Who says the best days of the big-firm partner are over? Kirkland & Ellis officially announced Tuesday that Robert Khuzami, who ended his four-year run as director of the Securities and Exchange Commission's enforcement division in January, has joined the firm as a partner in its government, regulatory and internal investigations practice.
Joining Khuzami in making the move to Kirkland is Kenneth Lench, who will be a partner in the same group after closing out his 23-year SEC career last week when he stepped down from his post as head of the enforcement division's structured and new products unit.
News of Kirkland's hire of Khuzami and Lench was reported by The New York Times' DealBook, which—citing "lawyers briefed on the matter"—said the SEC's former top enforcer will receive $5 million per year in guaranteed compensation for the next two years.
The 56-year-old Khuzami—who will divide his time between New York and Washington, D.C., where his family currently lives—spoke with The Am Law Daily by phone Tuesday afternoon about how he decided "within the last few weeks" to join Kirkland. He says the firm's strength in the two cities where he will split his time helped him determine the next step in a 30-year legal career.
The relative absence of top-level (and high-paying) in-house legal jobs that are based in D.C. meant that Khuzami was likely to end up back in private practice once he left his government post. And having already spent seven years as a high-ranking in-house lawyer at Deutsche Bank, Khuzami says he welcomed the chance to try something different.
"A general counsel isn't the focus of an organization's efforts," he says, noting that in-house legal departments are often understandably ancillary to most companies' business functions. While acknowledging that it's "easy to commiserate about [large] firm life," Khuzami says he expects that joining Kirkland's partnership will be "professionally rewarding" as he anticipates helping companies in various industries navigate their regulatory challenges.
Khuzami says that after stepping down from the SEC in January, there was a "significant amount of interest early on" for his services, with multiple Am Law 100 suitors making their pitches at a series of lunch and dinner meetings over the past few months. In the end, he spoke with roughly 30 Kirkland partners before choosing the firm as his new home.
"It's kind of like getting married," says Khuzami, when asked about the recruitment process. "You know she's the one, but sometimes it takes a little longer to decide. Although if I had chosen to stay in New York I think I would have ended up at Kirkland anyway."
Emphasizing Kirkland's track record of success when choosing a practice area—such as private equity and M&A—in which to invest, Khuzami says he was especially impressed by the firm's stated commitment to developing a strong government investigations practice.
Personal connections, Khuzami says, also played a key role in his decision. As a federal prosecutor in Manhattan in the 1990s, he tried terrorism-related cases with current Kirkland litigation partners Samuel Williamson, Henry DePippo, and Michael Garcia.
A son of ballroom dancers, Khuzami grew up in suburban Rochester, N.Y., and attended college in the area. After graduating from Boston University's law school in 1983, he clerked for the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Mo., before joining Cadwalader, Wickersham & Taft as a securities litigation associate in New York.
Khuzami left Cadwalader in 1990 for the U.S. attorney's office in Manhattan, where he spent the next 11 years. He served as chief of the office's securities and commodities fraud task force during his last three years as a prosecutor, gaining expertise that—given federal regulators' reported interest in investigating how big banks store certain commodities like aluminum—could also prove valuable to the corporate clients he will now represent.
In 2002, former Cadwalader partner and onetime SEC enforcement director Richard Walker, who had been hired the year before as a top in-house lawyer at Deutsche Bank and is now the German banking giant's global general counsel, hired Khuzami to serve as global head of litigation and regulatory investigations.
Two years later Khuzami was promoted to general counsel of the Americas, presiding over Deutsche Bank's U.S. legal department during an economic boom spurred by mortgage securitizations, holding that position until the bottom fell out of the capital markets and he took the enforcement reins at the SEC in February 2009.
Khuzami's arrival at the SEC came at a low point in the agency's history as it struggled to rebound from scandals involving Bernard Madoff and R. Allen Stanford.
In an August 2009 speech marking his first 100 days as head of enforcement, Khuzami had tough words for many of his former Wall Street colleagues among a packed reception hall of some 500 people at The Association of the Bar of the City of New York, warning that a period of aggressive enforcement was at hand after the excesses of the previous decade.
Asked about the challenges he faced in joining the SEC at a time when most of the attention focused on the regulator was negative, Khuzami says he takes pride in helping forge a response to the criticism in a "way that was thoughtful, responsible, and fulfilled our duty to investors."
Khuzami and his team—some of whom were former partners at Am Law 100 firms—came up with a restructuring plan for the SEC that included developing new tools to become more responsive to complaints and building new units for specialized prosecutions.
Lench—a former assistant chief counsel in the enforcement division—was named to lead one of those units, a structured and new products division launched by Khuzami in January 2010. Later that year, Lench would be part of a Khuzami-led team that secured a record-setting $550 million securities fraud settlement with Goldman Sachs.
"Self-evaluation and introspection is hard work," Khuzami says. "We had to ask ourselves how we could be better and look at what we did wrong. The holy grail of enforcement is deterrence."
Khuzami did not complete his four years in public service without drawing criticism.
Jed Rakoff, a federal district court judge in Manhattan, famously tossed the SEC's $285 million mortgage-backed securities settlement with Citigroup on the grounds that it wasn't in the public interest. Others have claimed that while Khuzami focused on collateralized debt obligations issued by Goldman, he didn't do the same for former employer Deutsche Bank.
In an article published last year about whether the SEC gave preferential treatment to favored lawyers, The American Lawyer touched on a 43-page report issued by former SEC inspector general H. David Kotz in 2011 that exonerated Khuzami of going easy on two Citigroup executives as a result of his friendship with their lawyer, Paul, Weiss, Rifkind, Wharton & Garrison litigation of counsel Mark Pomerantz. (Khuzami and Pomerantz had worked together as federal prosecutors in Manhattan in the 1990s.)
Khuzami responds to questions about just how tough the SEC was on his watch by citing the dozens of cases brought by the enforcement division since the financial crisis four years ago and the record fines collected during his tenure. When Khuzami stepped down in January, even Rakoff had kind words for his work, telling the Times that despite their differences he thought he had done a "terrific job."
Now ensconced at Kirkland—his first day was Monday—Khuzami says he is subject to "rigorous ethical restrictions" that he believes are of critical importance for those heading to the more lucrative side of the ever-spinning revolving door. Khuzami says conflict rules call for a one-year "cooling off" period on any contact with the SEC, a two-year ban on matters in which he may have had a supervisory role, and a lifetime ban on anything where he may have been directly involved.
As for how his job search unfolded, Khuzami says that he spoke with several recruiters, but that there wasn't one individual that managed the process. His prior relationships with partners at a multitude of Am Law 100 firms, including Kirkland, left him with no lack of contacts.
On the Kirkland side of the hiring process, Jeffrey Lowe, global leader of legal search and consulting giant Major, Lindsey & Africa's law firm practice group, was retained to serve as the firm's lead recruiter for Khuzami. Lowe—who confirmed his hire but declined further comment when contacted Tuesday by The Am Law Daily—worked closely with litigation partner Eugene Assaf, a member of Kirkland's management committee.
Both lawyers will be richly rewarded by their new employer. Khuzami cited Kirkland policy in declining to discuss the former SEC lawyer's reported $5 million compensation package. But last year the 1,520-lawyer firm saw gross revenue rise 11 percent, to more than $1.9 billion, while profits per partner jumped 7 percent, to $3.25 million, according to the most recent Am Law 100 financial data.
Brian Baxter writes for The Am Law Daily, a Daily Report affiliate.