White-Collar Experts Are Recruited to Handle Expected Increase in Government Enforcements

Nate Raymond

New York Law Journal

November 04, 2010

Law firms are stepping up their hiring of white-collar lawyers in anticipation of increased investigations by government agencies into financial fraud and corporate bribery of foreign officials.

Firms including White & Case; Jenner & Block; and Chadbourne & Parke over the last two months have recruited white-collar partners from other firms, many of whom have prosecutorial experience. Recruiters say law firms are seeking to bolster their practices in anticipation of more investigations by the U.S. Department of Justice and the Securities and Exchange Commission.

"People want to make sure they're covered," said Alisa Levin, a partner at recruiting firm Greene-Levin-Snyder.

The most recent partner grab occurred this week when New Jersey-based Lowenstein Sandler confirmed that Ira Sorkin, who was the defense counsel for Bernard Madoff, would be bringing along five other lawyers from Dickstein Shapiro on Monday. Mr. Sorkin, a former head of the SEC's office in New York, in a statement said Lowenstein "presents a unique opportunity for myself and my group that I could not pass up."

The push by law firms to poach white-collar partners is a response to the Dodd-Frank Wall Street Reform and Consumer Protection Act, meant to address the financial crisis, and increased scrutiny under the Foreign Corrupt Practices Act (FCPA) of alleged bribery of foreign governments by corporations.

Enforcement actions under the FCPA have reached an all-time high, while agencies such as the SEC and the Commodity Futures Trading Commission are gaining greater enforcement powers under recently enacted financial laws.

"The government is spending more money in this area and passing legislation," said Rita Glavin, the former head of the Justice Department's criminal division. "It would make more sense that in the private sector there would be a need for lawyers." Ms. Glavin joined Vinson & Elkins's New York office in March.

Other recent white-collar moves in New York have included Peter B. Pope, a top aide to Eliot Spitzer as attorney general who joined Jenner & Block last month from Arkin Kaplan Rice, and John M. Hillebrecht, who joined DLA Piper in September after most recently serving as senior trial counsel in the Southern District U.S. Attorney's Office's complex frauds unit.

The FCPA in particular has been a driving force in white-collar recruitment. In 2004, the Justice Department and the SEC filed only five foreign bribery actions, while last year they filed 40, according to an analysis by Gibson, Dunn & Crutcher. Through June, the federal agencies had already filed actions in 36 cases in 2010, according to Gibson Dunn.

In April, Mark Mendelsohn, who oversaw many of those investigations as deputy chief of the Justice Department's fraud section and is credited with helping to shape the current FCPA program, joined Paul, Weiss, Rifkind, Wharton & Garrison as a partner in Washington, D.C.

SNR Denton last month brought on board Sean C. Cenawood, the former chief of the civil frauds unit and affirmative civil enforcement coordinator in the Southern District U.S. Attorney's Office. Mr. Cenawood, who had previously served as health care fraud coordinator, in an interview said much of his focus will be in the health care and energy industries.

Mr. Cenawood said the Justice Department has signaled a willingness to broaden its FCPA targets to individuals, which means there are "more entities and folks that need representation."

Chadbourne & Parke meanwhile brought on M. Scott Peeler, a former Arent Fox partner who regularly advises on the FCPA. Charles K. O'Neill, the firm's managing partner, in a statement said Mr. Peeler's addition last month was "particularly timely" thanks to more stringent enforcement of the FCPA and other anti-corruption laws.

Mr. Peeler in an interview said many lawyers are preparing clients for the new Bribery Act, a law in the United Kingdom that will go into effect in April 2011. The act, considered by lawyers to be more strict than the FCPA, makes it a crime for a corporation to fail to prevent bribes to government officials by people associated with the corporation.

"It's the FCPA on steroids," Mr. Peeler said.

SEC Enforcement

Meanwhile, law firms expect a boost in activity from the SEC after President Barack Obama signed into law the Dodd-Frank Act in June. Jon Lindsey, a cofounder of recruiting firm Major, Lindsey & Africa, said Dodd-Frank "will trigger a fair amount of activity" on the recruiting side of law firms.

"The last time I saw the wave cresting like this was after Enron," he said. "They'd just passed [the Sarbanes-Oxley Act] and they were expecting a big push to enforce."

Lawyers have their eye on one provision in particular of Dodd-Frank that enables the SEC to pay bounties to whistleblowers for information on financial wrongdoing. Kenneth Caruso, a white-collar partner who joined White & Case in September from Bracewell & Giuliani, called the whistleblower provisions "revolutionary in some respects and [they] are bound to lead to more investigations and litigation."

The bounties can amount to 10 percent to 30 percent of amounts recovered in excess of $1 million, a significant incentive. Robert Khuzami, the SEC's director of enforcement, testified to Congress that the agency was establishing an office dedicated to whistleblowers.

Enforcement had already been increasing at the SEC under Mr. Khuzami, who assumed his post last year with the agency under widespread criticism for not being aggressive enough in the years leading up to the financial crisis and for missing financial scams like the Ponzi scheme run by Mr. Madoff.

Mr. Khuzami told Congress in September that the SEC in 2010 had so far filed 634 enforcement actions and obtained orders for disgorgement of $1.53 billion and penalties of $968 million.

With the SEC stepping up enforcement, former SEC lawyers have become attractive to law firms, recruiters said. Ropes & Gray, for example, last week brought on board Zachary Brez from Kirkland & Ellis.

Mr. Brez, a former staff attorney in the SEC's enforcement office in New York, said work spilling out of commission investigations "has gotten increasingly busy in the last year." He pointed to Mr. Khuzami's efforts to reorganize the SEC into units focused on specific subject matters as encouraging more investigations.

Among the new units are those dedicated to asset management and market abuse.

"I have colleagues there who run those units," Mr. Brez said. "And the outside view is that they are all competing with each other" to make cases.