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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 2 1/2 years ago to coordinate the government’s response to the parade of accounting scandals started by Enron Corp. According to Timothy Coleman, a senior counsel at the Justice Department 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. Turning to prevention Now that prosecutors have brought cases in all of the major recent fraud scandals, they are 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 said. Among other steps, the Justice Department will work with the Securities and Exchange Commission (SEC) to review financial filings and watch the market so that problems at a company can be caught before it collapses. (Coleman did 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 explained. 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.) Before the creation of the task force, the Justice Department typically steered clear of corporate fraud cases, said 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,” said Frenkel, now a partner at Rockville, Md.’s Shulman Rogers Gandel 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 said. 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 added 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. 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 Rite Aid Corp., David Klarman at 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,” said 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 Commodities Futures Trading Commission, the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission. The group meets periodically to discuss cases and strategies. Investigations transformed The interagency nature of the task force has transformed how investigations get handled, say government officials. Gone are the days when 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. “We marshal all of the government’s resources, maximizing interoffice and interagency cooperation, getting everyone on board early,” Coleman said. 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 said. 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,” said Kirby Behre, a former assistant U.S. attorney who is now a partner at the Washington office of Paul, Hastings, Janofsky & Walker. Behre explains that businesses are now routinely expected to waive the attorney-client privilege. Behre’s complaint is common among 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,” said 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,” said 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,” he said.

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