Addressing a broad array of matters of interest to lawyers representing or regulating banks, insurance companies, investment advisers and other financial services businesses.

BBA's Writers Pool: Securities Enforcement in the Wake of the Financial Crisis

By Robert T. Alfred

Nearly five years after the financial crisis, its continuing impact on regulatory and criminal enforcement was explored on April 4 at “Securities Enforcement: Recent Developments, Trial Strategies & Getting to a Non-Prosecution Agreement.”  

Current Enforcement Efforts by the SEC and U.S. Attorney’s Office:  

The SEC is becoming more proactive in looking for law violations, said John Dugan, Assoc. Director of the SEC’s Boston Regional Office.  In particular, the SEC’s recent focus on proactive enforcement has led to several risk-based initiatives that use new analytical tools and technology to identify “red flags” in company filings, portfolio performance, and other market activities.  Likewise, the DOJ has become more focused on securities fraud than at any other time, said Paul Levenson, Economic Crimes Unit Chief of the U.S. Attorney’s Office in Boston.  The government has not seen a drop in investment schemes post Madoff, continued Levenson.  But through close cooperation with the SEC and other government agencies, federal criminal prosecutors can identify potential cases earlier and get the right set of investigatory tools to bear on a particular problem, increasing the government’s ability to prove financial fraud at trial. 

Trial Strategies:

Juries are capable of deciding most white-collar cases, but lawyers need to keep it simple and to keep it moving, said Andrew Lelling, Assistant U.S. Attorney in Boston’s Economic Crimes Unit.  Securities trials, however, are different; additional, industry specific education is required to ensure that jurors comprehend the information presented.  It is better to avoid calling expert witnesses to educate the jury at trial, advised Jack Falvey Jr., a Partner in Goodwin Procter’s litigation group; you have no control over what they say, yet they are identified with you.  Experts are there to be turned, Judge Douglas Woodlock of the U.S. District Court in Boston, further explained.  A trial attorney’s focus should be on presenting a comprehensive narrative, and experts often cause greater confusion.  Instead, strategic use of visual aids can be a more effective way to direct juries to the facts you think are important, suggested Daniel Tighe, a Partner at Griesinger Tighe & Maffei LLP.  But there is real danger in putting too much up on the screen, cautioned Judge Woodlock; lawyers have to be tactical and present only the most essential documents to the jury.

The Role of Internal Investigations:

The goal of an internal investigation should be to convince the government not to initiate an enforcement action against the company.  Self-reporting, being transparent with the government, and conducting a credible investigation are keys to success, advised Randall Bodner and Daniel O’Connor, Partners at Ropes & Gray who obtained the SEC’s only non-prosecution agreement to date, for Carter’s, Inc.  Even if the choice is made not to self-report, counsel must be able to demonstrate that the problem was found through self-policing, was investigated thoroughly by independent investigators, and was effectively remediated to eliminate the risk of repeat issues.  However, as Cynthia Young, Deputy Criminal Chief of the U.S. Attorney’s Office in Boston reminded the audience, the government expects companies to self-report; it is much worse for the company if the government finds out on its own.  
Given the proactive approach of the SEC and DOJ in the wake of the financial crisis, if there is a problem, it is more likely than ever that the government will find it.

The expert panelists at Securities Enforcement: Recent Developments, Trial Strategies & Getting to a Non-Prosecution Agreement included:

Panel One - SEC/DOJ Trends & Developments
Jonathan L. Kotlier - Nutter McLennen & Fish LLP (Moderator)
David P. Bergers - Regional Director & Acting Deputy Chief of Enforcement – SEC
Paul G. Levenson - Chief, Economic Crimes Unit, U.S. Attorney’s Office
Emily R. Schulman - Wilmer Hale Pickering and Dorr LLP
Nicholas C. Theodorou - Foley Hoag LLP

Panel Two - Trying Securities Cases: Can the Jury Really Get it?
Rachel E. Hershfang - Securities & Exchange Commission (Moderator)
Hon. Douglas P. Woodlock - U.S. District Court, District of Massachusetts
John J. Falvey - Goodwin Procter LLP
Andrew E. Lelling - U.S. Attorney’s Office
Daniel P. Tighe - Griesinger Tighe & Maffei LLP

Panel Three - Internal Investigations Done Right: Obtaining a Non-Prosecution Agreement & Other Ways to Protect Shareholder Value
Ian D. Roffman - Nutter, Mclennen & Fish LLP (Moderator)
Cynthia A. Young - Chief of Criminal Division U.S. Attorney’s Office - District of Massachusetts
Randall W. Bodner - Ropes & Gray LLP
Stephen G. Huggard - Edwards Wildman Palmer LLP
R. Daniel O’Connor - Ropes & Gray LLP


Robert T. Alfred is a litigation attorney with experience representing corporate and individual clients in complex commercial litigation, white-collar criminal defense, internal investigations, and corporate compliance matters. For more on Robert,  click here .

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