killed me or killed the baby.” Another time, she recalled, he grabbed her by the hair and tried to heave her over a 5-ft.-high banister in their home, causing an injury to her neck, for which she must occasionally wear an orthopedic brace. The marriage finally ruptured in the summer of 1983, when Fedders refused to continue psychotherapy after only half a dozen sessions. Mrs. Fedders then ordered her husband out of their $250,000 house in Potomac, Md.

Fedders had a history of “black moods,” and these apparently were exacerbated by a 1982-83 federal grand jury investigation of Southland, the Dallas-based operator of 7-Eleven. Southland was accused of attempting to bribe state officials, and Fedders was questioned about his role in helping the company conduct an internal investigation, which failed to turn up any wrongdoing.

Money worries also assailed him. Despite taking a pay cut from $161,000 to $59,500 when he joined the SEC, Fedders was determined to maintain the style to which he had become accustomed as a successful securities lawyer. He barely trimmed his expenses and borrowed heavily to pay his state and federal taxes, maintain a 70-acre farm in Virginia and keep his five sons in private schools. After he moved out, Fedders was straining to support his family while living in a spartan one-bedroom apartment with ramshackle furniture he had bought from some departing college students.

Fedders admits that he always put work before family. At home he was a fastidious, obsessive man who did not permit anyone to wear shoes on the carpeting; on the job he was a demon for organization, logging long hours as he supervised a 200-strong enforcement staff and meticulously reviewed proposed cases. According to SEC Chairman John Shad, Fedders demonstrated “unique executive and managerial abilities by increasing the annual volume of enforcement actions by over 50%, with 5% less personnel.”

In his efforts to crack down on insider trading, Fedders engineered an unprecedented agreement with Swiss authorities that made it harder for inside traders to hide behind Swiss banking secrecy laws. He also launched the probe that resulted in the indictment of a Wall Street Journal reporter for passing tips to investors before publishing them in his column. Fedders withdrew from that case after one of the targets of the investigation retained counsel from his old law firm. While some associates found Fedders overbearing, the consensus at the agency and on Wall Street was that he was a tough, thoroughgoing official, one who did not allow his financial and personal problems to affect his work. Said one top Washington securities lawyer: “You may not like what he’s done at home, but you’ve got to admit he was first-rate in the job.”

Some observers complained that the press had been too zealous in describing Fedders’ travails, and protested that as long as an official is getting the job done, he should not be penalized for his private life. After trying to dissuade the Journal from printing the story, Fedders’ lawyer, Nathan Lewin, dismissed the piece as “gratuitous” and “exaggerated.” Yet a senior Administration official privately conceded that President Reagan could not keep on a known wife abuser, no matter how effectively he performed his job. Indeed, the White House had been informed of Fedders’ behavior last year when Mrs. Fedders, after hearing Reagan decry “family violence” in a speech, composed a tell-all letter that was eventually forwarded by her sister to White House Counsel Fred Fielding. In it she wrote plaintively, “I do not understand how a man can enforce one set of laws and abuse another.”

Charlotte Fedders was reluctant to let the case go to trial, but the two sides could not agree on alimony and child support. Fedders insisted that they be based on his current Government salary, while his wife argued that they be scaled upward once he returned to private practice and cashed in on his cachet as a former SEC enforcement chief. That rich future is now less assured. Said one top Washington lawyer: “He may be a damned good securities lawyer, but he’s going to find it tough to land a job in this town.”

In the midst of last week’s divorce hearing, Fedders, staring intently at his wife, delicately held out the possibility of reconciliation. Charlotte Fedders, seeming more sorrowful than angry, simply closed her eyes and slowly shook her head no. Said she: “I just think the whole situation is very sad.”

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