Committed to Crime – boutique firms and White-collar Crime

White-collar crime work was once the comfy preserve of niche London law firms that knew their way around the inside of a police station. Not any more. But as the big international players stake a claim, the boutiques are standing their ground.

When the Bribery Act came into force in July 2011, it shook the world of white-collar crime to its core. In one fell swoop the UK became home to the most stringent legislation combating corruption in the world, going beyond the scope of America’s Foreign Corrupt Practices Act (FCPA). Its strict measures created a worldwide trend of amplified anti-corruption enforcement, which is now booming in a similar fashion to competition law in the nineties, and the established legal market players found themselves with a fight on their hands.

Traditionally, firms like BCL Burton Copeland, Kingsley Napley, Byrne and Partners and Peters & Peters have dominated the UK white-collar market by leading clients from the police station safely through court proceedings. Now international players like Berwin Leighton Paisner (BLP), Clifford Chance, Linklaters, Hogan Lovells and Norton Rose – not to mention a swathe of US law firms – want a slice of the action.

And that’s because – as global corporate and financial regulators get tough and individuals are increasingly in the spotlight – criminal law is the new regulatory. As Neil O’May, a white-collar crime partner at Norton Rose, puts it: ‘All regulators now see the criminal route as a powerful means of enforcing compliance across a sector – whether in corporate manslaughter, criminal cartels, bribery or market abuse. As a result, companies are more likely to seek legal advice in the early stages of a potential crisis to avoid fierce penalties.’

O’May joined Norton Rose from Bindmans last summer, where he was a partner and head of the criminal law practice. His arrival complemented the existing regulatory expertise in the group but also initiated the rapid development of the corporate, business and white-collar offering to clients.

Since he joined, Norton Rose has been actively recruiting to develop the team’s strength in white-collar, and hopes to announce more laterals this year. The firm will be particularly concentrating on Africa, Asia and Eastern Europe, following its planned merger with US firm Fulbright & Jaworski.

And it is little wonder crime is arousing the interest of the big firms. When Serious Fraud Office (SFO) head David Green was appointed in May 2012, he made clear his intention to bring more high-profile prosecutions of companies and senior management to demonstrate the effectiveness of criminal sanctions in controlling boardroom behaviour.

Step forward the City firms putting their white-collar specialists out there as quasi-regulatory lawyers with experience not only of ensuring companies are compliant with various legislation, but also of keeping bigwigs out of jail. Nowadays, any company going through a transaction is wise to put compliance at the heart of a due diligence process, and bring in expert lawyers to ensure the appropriate procedures are in place.

 

Come join us

While corporate clients may delight in their favourite law firm beefing up its criminal expertise and doling out reassurance by the bucket load, for the boutiques it can be hard to swallow. For a start, the white-collar lawyers at smaller firms find themselves constantly wooed by very appealing wage packets.

Matthew Frankland, a criminal law specialist at Byrne and Partners, says: ‘Manchester City won the Premier League title last year, because it bought a huge amount of talent for a lot of money and upped its game. That seems to be the strategy these big firms are adopting.’

The dramatic rise in lateral moves in the last 18 months illustrates the challenge for the established players (see boxout, ‘Lateral hires of 2011/12’, below). Alongside O’May, two of the other big moves saw Kim Green join Pinsent Masons from Byrne and Partners in September 2012 and Stephen Pollard exit Kingsley Napley for Wilmer Cutler Pickering Hale and Dorr in November 2011. As one of the undisputed dons of the area, Pollard’s relocation in particular showed a shake-up was on the cards.

Today, retaining staff is a big challenge. For Frankland, American firms pose a significant threat as they offer giant salaries to buy in the criminal experience they are lacking.

‘That seems to be why a lot of senior people have left the SFO to join the big American firms, because government legal services aren’t as well paid,’ he says.

 

 

The other challenge is simply one of scale. ‘Smaller firms like ours are not geared up to act for someone like Barclays in the Libor investigation, for example. We have smaller teams and cannot operate in that capacity,’ Frankland adds.

Daren Allen, partner in the litigation and dispute resolution department at BLP, says the Financial Services Authority (FSA)’s increased focus on money laundering and fraud has forced a lot of financial services clients to seek advice on how to safeguard against fraudulent activity and avoid criminal sanctions.

