White collar lawyers predict boom times under Biden
By Joshua Chaffin in New York
Corporate criminal prosecutions expected to rise after falling dramatically during Trump era
For those lawyers who make a living defending executives accused of insider trading, accounting fraud and the like these past four years have been lean ones.
The business-friendly administration of former president Donald Trump prized economic growth and a soaring stock market while showing less enthusiasm for prosecuting financial crime.
So for many white collar criminal defence lawyers, Trump's defeat at the hands of Democrat Joseph Biden has been cause for celebration.
"The Trump administration's approach to dealing with white collar crime can be encapsulated in the dozens of pardons that president Trump granted to white-collar criminals stretching back decades," said Daniel Horwitz, a former prosecutor who is now a partner at McLaughlin & Stern in New York. "Will there be an improvement? The Trump administration set the bar as low as it could possibly be."
Another white-collar lawyer described fellow members of the trade as "gleeful" — almost inappropriately so — at Biden's triumph. "The next four years are going to be booming," he predicted.
White-collar criminal prosecutions undertaken by the justice department last year fell to their lowest level in 25 years, according to statistics compiled by Syracuse University. At just over 5,000, they were roughly half the 10,162 notched by the Obama administration in 2011, in the wake of the 2008 financial crisis.
Both prosecutors and defence lawyers quibble with such headline numbers, arguing that they do not necessarily reflect the quality or ambition of enforcement efforts.
Still, there is broad agreement among defence lawyers that regulators have been less active in recent years. "I'd say everything was just a shade or two less aggressive," said Daniel Alonso, a former Manhattan prosecutor now practising at Buckley in New York.
Jacob Frenkel, a former Securities and Exchange Commission attorney who now leads the government practice at Dickinson Wright in Washington, framed the Trump administration's regulatory approach as a matter of priorities: it poured resources into prosecuting immigration violations, drug gangs and Chinese espionage. "That, by definition, shifted attention from the more traditional corporate fraud cases," he said.
It is difficult to pinpoint the degree to which white-collar lawyers have suffered as a result. Several practitioners say their own business has remained steady — but that they know others who are ailing.
One sign of strain is that large firms that traditionally represented big companies and financial groups in white-collar matters have begun to move down the food chain to take on the less lucrative work of representing individuals. At least one well-known New York defence lawyer — also dealing with the disruption from the pandemic — put his practice into hibernation last year.
"There has always been that ebb and flow when you have a change in administrations from Republican to Democratic. But I do think it's likely to be more extreme now," said Mark Zauderer, a partner at Ganfer, Shore, Leeds and Zauderer in Florida.
With Biden, he expected a resumption of insider trading and antitrust cases, but also a new focus on other areas neglected by the Trump team. "This administration is clearly going to have a much more aggressive approach in terms of enforcing environmental regulation," Zauderer predicted.
An encouraging sign for white-collar lawyers was Biden's nomination of Gary Gensler to lead the SEC. Gensler was known for his rigour when he led the Commodity Futures Trading Commission from 2009 to 2014. Assuming he is confirmed by Congress, one of his first challenges may be reviewing the extraordinary trading of GameStop for possible market manipulation.
Fines and disgorgements that can result from enforcement actions are sure to be welcomed by local governments, whose finances have been ravaged by the pandemic, white-collar lawyers say. They also believe the progressive wing of the Democratic party, led by figures such as Senator Elizabeth Warren, will demand aggressive enforcement of tax fraud and other financial crimes.
"Will Biden feel compelled to be tougher?" Horwitz asked. "I seriously think so."
The white-collar business has developed in the shadow of Wall Street, often influenced by the prevailing political mood.
As recently as the 1970s, criminal lawyers were still a rarity at elite Wall St law firms, where partners tended to regard them as unseemly. Should a client find themselves in such a bind, they tended to be referred elsewhere.
That began to change, thanks to an aggressive and media-savvy prosecutor in New York: Rudolph Giuliani. "It didn't really become ‘acceptable' until Rudy and Boesky and the insider trading cases in the late ‘80s," said Thomas Curran, a third-generation prosecutor-turned-defence lawyer, referring to Giuliani's prosecution of financier Ivan Boesky. "Why is it that it became more acceptable? Because it was lucrative — and necessary."
As white-collar cases grew larger and more complex, big firms discovered that their core clients needed expertise. They scrambled to create their own white-collar practices.
Audrey Strauss, the current US attorney for the southern district of New York, was recruited by Fried Frank in 1990 to help build its white-collar team after a long career as a prosecutor.
The trade reached a high water mark in the early 2000s with era-defining criminal fraud cases involving Enron, Arthur Andersen, WorldCom, Tyco and other Fortune 500 companies.
The Obama years lacked those headline cases but were still flush for white-collar lawyers. There was also renewed scrutiny of the derivatives market and mortgage lending as a result of the 2008 financial crisis.
There was also the economic stimulus package the administration deployed in response to the crisis. A dozen years later, it is still generating fraud cases and allegations that federal contracting rules were violated.
"When the government spends money, with it comes government regulators who watch the manner in which that money is spent," Curran said.
The massive economic stimulus deployed by the government to address the coronavirus pandemic came with its own special inspector-general as well as an accountability committee to monitor spending.
For recipients, that might sound onerous. For white-collar lawyers, it sounds like future business.