There are so many interesting parts of the Dewey criminal charges, it’s hard to count them all.
For starters, there are the emails laid out by the SEC in its complaint, such as:
- “I don’t see how we’ll get past the auditors another year.”
- “I assume you [k]new this but just in case. Can you find another clueless auditor for next year?”
- “I don’t know anything about [the contracts] and I don’t want to cook the books anymore. We need to stop doing that.”
- “I don’t know. He’s starting to wig a little. Maybe he’s hearing and seeing too much . . . .”
Sadly for people and happily for prosecutors, regrettable emails are simply a fact of modern electronic life. Still, “I don’t want to cook the books anymore” has to be pretty high on the list of things that one is likely to regret putting in an email.
(These emails, and more, are collected in the Bloomberg piece by Matt Levine wonderfully titled “Law Firm Accountants Were Bad at Accounting, Law.”)
But, probably more interesting than these regrettable emails is what the Dewey prosecution can tell us about white-collar prosecutions in New York more generally….
As Lawrence Goldman writes on the White Collar Crime Prof Blog (tremendously great blog, by the way, that everyone who cares about white-collar work should read), one interesting thing about the case is that “[i]t is being brought by a state prosecutor — the District Attorney of New York County — rather than the United States Attorney for the Southern District of New York, the predominant prosecutor of white-collar crime in Manhattan.”
The case was investigated by the FBI though, and the civil case is being brought by the SEC. Normally if there’s an FBI and SEC investigation, one would think the case would be brought by the U.S. Attorney’s Office for the Southern District of New York.
Why did S.D.N.Y. not bring this case?
Let’s think about a few reasons why these charges were brought by the D.A. and not the U.S. Attorney:
1. The case is weak.
The explanation one of my partners favors is that the case is weak (though, in fairness, she thinks most government cases are weak). James Stewart of the New Yorker, who wrote the only article every lawyer in America seems to have read in 2013, is skeptical of the government’s case. It could be that the feds thought the allegations against the former Dewey folks simply weren’t strong enough to make a federal criminal case, as least as to the folks most likely to get attention if charged, and they didn’t want to chance a loss in a very high-profile case.
2. There’s no federal interest.
A federal prosecutor is, of course, supposed to exercise judgment and only bring cases where there’s a federal interest. In light of the SEC action and the collapse of an entity as large and multijurisdictional as a law firm like Dewey, it’s hard to see how there isn’t a federal interest here. More reasonably, they could have thought that a case like this would be a big one, and that the office’s resources are more appropriately spent on other cases.
3. The D.A. got there first.
It’s possible that the D.A. simply came in first and developed better evidence than the FBI and the U.S. Attorney’s Office. If so, then they would have run with the case and the U.S. Attorney’s Office wouldn’t have been able to catch up.
That explanation seems a little odd to me. How did the FBI come to be on the case? If the FBI was on the case early too, then they would normally go to the U.S. Attorney’s Office.
As a slight twist, perhaps someone brought evidence to the D.A., instead of to the feds, and the D.A. is helping the FBI and SEC on the condition that it gets to bring the case. Maybe, but that too seems a little odd — and is also a vote of no confidence of the state law enforcement’s ability to do a white-collar case, even if it’s working with the SEC.
4. This signals a new era of joint U.S. Attorney’s Office/D.A. Interaction.
Maybe the U.S. Attorney’s Office and the D.A. sat down and discussed who should bring the case, and the U.S. Attorney’s Office decided to stand down and let the D.A. bring it. Perhaps this happened early in the case after the D.A. got a big piece of evidence first (dovetailing with the point above). If so, that’s awfully kind of the Southern District’s U.S. Attorney’s Office to share such a high-profile case. That said, the Manhattan D.A.’s office is a really good prosecutorial office — perhaps the most well-regarded local prosecutor’s office in the country. As Goldman notes, “if this joint effort between federal investigators and New York State prosecutors is a harbinger of further cooperative efforts, it will be a significant step forward for white-collar prosecution in New York City, the financial (and probably white-collar crime) capital of the country.”
I’m biased, but I tend to think of Washington, D.C. as the white-collar capital of the country (perhaps I simply hold my neighbors in low regard). But if there are going to be two powerhouse prosecutors’ offices bringing big white-collar cases in New York, that could indeed be a harbinger of change.
Matt Kaiser is a partner at The Kaiser Law Firm PLLC, a boutique litigation firm in Washington DC, which handles government investigations, white-collar criminal cases, federal criminal appeals, and complex civil litigation. You can reach him by email at mattkaiser@thekaiserlawfirm, and you can follow him on Twitter: @mattkaiser.