Joshua Robbins practices on both sides of the corporate crime aisle.

He defends corporations and individuals in criminal prosecutions.

And he represents whistleblowers in False Claims Act and other civil cases against corporations.

Robbins believes that handling both kinds of cases strengthens his practice.

Robbins is a partner at Greenberg Gross, a litigation boutique firm in Costa Mesa, California.

“You hear about debate teams training by arguing both sides of a case,” Robbins told Corporate Crime Reporter in an interview last week. “It helps you understand the strengths and weaknesses of both sides, the possible moves and countermoves on both sides. It makes you much more effective as a defense lawyer if you have been on both the prosecution side and the defense side.”

“To be able to handle both sides inevitably makes you more effective. You don’t get caught up in patterns and staid ways of thinking. There is definitely an upside just in terms of sheer advocacy ability and ability to see several moves ahead. You know what the other side is going to do because you have been on the other side.”

“The white collar defense and False Claims Act plaintiffs’ side are quite compatible. Many lawyers who do white collar defense are former prosecutors. And False Claims Act plaintiffs work is quintessentially prosecution oriented. You are basically doing the background prosecution work for the Department of Justice. And although it is a civil charge rather than a criminal charge, it could just as easily be criminal. At some level fraud is fraud.”

“If the case goes to litigation, as a former prosecutor, you have experience putting together paper intensive cases that have complex commercial or financial dimensions to them and making them compelling whether to a government audience, a judge or a jury. And those translate very well into the plaintiffs side of that practice. As a former prosecutor accustomed to being on the offense, and having limited resources in pursuing a case, you understand how to pursue the plaintiffs’ side of litigation without an unnecessary waste of time and resources. You can run things leanly – as opposed to a defense oriented practice at a large firm that is focused on a billable hour model where the incentive is to be less efficient, do more work and delay things as much as possible.”

Why do you think it is the case that overall, the attorneys in the corporate criminal defense practice are with big firms?

“The larger law firms are more oriented toward representing companies, where there is a lot of information, a lot of witnesses and a lot of documents to go through. Their model is to use a lot of resources to do that work. Whereas, representing individuals where it is more likely cases are to be tried, you see that work gravitate more toward boutiques which can be more efficient.”

“For reasons of historical inertia and experience, people have done things that way. You might start to see that change as technology starts to allow smaller firms to do things more efficiently with fewer people than in the past. You don’t need the huge volume and leverage that some of the larger firms have in order to do some of the same things. As companies start to catch onto that and notice that you don’t need to pay for the huge number of associates and staff that larger firms have in order to get the same things accomplished, they will start testing the waters – and have started testing the waters – by using smaller firms and boutique firms, including for corporate investigations and corporate side defense.”

As a former federal prosecutor in California, Robbins has been tracking the government’s criminal prosecution of the top executives of Theranos – Elizabeth Holmes and Sunny Balwani.

How is it that the government can charge the founders of this relatively small firm but can’t charge the top executives of the Wall Street banks, whose fraud triggered the 2008 financial meltdown?

“This case is different from some of the Wall Street cases you are referring to,” Robbins said. “This was a pre-public company. It was a much smaller company and there were fewer layers of bureaucracy than in say a major investment bank. And it was more difficult for the two top executives charged here to insulate themselves from allegations of knowledge of what has been charged.”

“I have handled a number of investment fraud cases involving private companies, including startups, where the people in charge, the founder and the heads of the company, are a lot more involved in the day to day practices in directing a lot of the communications with investors than in a situation of a major corporation where the top executives will have multiple layers of management between themselves and the shareholders or others who would be defrauded. It becomes harder in smaller companies for the people charged to claim ignorance. That might be one of the reasons why you see more charges in high profile investment fraud cases involving private companies like this than in public companies.”

You also say that one reason the Theranos case is different is because human beings were put at risk. Theranos marketed a faulty blood testing device.

“The indictment is divided into two schemes. One is the scheme to defraud investors. And the other is the scheme to defraud doctors and patients. No doubt when you have people’s actual physical health being put at risk, that creates a lot more pressure on the government to take action. And it makes it a much more attractive case, not just from the charging standpoint. If you were to take this to a jury, that obviously has much more jury appeal than just financial fraud.”

