Greenberg Traurig’s Sklaire on the Shift in Tone at the SEC
24 Corporate Crime Reporter 4, February 1, 2010

Robert Khuzami is a former federal prosecutor.

And he’s bringing a prosecutor’s touch to his new job – head of the Securities and Exchange Commission (SEC) enforcement division.

Khuzami wants deferred prosecution agreements.

He wants non prosecution agreements.

And he wants first in the door immunity.

What’s next?

Criminal prosecution authority for the SEC?

Michael Sklaire wonders about the rhetoric coming out of the SEC.

“I’m fascinated by the fact that the SEC actually uses the terms – deferred prosecution agreement and non prosecution agreement,” Sklaire told Corporate Crime Reporter last week. “Why not – deferred enforcement agreement and non enforcement agreement? The use of the word ‘prosecution’ signals that they want to act more like the Justice Department. In the past, it’s been clear – we have a civil enforcement action. Our burden of proof is preponderance, not beyond a reasonable doubt. We end the case with a financial penalty, not imprisonment.”

Should the SEC be given criminal enforcement authority?

“They don’t have the resources,” Sklaire said. “There aren’t enough enforcement attorneys or investigators to bring those kinds of cases.”

“The SEC is a civil enforcement agency. If you are going to allow the SEC to bring criminal cases, why not allow the other enforcement agencies to do the same?”

Sklaire says that Khuzami is changing the SEC enforcement division by adopting policies and procedures that derive from his experience at the Justice Department.

One of the biggest changes that Khuzami has implemented is how SEC enforcement attorneys secure immunity agreements.

“In the past, SEC enforcement had to go to the Commission to get approval for immunity agreements,” Sklaire said. “Now they don’t. So, that has been streamlined.”

“That is as significant as anything else. You are going to see more immunity requests. And you are going to see them come from SEC enforcement to the Justice Department. They are going to say – we need immunity ASAP. And the Justice Department is going to have to deal with it. “

”The Criminal Division will farm these out to the Fraud Section and ask – is this worth it? Is this going to increase the friction between the SEC and the Justice Department?”

“When the SEC and the Justice Department are both working the same case at the same time, no problem for the defense lawyer. The problem arises if the SEC is on a case, and the FBI and the Justice Department aren’t there yet.”

[For a complete transcript of the Interview with Michael Sklaire, see 24 Corporate Crime Reporter 4(14), print edition only.]



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