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With securities fraud-busters stepping up investigations in Northern California, white-collar crime defenders have become a hot commodity in the lateral partner market. “You definitely have a need for advice from criminal lawyers,” said Robert Sims, a Latham & Watkins partner and white-collar criminal specialist hired in February from San Francisco’s McCutchen, Doyle, Brown & Enersen. “Over the last few years, you’ve seen increased government focus — and resources being focused — on sophisticated financial crimes.” Los Angeles-based Latham is just one of a handful of law firms that have bulked up on criminal defense lawyers in recent months. Other firms that have hired white-collar crime specialists are Gray Cary Ware & Freidenrich; L.A.’s Sheppard, Mullin, Richter & Hampton, and Chicago’s Sonnenschein, Nath & Rosenthal. “Almost every firm is getting into that in some fashion,” said Walter Brown Jr., a white-collar crime specialist who joined Gray Cary in March from New York-based Thelen Reid & Priest. White-collar criminal defense is a lucrative practice area that pays hefty retainers. That’s appealing to firms that have seen a drop-off in corporate work and could stand to add an extra dimension to their busy litigation practices. Individuals targeted for a criminal investigation typically put up retainers of $10,000 to $50,000, said Christopher Rillo, who recently joined Sonnenschein Nath to beef up its criminal defense practice. And when a person is facing trial, the retainer jumps to $250,000 to $500,000, Rillo said. The emphasis on fraud investigations by federal prosecutors has forced a change in the way civil securities litigators represent clients that are targeted for inquiry. It used to be that only the SEC would investigate fraud allegations, and lawyers would step in to negotiate a civil settlement. The presence of criminal prosecutors makes negotiating with the SEC harder since a civil settlement can hinder a defense if charges are actually filed. The tag-team approach by the SEC and federal prosecutors “raises the stakes substantially and makes it much more difficult to represent your client,” said Robert Friese, a Shartsis, Friese & Ginsburg partner. A longtime securities litigator, Friese has been trying to persuade prosecutors and the SEC to signal when civil investigations take on criminal elements. So far, law enforcement is resistant to giving would-be targets a heads-up. Fraud investigations heated up in late 1999 when Robert Mueller, then the U.S. Attorney for the Northern District, created a special fraud unit that put prosecutors in close contact with the FBI and the SEC’s civil lawyers. The team approach fast led to a jump in the number of securities fraud indictments from the office. In its first full year of operation in 2000, the fraud unit issued seven indictments, said Martha Boersch, chief of the securities fraud unit. In the prior year, the Northern District had issued just two, she said. And this year, federal securities fraud-busters in the San Francisco Bay Area are on target to beat their record number of indictments set in 2001. The unit has issued eight securities fraud indictments as of mid-June compared with 15 for the year in 2001. At Latham, Sims’ plate is loaded with several matters involving the securities fraud unit. And while with McCutchen Doyle, Sims worked with a number of the white-collar crime specialists both locally and nationally. In one such case, an investigation into alleged money laundering in Russia and Eastern Europe that involved prosecutors from New York and Washington, D.C., Sims represented Commercial Bank of San Francisco. Some feared that Mueller’s move last year to head the FBI would lead to a change in priorities, but that hasn’t happened, Boersch said. And fears that the surge in terrorist activity would divert law enforcement agencies away from securities fraud investigations have proven largely unfounded. “We have not seen, at this point, any downturn in investigations as a result of Sept. 11,” said William Keane, a partner at San Francisco-based Farella Braun & Martel. In the meantime, civil securities litigators say they aren’t taking any chances. They’ve been calling in criminal experts more often and earlier in the process than in prior years, or hiring them outright. Robert Brownlie, head of Gray Cary’s litigation group, said the steady rise in criminal inquiries prompted the firm to start hiring specialists last year. In November, the firm hired former SEC branch chief Clifford Hyatt in San Diego and Brown, a former federal prosecutor, earlier this year. “Since Mueller was head of the Northern District, we’ve been looking to bolster the practice area,” Brownlie said. “If things go really bad, we’ve got our clients covered.”

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