“One thing you notice about the financial fraud side of it, it was pre-public. Many of the investors were wealthy, sophisticated investors, as opposed to a public company where you have a lot of retail level investors. And a jury may have less sympathy for very sophisticated investors who fail to see through some of the statements. But when you have patients whose health is put at risk by virtue of these certifications, that makes for a very appealing jury case. And it’s pretty easy for the government to justify why it is taking an aggressive approach.”

John Carreyrou, the Wall Street Journal reporter who broke the story in the Journal and in his book – Bad Blood: Secrets and Lies in a Silicon Valley Startup – said that the founders of this company were basically following the typical Silicon Valley playbook – fake it until you make it.

What does this portend for other startups?

“The Department of Justice can only do so many of these cases. There are startups in other parts of the country. I had a case involving a wind energy company that turned out to be misrepresenting the state of its technology and business. Does the Theranos prosecution portend a huge increase in these types of cases? I wouldn’t suspect that. The government has always been willing to look at cases when it suspects serious fraud, whatever type of case it is.”

“But the indictment itself is interesting in terms of how aggressive it is in characterizing certain types of representations or promotions of the company as fraud.”

“There is a difference between what is called puffery – touting opinions about a company or using hyperbole as opposed to misrepresenting concrete facts. If you are prosecutor, you want to make sure these are concrete false misrepresentations. I’m saying x is true and x is not true and I know it. If you look at the indictment, some of the things that are in here are a little closer to the line at least in terms of how they are described in the indictment than what you might think of as the standard fraud case.”

“So, for example, the representation that Theranos would generate a certain amount of revenue and break even at a certain point, when in truth, they had only modest revenues. Asserting fraud based on what the leaders of the companies expect is a risky proposition for the government. How do you know what they expect? Unless they have emails where they are saying –we are only going to make this much? The founders who run startups like this are notoriously optimistic and have a capacity for self-delusion. Some of the thinking in Silicon Valley is – you have to believe in yourself and in what you say, even if the things are unbelievable – in order to succeed. If you turn that into fraud, that could have something of a chilling effect on innovation.”

“If the indictment were based solely on that, that might signal a much more aggressive approach. But there is plenty else in the indictment where they are alleging false representations about existing current facts that Holmes and Balwani would presumably know or allegedly know were false. And that’s a different proposition.”

What is the possibility that these kinds of prosecutions are being driven by wealthy victims?

“I certainly didn’t have the experience that wealthy victims lobbying for prosecutions would make it more likely that a prosecution would happen. I can’t represent what happened in this case.”

“But one dynamic you will see is that victims of investment fraud are often embarrassed by the fact that they were victimized and that they fell for it. From what I understand in this case, the people who invested a lot of money were some of the more aggressive cheerleaders for the company. That doesn’t mean that they should be held liable for it. But they are going to be somewhat chagrined with the fact that it didn’t turn out to be real. And they may not have wanted this to turn into a criminal case. But some will be upset that they are defrauded and they may communicate with the Department to encourage the Department to move forward.”

“I haven’t seen it as a dynamic where wealthy investors are successfully pushing for prosecutions. To the contrary, if you have a lot of vulnerable victims who have had their life savings wiped out – most prosecutors are going to see that as a more compelling case than otherwise.”

Will this case go to trial?

“Way too early to say,” Robbins says. “You have a sense that Balwani might be likely to go to trial. He, unlike Holmes, is refusing to settle with the SEC. And if you are refusing to settle with the SEC in a civil case, that is sometimes a signal that you are going to take a more aggressive line on the criminal case as well. But it’s hard to predict. Trial will probably be some ways out. If one pleads and decides to cooperate against the other one, that could influence the other one not to hold out any more. It depends on what kind of evidence the government has that it is going to be disclosing shortly to both of them. It seems likely the government has talked to multiple witnesses inside the company who can give first hand accounts in support of the allegations. And if they have emails to support them, it may be difficult for them to present a defense.”

“But if the government isn’t offering enough of a plea deal and both of them think they have a good defense on the ultimate issue in most of these cases, which is intent to defraud, they may decide to go to trial.”

[For the complete q/a format Interview with Joshua Robbins, see 32 Corporate Crime Reporter 27(12), July 2, 2018, print edition only.]