Uptick in Trump white collar prosecutions may ease lawyers' pain

[April 27, 2019]  By Suzanne Barlyn and Andy Sullivan

NEW YORK/WASHINGTON (Reuters) - An uptick in white-collar prosecutions by the Trump administration could bring relief to high-end defense lawyers, who have been searching for work after years of declining federal prosecutions.

Many white-collar lawyers have been fretting about their caseloads since the Trump administration took charge of the U.S. Department of Justice, worrying that it would continue or accelerate the declining level of activity under the last years of the Obama administration.

Prosecutions, in fact, are now edging upward, Justice Department statistics show. But they are still far below levels seen in the wake of the 2008-2009 financial crisis.

"I'm in a profession where everyone says they are 'doing great'," said Charles Ross, a New York-based criminal lawyer. "But generally, when I talk to people now, they are scrambling," said Ross, whose clients include white-collar defendants.

The Justice Department says it filed charges against 6,547 defendants in the most recent fiscal year, which ended on Sept. 30, 2018, a 3 percent increase from the 2017 fiscal year.

But that figure is far short of the 10,133 people who were charged with white-collar crimes in the 2011 fiscal year, and it remains short of the average annual figure of 8,479 this century.

White-collar crime includes a wide range of nonviolent behavior, such as identity theft, Medicare fraud, and embezzlement. As the April 15 tax-filing deadline approached this year, federal prosecutors announced a spate of fraud cases against tax accountants.

The number of white-collar prosecutions during a presidential administration’s first year can dip from the previous administration and then notch up again as new leaders are confirmed for top Justice Department posts and different priorities are set.

Trump administration officials have spoken frequently about cracking down on illegal immigration, violent crimes and opioid abuse, among other issues.

Under Trump, the Justice Department has focused on prosecuting people involved in corporate wrongdoing, rather than the companies themselves. Companies that voluntarily report wrongdoing will be treated sympathetically, officials say.

"The goal of criminal enforcement should not be to pursue a small number of cases and set a new record each year for the largest check extracted from shareholders. Enforcement should not be like a random lighting strike," Deputy Attorney General Rod Rosenstein said in a speech in March.

The Justice Department's Fraud Section, which focuses on securities, financial and healthcare fraud, charged more than 400 people in the 2018 fiscal year -- an increase of more than one-third from the previous year, said spokeswoman Nicole Navas.

Last year, former hedge fund manager Michael Scronic, of Westchester, New York, plead guilty to defrauding 45 investors of more than $22 million and radio personality Craig Carton was convicted of securities fraud and other offenses in a Ponzi-like scheme involving the reselling of concert tickets.

ONE-OFF CASES

The increase in prosecutions is still a long way from plugging gaps for many white-collar lawyers, who are beefing up other areas of their practices to fill the void.

"There might be a natural resetting of the bar," said New York-based white-collar defense lawyer Greg Morvillo, who is devoting more time to defending “one-off” type cases against individuals, conducting corporate internal investigations and advising companies on governance issues.

U.S. authorities are not conducting the types of sprawling, interrelated financial fraud investigations, such as those launched by former U.S. Attorney Preet Bharara, whose crackdown against insider trading at hedge funds began within months after his 2009 swearing-in.

"It seems that nothing is hot in the sense that there is no overarching investigation keeping everyone in the industry busy," Morvillo said.

Though the Justice Department was criticized for not aggressively pursuing Wall Street in the wake of the 2008-2009 financial crisis, fraud cases involving financial services did increase. Federal prosecutors charged 1,861 defendants in the 2010 fiscal year for crimes involving corporate fraud, securities fraud, investment fraud and mortgage fraud, official statistics show – accounting for nearly one in five white-collar defendants during that time period.

Activity has fallen sharply since then. Only 486 people were charged in those types of cases in the 2017 fiscal year, accounting for 8 percent of white-collar defendants.

Insider trading cases have slowed. But authorities are still bringing cases involving spoofing, a crime that involves placing bids to buy or offers to sell futures contracts with the intent to cancel them before execution. By creating an illusion of demand, spoofers can influence prices to benefit their market positions.

Not all white-collar lawyers say they are feeling the pinch. For example, Robert Frenchman recently left his job as a white-collar lawyer at a large New York law firm to launch a boutique defense firm.

“Maybe it is a little slower in terms of financial services white collar, although there are still quite a few out there,” said Frenchman.

(Reporting by Suzanne Barlyn in New York and Andy Sullivan in Washington; editing by Jonathan Oatis)

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