Boots on the Ground in DC: The New Reality of White-Collar Enforcement Defense

Editor’s Note: This article is written by the former acting assistant attorney general of the criminal division at Main Justice who is now a partner at Debevoise & Plimpton.

By David O’Neil, Partner, Debevoise & Plimpton

For many years, the main front in the government’s efforts to extract penalties from corporate America ran in a tight line across lower Manhattan -- from the SDNY U.S. Attorney’s Office at St. Andrew’s Plaza to the SEC regional headquarters a few blocks away.

Today, that front has shifted well to the south. The battle in New York continues, but the hotbed of white-collar enforcement activity is now centered squarely in Washington, D.C. The phone call signaling the overt phase of an investigation targeting a bank or company is now likely to come from one of the sections in the Justice Department’s headquarters, working alongside the many regulatory agencies lining Constitution Avenue.

That shift has occurred even though the Southern District of New York has continued to produce the kind of major prosecutions for which it is justifiably renowned. SDNY has not been doing less over the last decade; prosecutors and regulators in Washington have simply become much more active than ever before.

A large part of the explanation for that trend lies in the internal organization of the Justice Department. DOJ guidelines emphasize the need for centralized supervision of FCPA investigations and therefore provide that the Criminal Division must receive notice whenever an allegation of FCPA violations surfaces, expressly approve the initiation of any FCPA case, and staff every FCPA matter.

Main Justice exercises a similar, though slightly less strict, level of control over tax and antitrust investigations. The U.S. Attorneys’ Manual requires the prior approval of the head of the relevant section before any tax or antitrust investigation begins, and although there is no formal staffing requirement akin to the FCPA rules, as a practical matter, Main Justice stays heavily involved in such cases from start to finish.

[Image “david o’neil” (src=https://bol.bna.com/wp-content/uploads/2015/03/david-oneil.jpg)]

Above: The author at his desk.

Because of these requirements, prosecutors from Washington, D.C., are embedded in three areas that have exploded in importance and now dominate corporate enforcement: global FCPA investigations that have resulted in record-setting fines; tax evasion cases that last year led to the first guilty plea by a major bank in nearly 30 years; and massive cartel price-fixing prosecutions, including those focused on manipulation of LIBOR and the FX markets.

Moreover, the Criminal Division has always played a key role in major prosecutions for violations of anti-money laundering, bank secrecy, and trade sanctions laws. As the significance of those cases has expanded dramatically in the past decade – they generated more than $10 billion in recoveries over the last year alone – so has the prominence of the Main Justice components overseeing them.

The centralization of control in Washington over these corporate cases is a reflection of the fact that they are global, sprawling, and often rife with difficult questions of intra-government and international relations. They involve not only the Justice Department but many other domestic agencies, which are overwhelmingly based in Washington. And they inevitably enmesh regulators and prosecutors from around the world, who have watched the recoveries obtained by their U.S. counterparts and now insist on playing an ever larger role.

As the enforcers have shifted from New York to Washington, the white-collar bar has followed suit. New York will always be the hub for top firms that serve financial institutions and multinational companies, but those firms have also recognized that a strong D.C. presence is a critical component to a credible investigations practice.

That is true not because of physical proximity, but instead because experience in navigating the corridors of Washington enforcement agencies is indispensable. Those offices are a fundamentally different beast from the Southern District of New York, with vastly divergent personalities, customs, expectations, and pressure points. What works in SDNY will not necessarily work – indeed, may be affirmatively counterproductive – when dealing with Main Justice or D.C.-based regulators.

As long as the southward trend of enforcement activity continues, boots on the ground in Washington will remain essential for banks and companies in the government’s crosshairs.

O’Neil Photo by Big Law Business.