For more than a decade, the provenance of white-collar defense work has been shifting away from boutiques to large corporate firms that have wooed prominent former prosecutors and built strong white-collar practices.

Nevertheless, boutiques continue to form, prompting many in the defense bar to ask whether there’s enough white-collar work to go around.

In interviews with the Law Journal, a few white-collar defense lawyers said they felt the field was getting crowded, but others said there is a role for boutiques that find a niche and develop an expertise.

"There are many more fish chasing the same business," said Gordon Mehler, who started his own firm in 2000. While he said he thought older, established lawyers like himself would survive, younger lawyers entering the field in boutiques "will have a rough time."

There are more small firms focused on white-collar practice than there were five years ago, Mehler said. "The dynamics have dramatically changed" among the boutiques, he added.

One partner at a white-collar boutique who did not want to be identified said that "the practice area now feels to me very crowded and it’s seems unlikely that there’s enough work to go around."

"As work has slowed down for big firms, you see more lawyers at top firms competing with boutiques to represent individuals," the partner said. "For the people who want to get into it, it’s a tough market to crack."

Others are more optimistic.

"You don’t need to do any more than open the newspaper and see that there’s another investigation," said Steven Molo, a partner of boutique MoloLamken. "The opportunities have increased for boutiques in several ways."

Increased government enforcement and regulation have propelled the growth of the white-collar practice. In just one example, the Securities and Exchange Commission said that in fiscal year 2012 it filed 734 enforcement actions, including those against insider trading, broker-dealers, delinquent filings and others actions, just one shy of the record in 2011. The government said the last two years reflect the highest numbers of total actions brought by the SEC.

White-collar lawyers are also representing clients in matters before the U.S. Justice Department, Commodity Futures Trading Commission, Financial Industry Regulatory Authority and state attorneys general, among other government bodies.

Among the newer white-collar and civil litigation boutiques that have opened in New York in the last few years are Petrillo Klein & Boxer; Holwell Shuster & Goldberg; Levine Lee; Sher Tremonte; and Morvillo LLP, formed by the sons of the late Robert Morvillo.

"There’s room for the boutiques to play in the white-collar world because there’s oftentimes a stratification in representation," said Michael Rakower, a partner of a new boutique, Rakower Lupkin, which focuses mostly on civil litigation but handles some white-collar work.

Large firms commonly represent a corporate entity, but individuals within the company such as board members may need separate representation.

"Boutiques are well situated" for that, Rakower said.

Veteran defense attorney Robert Anello, a partner with Morvillo Abramowitz Grand Iason & Anello, said that while there are more cases in the white-collar arena, their is also more competition. He added, "I don’t think we’re an overcrowded profession."

When the practice was in its infancy some 35 years ago, white-collar firms were almost exclusively boutiques, because large corporate firms did not want to get involved in criminal practice, he said.

Now, Anello said, his main competition is from large firms.

"The firms realized [white-collar practices] were lucrative, that there was a considerable need for them, for their corporate clients who were receiving investigation subpoenas," he said.

Larry Krantz, a partner with Krantz & Berman, said, "Even though there is more competition, I still think there’s a special niche for the small firms."

"As the work was expanding, the larger firms tended to represent the [corporate] entities, so there was a need to partner with smaller firms to represent the individuals," he said."

Large Firm Referrals

Richard Holwell, a former Southern District judge who last year co-founded Holwell Shuster & Goldberg, said competition from large firms is a "double-edged sword." While firms commonly refer individuals to boutiques, they often take the more lucrative roles by representing the company or board of directors, he said.

For his firm, which focuses on financial markets litigation and regulation, about 75 percent of new matters, including investigations, have been referred from major law firms such as Jenner & Block; Willkie Farr & Gallagher; White & Case; and Kasowitz, Benson, Torres & Friedman, said Holwell.

"It’s typically a conflict situation," he said. "They represent a party that is adverse to their client or a situational conflict where they’re representing commercial banks in general." Sometimes, he said, there is the need for independent counsel separate from a corporate entity’s own lawyers.

Representing individuals in investigations, many of them referred from big firms, is a reliable form of revenue for small firms with few conflicts of interest.

If there’s a major investigation of a financial institution, each executive may need his or her own counsel, said Jon Harris, of Harris, O’Brien, St. Laurent & Houghteling, a boutique focusing on litigation and white-collar work. Harris said a large portion of his work in investigations comes from large firm referrals.

"It’s a great spot for firms like ours because [the financial institution will likely] not hire us to represent them in a $1.5 billion Libor rating scandal," Harris said. "They’re going to hire a massive firm."

But the company might have 15 traders, he said.

"Those folks need lawyers," he said. "It’s a good business of law firms of this size."

Anello said investigations are one of the largest drivers of business for his firm, which represents both companies and individuals subject to the internal investigations, he said. Often, cases are referred by a company’s in-house lawyers and its outside counsel, Anello said.

At Molo’s firm, more than half of the white-collar defense and investigation work comes through referrals, he said. Other matters come directly from a private equity fund or hedge fund, he said.

New boutiques must face the reality that clients might want large firms to conduct an investigation so it carries more weight and credibility with the government, Harris said. A smaller firm may need to have prominent former prosecutors or government officials on their roster.

"It’s going to really depend on whose name is on the report," Harris said.

An advantage for boutiques, however, is that they can promote cost savings and lean staffing.

"At the end of the day, our billable rates are a bit lower, our staffing is a little more streamlined," as fewer people are assigned to each case, Krantz said. "So we come in at a different price point."

Meanwhile, firms continue to see potential in the practice. Philadelphia-based Montgomery, McCracken, Walker & Rhoads, which opened a New York office in 2011, is planning to beef up its white-collar practice with new associate and partner hires this year in the 20-lawyer Manhattan office.

Firm chairman Richard Scheff, who splits his time between Philadelphia and New York, said that "there are a lot of lawyers focused on this practice area" but "it does not give me the least amount of concern given the level of activity."

Noting the steady demand in the practice, Molo pointed to U.S. and global investigations into corruption, continued enforcement activity in the securities field and the 2012 presidential election.

"The nomination of Mary Jo White as the new head of the SEC signals a strong emphasis on enforcement. With the re-election of President Obama and the likely continuation of his policies regarding competition, we will likely see increased activity in antitrust enforcement," he said.

Anello said a pending U.S. Supreme Court decision could impact white-collar practice. The central question in Gabelli v. SEC, 11-1274, is whether the statute of limitations is five years from the time the alleged wrongdoing was discovered, or when it occurred. If the Supreme Court decides it is when the alleged violation occurred, some civil enforcement charges brought during the financial crisis could soon become stale, Anello said.

But speaking on the long-term prospects of the white-collar practice, Anello said, "It will continue to be a fertile area for law firms."

"You see the recent [regulatory and criminal] settlements. The numbers are very big so that companies will increasingly have the need for white-collar lawyers to protect them and guide them through the shoals of criminal multi-national investigations because the stakes are so high," he said.