Legal News

In Prosecutor Subway Series, EDNY Riding a Hot Streak

By Dan Slater

Benton Campbell, U.S. attorney for the Eastern District of New York, at a press conference on Thursday on the Bear Stearns matter. Photo: AP

Yesterday, when former Bear fund managers Ralph Cioffi and Matthew Tannin were perp-walked to federal court in Brooklyn’s Cadman Plaza, it represented a victory of sorts for EDNY prosecutors. As reported today by the WSJ’s Amir Efrati and Tom McGinty, the mortgage-market crisis — of which Cioffi and Tannin were either casualties or instigators, depending on your view — is helping the EDNY revive their white-collar crime operation, and catch up to their cross-river rivals at the Southern District, located just a few stops away on the 4 train.

In recent years, as the FBI has increasingly allocated resources to areas such as terrorism and pornography, securities cases have waned, according to the story. And referrals of potential criminal securities-fraud cases by the SEC — which, the story points out, has faced criticism for a perceived case of the slows — are also down.

But now Brooklyn prosecutors are taking the lead in investigating whether Wall Street misled investors in handling mortgage securities, resulting in a financial crisis causing hundreds of billions of write-downs and a global credit crunch. (Click here for a 2006 WSJ story on the so-called legal subway series.)

“The focus of securities prosecutions no longer resides with any kind of franchise in the Southern District,” said Stanley Arkin, a white-collar defense lawyer at Arkin Kaplan Rice LLP. “A legend doesn’t continue itself.”

So what accounts for the EDNY’s white-collar rise? For starters, its leader, 41 year-old Benton Campbell. According to the story, Rudy Giuliani inspired Campbell, who joined the DOJ’s Enron task force in 2003, to become a federal prosecutor. Campbell recently formed his own task force to investigate possible fraud stemming from the mortgage crisis. Meanwhile, his counterpart at Southern, Michael Garcia, 46, has focused more on terrorism and public-corruption cases. (In the white-collar arena, SDNY has stumbled. See, e.g., KPMG.)

Also, hiring SEC staff lawyers and fostering closer ties with the agency has helped it get referrals. For example, it got the Bear fund manager case from the SEC, says the story, partly because one of the prosecutors at Eastern working on the case had previously worked at the agency.

Full post as published by Law Blog - WSJ.com on June 20, 2008 (boomark / email).