Mary Jo White, the chairman of the Securities and Exchange Commission, has been on a charm offensive of late, hoping to prove that her agency is no longer the lap dog of Wall Street.

It’s not an easy argument to make. Not only did White’s predecessor, Mary Schapiro, appear to let the inmates run the asylum by not aggressively bringing cases against the Wall Street bankers who caused the financial crisis, but White herself, for all the bravado, is also a product of the revolving door between Wall Street and Washington.

During her long legal career, White has ping-ponged between the U.S. attorney’s office in Manhattan and Debevoise & Plimpton LLP, the Wall Street law firm. Her husband, John White, has also bounced between the SEC and Cravath, Swaine & Moore LLP, another prestigious Wall Street law firm.

Part of White’s strategy to recover the SEC’s swagger has been to appear tougher than Schapiro in speeches, including at a Bloomberg conference in September and at a lecture at Fordham Law School in October, and to make herself available for a rare profile in the New Yorker.

In that Nov. 11 article, Nick Lemman spoke with Andrew Ceresney, who worked with White at Debevoise and whom White recruited to be co-head of SEC enforcement along with George Canellos, another revolving-door practitioner. “Part of the mission is to protect investors and make sure the markets are fair and efficient,” Ceresney told Lemman. “Through enforcement you do that by bringing the actions where the evidence supports it. You punish people to the extent the securities law allows. You try to deter misconduct. Take important actions in important priority areas.” Sadly, this seems like pretty standard spin rather than anything new and aggressive.

Genuine Change

How do mere mortals gauge whether White & Co. are just blowing smoke, as did so many of her predecessors, or whether genuine change is afoot at the SEC? Will the SEC punish Wall Street bankers for wrongdoing leading up to the financial crisis? (And not just poor Fabrice Tourre, the Goldman Sachs Group Inc. vice president whom the SEC prosecuted civilly for his role as a foot soldier in Wall Street’s army of mortgage-backed securities traders and salesmen. To which I continue to say, “Free Fab!”)

To test the SEC’s new resolve, keep an eye on the civil case involving Eric Ben-Artzi, a quantitative analyst turned whistle-blower at Deutsche Bank AG in New York. The bank is being investigated by White’s enforcement division. If she pursues Deutsche Bank for misrepresenting its financial health before and during the financial crisis, as Ben-Artzi alleges, then we’ll know her zeal is for real. If the case languishes or isn’t prosecuted aggressively, then we’ll know that the SEC remains in the thrall of Wall Street.

Ben-Artzi previously worked at Goldman Sachs and Citigroup Inc. before joining Deutsche Bank in June 2010 as a vice president in the legal, risk and capital division. One of his jobs was to figure out how much the bank could lose from a credit-derivatives portfolio in a “black swan” event, such as the one the world experienced in 2007 and 2008. He had done similar work at Goldman Sachs, using the firm’s proprietary computer models. But at Deutsche Bank, he quickly discovered that a flawed financial model was improperly evaluating the “tail risk” in the bank’s $120 billion portfolio.

Ben-Artzi believed that Deutsche Bank had been overvaluing its portfolio, which was composed largely of Canadian collateralized debt obligations, by $10 billion to $12 billion. If true, it would mean that, in the years leading up to 2008, the bank had materially overstated its income. Ben-Artzi believed the miscalculation was the difference between Deutsche Bank appearing solvent and being insolvent and in need of a government bailout -- or risk failing.

Complex Models

The financial models are complex, of course, and subject to interpretation and differing opinions. Yet Ben-Artzi -- who has a doctorate in applied mathematics from New York University and has experience valuing options embedded in complex credit portfolios -- was convinced the bank had erred.

He told his bosses, who tried to dissuade him from his view that the securities were misvalued. They encouraged him to toe the party line. Instead, after reporting his dissenting views to his supervisors and then to an internal hotline, Ben-Artzi filed with the SEC a confidential whistle-blower complaint in which he claimed a serious error had been made. Three days later, in November 2011, Deutsche Bank fired him and immediately ushered him out of his office at 60 Wall Street.

If things are working properly at the SEC, Ben-Artzi’s complaint should lead to an enforcement action that could be the test case for White’s new resolve. (Much of Ben-Artzi’s story was originally revealed in an excellent December 2012 Financial Times article.)

Although Ben-Artzi’s complaint is confidential, his attorney, Jordan Thomas, a partner at Labaton Sucharow LLP and a former senior SEC enforcement official, told me that Ben-Artzi hired the Kilgour Williams Group, a respected Toronto-based boutique investment bank that specializes in valuation work, to conduct a financial analysis of the Canadian CDO portfolio.

As part of that analysis, Kilgour Williams uncovered copies of Deutsche Bank’s own contemporaneous analyses filed with the trustees of the CDOs. They showed that the Canadian CDO portfolio had been overvalued by Canadian $3.6 billion and likely much more, according to Kilgour Williams, when the time value of the options are factored in, among other reasons. That isn’t quite the $10 billion to $12 billion that Ben-Artzi found, but not tin, either.

Complicating matters further is that one of the people at Deutsche Bank who repeatedly tried to persuade Ben-Artzi to drop his concerns was Robert Rice, the head of governance, litigation and regulation in the Americas. Rice is now White’s chief counsel at the SEC.

Revolving Door

Also, the person who preceded Ceresney and Canellos as director of enforcement -- when Ben-Artzi filed his complaint -- was Robert Khuzami, the SEC enforcement director under Schapiro, the former general counsel of Deutsche Bank in the Americas and now a $5 million-a-year man at Kirkland & Ellis LLP. Khuzami’s boss at Deutsche Bank was Richard Walker, the general counsel of Deutsche Bank’s corporate and investment bank and also a former chief enforcement officer at the SEC. Spin, revolving door, spin.

Senator Sherrod Brown, a Democrat from Ohio, voted against White’s confirmation as SEC chairman. He told the New Yorker why he cast that vote: “I believe there is too much bias toward Wall Street among regulators. At the time, I said I hoped she would prove me wrong. But I’m still waiting for the S.E.C. to break from the status quo and demand accountability from the financial institutions it oversees. It’s time we find watchdogs outside of the very industry that they are meant to police.” Amen, brother.

(William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres & Co., Merrill Lynch and JPMorgan Chase.)

To contact the writer of this article: wdcohan@yahoo.com.

To contact the editor responsible for this article: Paula Dwyer at pdwyer11@bloomberg.net.