Outgoing Securities and Exchange Commission enforcement chief Robert Khuzami lent support to Lanny Breuer today, who announced he is leaving as head of the Justice Department’s Criminal Division.
A former Assistant U.S. Attorney in the Southern District of New York, Khuzami was hailed for bringing a prosecutorial mindset to the SEC’s Enforcement Division, which he’s led since 2009. In a telephone interview with Main Justice today, Khuzami said the SEC’s lower burden of proof in pursuing civil charges against corporate wrongdoers means his job can’t compare to Breuer’s.
Breuer has been criticized for not prosecuting top Wall Street and mortgage industry executives who played major roles in the financial crisis.
“I think Lanny’s been a forceful Criminal Division head who’s achieved a lot in a variety of different areas under challenging circumstances,” said Khuzami, noting hostile scrutiny of the Justice Department in Congress and the complexities of the financial crisis.
“I can tell you that having been with the Justice Department for nearly 11 years and working with them very closely as head of the Enforcement Division, I think the Justice Department has looked at these cases very closely,” he said.
Under Khuzami’s tenure, the commission’s Enforcement Division charged more than 150 individuals and entities with wrongdoing, including 65 chief executives and chief financial officers, according to the SEC. Its financial crisis cases are highlighted on a web page devoted to the topic. The cases have resulted in $2.68 billion in payouts to investors and 36 individuals have been barred from working as executives in the securities industry.
Khuzami said that the SEC’s and Justice Department’s differing jurisdictions, and the different burdens of proof required in criminal and civil cases, helped explain why the SEC had taken more action than the Justice Department.
He rejected the suggestion that the Justice Department had favored easier prosecutions out of a concern for its record of victories or because of Breuer’s and Attorney General Eric Holder’s prior work at the law firm Covington & Burling LLP, which has reportedly represented clients at the center of alleged mortgage and foreclosure fraud.
“Certainly it’s not a legitimate criticism to suggest that cases are not being filed for anything other than legitimate reasons, such as that the law has not been violated or that you cannot establish willfulness,” said Khuzami.
One of the longest serving Criminal Division heads in the department’s history, Breuer was praised for having overseen aggressive action against foreign corruption, healthcare fraud and organized crime as well as pursuing trans-national cooperation in law enforcement.
Yet Breuer, who was confirmed for the job in April 2009, has spent much of his time in office defending his record. While criminal prosecutions have been lacking, the SEC has taken the bulk of enforcement actions resulting from the crisis.
“I understand why people are upset,” Breuer told The Washington Post. “But we have 94 U.S. attorneys and they don’t report to me. Not one of them determined that there was a criminal case to be had. These are very complicated cases and they were just simply, on the merits, not cases that could be brought criminally.”
The announcement of Breuer’s departure came the day after Sen. Sherrod C. Brown (D-Ohio), chair of the Senate Banking subcommittee on financial institutions, and Sen. Charles E. Grassley (R-Iowa), ranking member on the Senate Judiciary Committee, wrote to the Justice Department, complaining of a poor track record in prosecuting financial crime.
Khuzami’s departure was announced earlier this month and he is to step down on Feb. 8. Breuer is to step down on March 1.
Previous coverage by Just Anti-Corruption:
Breuer’s DOJ Days Said to Be ‘Winding Down’
Thursday, January 24, 2013
Barney Frank Calls for Increased Prosecution of Individuals in Financial Crime Cases
Friday, December 21, 2012
FCPA Guidance Expands on M&A Due Diligence Requirements
Sunday, November 25, 2012