Thank you for sharing!

Your article was successfully shared with the contacts you provided.
John Ashcroft may be stepping down as the head of the U.S. Department of Justice, but one of the most successful initiatives of his tenure will continue. That’s the Corporate Fraud Task Force, created two and a half years ago to coordinate the government’s response to the parade of accounting scandals started by the Enron Corp. According to Timothy Coleman, a senior counsel at Justice and a member of the task force, “There are no current plans to disband” the panel. However, Coleman adds that the focus of the task force is changing, partly as a result of its own effectiveness. Now that prosecutors have brought cases in all of the major recent fraud scandals, they’re running out of obvious targets. Instead, the task force will turn its attention to preventing business crime. “We’re in a more proactive mode now,” Coleman says. Among other steps, the Justice Department will work with the Securities and Exchange Commission to review financial filings and to watch the market so that problems at a company can be caught before it collapses. (Coleman does not cite specific examples.) When President George W. Bush established the task force by executive order in July 2002, “the spotlight was shining brightly on corporate fraud,” Coleman explains. The previous month, WorldCom Inc. announced that it had overstated past earnings in the biggest accounting fraud in American history. And though the scale of the wrongdoing at WorldCom was unprecedented, it turned out that plenty of other companies had been fixing their books. (WorldCom emerged from bankruptcy as MCI Inc. in May 2004; former CEO Bernard Ebbers is scheduled to go to trial this January.) Prior to the task force’s creation, the Justice Department typically steered clear of corporate fraud cases, says Jacob Frenkel, a former government prosecutor and SEC enforcement lawyer. “If you talked to federal prosecutors three years ago about going after a company for false financial statements, they would have laughed,” says Frenkel, now a partner at Rockville, Md.’s Shulman, Rogers, Gandal, Pordy & Ecker. “They would have said, ‘Our priorities are terrorism, money laundering, drugs — the SEC can handle securities fraud cases.’ “ Not anymore. Because of the task force, the Justice Department has increased the number of prosecutors assigned to corporate fraud cases by an “astronomical” amount, Coleman says. The department has also organized training programs for its lawyers, and designated a corporate fraud coordinator at all 94 U.S. attorney’s offices. Coleman adds that the task force has transformed how corporate fraud cases are prosecuted. The government’s vast resources have been marshaled into a multiagency, multioffice approach. Plus, cases are brought in what the feds call “real time” — when scandals are still fresh in the public’s mind. A NEW CATEGORY OR CRIME When the panel was created, the Justice Department added a new category of crime — corporate fraud — to the forms that federal prosecutors must fill out when they open a case. In the ensuing two years, prosecutors have checked this box more than 900 times, according to a July 2004 report by the task force. The government has also obtained more than 500 convictions or guilty pleas against company executives, including at least four ex-GCs: Franklin Brown at the Rite Aid Corp., David Klarman at the U.S. Wireless Corp., Steven Woghin at Computer Associates International Inc., and Leonard Goldner at Symbol Technologies Inc. “There is no arguing with the success that this task force has had,” says Robert Mintz, a former federal prosecutor now practicing white-collar criminal defense at McCarter & English in Newark, N.J. “What they have done so successfully is ride the crest of public outrage that began with Enron.” The task force includes several Justice officials, as well as the heads of the SEC, the U.S. Department of the Treasury, the Federal Bureau of Investigation, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, and the Federal Communications Commission. The group meets periodically to discuss cases and strategies. The interagency nature of the task force has transformed how investigations get handled, say government officials. Gone are the days where the local U.S. Attorney’s Office jealously guarded its cases, and one agency would ask another for help only when its probe was already well under way. SWATing FLIES “We marshal all of the government’s resources, maximizing interoffice and interagency cooperation, getting everyone on board early,” Coleman says. Case in point: the Enron investigation, which is staffed with 15 prosecutors from around the country, 22 FBI agents, and personnel from the SEC, FERC, the Internal Revenue Service, and the U.S. Postal Service. “It’s a real SWAT team approach,” Coleman says. Some defense lawyers charge that the task force has been a little too effective. “The government has effectively transformed the company into an arm of the government,” says Kirby Behre, a former assistant U.S. attorney who is now a partner at the D.C. office of Paul, Hastings, Janofsky & Walker. Behre explains that businesses are now routinely expected to waive the attorney-client privilege. Behre’s complaint is a common one among other defense attorneys, including Robert Anello. “I haven’t seen an investigation recently where corporate counsel has been able to withstand the request to turn over all its information on all employees,” says Anello, a partner at Morvillo, Abramowitz, Grand, Iason & Silberberg in New York. The result, Anello argues, is that “corporations now basically take the position that they will not preserve the attorney-client privilege, and every employee is expendable.” The Justice Department’s Coleman counters that he has seen “absolutely no evidence” of any increase in requests by prosecutors to waive the privilege. “What we have seen is companies voluntarily waiving the privilege because [they] want to cooperate,” says Coleman, adding that the Justice Department was “delighted to see” the greater level of corporate cooperation. “When companies cooperate, it makes our investigation that much easier to conduct.” Tamara Loomis is a contributing writer for Corporate Counsel magazine, the ALM publication where this article first appeared.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.