THE WHITE SHEEP
Khuzami, 53, is the son of two professional ballroom dancers. His sister is an artist and his brother is a musician. "The family joke is that my parents would say, 'He's the white sheep of the family, where did we go wrong?' " Khuzami said.
He earned his law degree from Boston University in 1983, then clerked for Judge John Gibson of the 8th U.S. Circuit Court of Appeals. He joined Cadwalader, Wickersham & Taft as an associate, moving in 1990 to the U.S. Attorney's Office in New York. Initially, he was assigned to the general crimes unit, then was promoted to major crimes, where along with Andrew McCarthy and Patrick Fitzgerald, he prosecuted Sheik Omar Abdel Rahman and nine followers for bombing the World Trade Center in 1993.
In 1998, he became chief of the office's securities task force. One notable case involved more than 100 defendants, including members of New York's five organized crime families, who were arrested in an undercover sting operation -- the largest simultaneous arrest in a securities fraud case in Department of Justice history.
Khuzami moved to Deutsche Bank in 2002 and became general counsel for the Americas in 2004. Perhaps not coincidentally, his boss there, global general counsel Richard Walker, served as head of the SEC Enforcement Division from 1998 to 2001.
Khuzami said he accepted the enforcement director job because of the "professional and personal satisfaction that comes with working in the public sector that can't be matched in the private sector."
Still, in some ways, he was not an obvious pick for a new Democratic administration. Khuzami said he has "been a registered independent nearly my whole life," but he gave $2,300 to John McCain in 2007 and spoke at the Republican National Convention in 2004 (his speech was about terrorism, he noted). "To the extent there was a perception that I was a Republican, it obviously didn't hamper me in this job," he said. "The job is itself is completely apolitical, near as I can tell."
As Khuzami has moved to implement his ideas, some employees of the division have expressed confusion and uncertainty about the new direction.
In a survey by SEC Inspector General H. David Kotz conducted in June and released on Sept. 29, more than 750 Enforcement Division staff gave their opinions on management effectiveness. When asked whether management clearly communicated workload priorities, 41 percent of staff said no, while 43 percent felt they did not have adequate guidance on how to achieve program priorities. In addition, 42 percent did not believe the division has an effective process in place for selecting cases.
One employee wrote, "Priorities change like the flavor of the day. Whatever's 'hot in the news' becomes our priority. Often it feels like we're the dog chasing its own tail." Another wrote, "While management's workload priorities are laid out, they are subject to constant change from day to day. Staff attorneys are not allowed to prioritize and manage their investigations as they see fit. Attorneys are constantly being pulled from one task to another at the whim of their manager." A third said simply, "I don't know quite what is expected of me."
Within the Enforcement Division, one major change being felt in the day-to-day work of most staff is Khuzami's plan to do away with the lowest level of supervisors, known as branch chiefs, who typically supervise three staff attorneys. Of the 115 chiefs, some are being assigned to work on front-line investigations, while others will be bumped up to the next supervisor level, assistant director. The assistant directors will each be put in charge of about six staff attorneys. There are currently 55 assistant directors, and another 46 positions will be added.
Khuzami described the move, which has not been fully implemented, as a way to "rebalance our staff to both reduce management levels and redeploy some of our most talented attorneys and investigators back to the full-time, mission-critical work of conducting investigations."
But some agency veterans question the wisdom of the move. "I always believed the branch chiefs were very much value-added to the process," said Randall Fons, a securities litigation partner in the Denver office of Morrison & Foerster.
Fons, who spent 18 years at the SEC and served as director of the central region as well as director of the southeast region, said he was concerned that assistant directors "might not have the bandwidth to understand what was going on in detail in each investigation. I understand the idea of wanting to flatten management, but they have to be careful not to lose some of the effective and truly knowledgeable supervision of specific matters."