‘It is in our interests to provide a full service to our corporate clients and that is why big City firms are recruiting in this area. At a time where legislation is dramatically changing, it is important we are equipped to advise our clients accordingly,’ he says.

Rod Fletcher, head of the business crime and regulation department at Russell Jones & Walker (part of Slater & Gordon Lawyers), says City firms have realised white-collar is a booming practice area to be in and there is a need for experts that are up to date with all the different jurisdictions.

‘The demand in this sector is client driven. Companies and corporations are finding themselves investigated. And firms don’t want to give up their clients to other firms. So they’re having to skill up to meet the outside pressure of the Department of Justice (DoJ), the SFO and the FSA,’ he says.

 

Crime offensive

A number of large American law firms have committed serious resources to building up criminal teams in London of late, having handled criminal work on the other side of the Atlantic for years. Sullivan & Cromwell hired Louise Delahunty from Simmons & Simmons in 2011, for example, while Jones Day recruited Glyn Powell from the SFO last January and K&L Gates hired Addleshaw Goddard’s corporate crime chief Elizabeth Robertson as a partner in January 2012. Before Addleshaws, she was at Peters & Peters.

DLA Piper shook up the market when it brought in Jo Rickards from Peters & Peters in 2010 – she has acted for Italian politician and media tycoon Silvio Berlusconi, the Maxwells and Andy Coulson, former editor of the News of the World, to name but a few. Before that it had hired Robert Wardle, the former director of the SFO, in 2008.

These hires are attractive because the work isn’t just getting bigger and more prolific, it’s becoming increasingly international. US firm Debevoise & Plimpton advised Rolls-Royce on its activities in Indonesia and China after the SFO claimed the company paid a $20m bribe to secure an aircraft engine order. Such cases are investigated in both the UK and the US and bring with them the threat of potential penalties under the FCPA and entanglement with both the DoJ and the SFO.

Head of criminal litigation at Kingsley Napley, Stephen Parkinson, says his sector has become mainstream for two reasons: tighter regulation and client demand.

‘City firms were not really interested in this area before,’ he says. ‘Until the last director of the SFO Richard Alderman came along, no company had been prosecuted by the SFO. He established the practice of self-reporting and engaged in civil settlements. This drew in the City corporate firms because they had corporate clients.’

However, business crime partner at Peters & Peters, Jasvinder Nakhwal, says white-collar crime has always been a buoyant sector.

‘White-collar crime work is not a recent phenomenon; it has simply gained greater publicity and recognition in recent years. In fact, Peters & Peters has been doing this type of work for many decades and has built a stellar reputation in this area. As a result of various changes in the law and a shift in political focus, the City has now become alive to the increasing importance of this area of the law. No doubt, in light of recent changes, their clients expect to be advised on any regulatory and criminal exposure, especially in terms of bribery and corruption, extradition, money laundering and FSA matters – none of this is new to us,’ she says.

Companies have never been more liable. ‘It’s a mixture of new legislation, changes in policy, a more aggressive enforcement landscape, a greater Americanisation of the process and the realisation that this is a service that big firms have to provide to their corporate clients,’ Fletcher adds.

Court appeal

But not all of the big firms have the boutiques in their sights. Luke Tolaini, a disputes partner at Clifford Chance, says City firms are merely placing emphasis on – or marketing – the talent they already have within their firms.

‘We already have longstanding relationships with our corporate clients and have experience of dealing with a number of cases for them across various sectors. By marketing our white-collar crime capabilities, we aim to provide a better service to these clients,’ he says.

Clifford Chance already has strong international capabilities in this sector, especially in Frankfurt and Milan. The firm is also strong further afield; it hired Wendy Wysong in Hong Kong in 2007 to focus on white-collar criminal defence, complex civil litigation, and international and domestic regulatory compliance work. And in New York the firm hired three ex-prosecutors – David Raskin, Chris Morvillo and Ed O’Callaghan – in 2011 in a move to expand its fraud practice.

Aaron Stephens, partner and co-head of BLP’s financial crime and corporate investigations practice, is dual-qualified in both the UK and the US. He points out that in the US there is an established career path of highly educated lawyers starting out as federal prosecutors or in Securities and Exchange Commission enforcement, before switching to private practice defence work.

All regulators now see the criminal route as a powerful means of enforcing compliance across a sector.’ – Neil O’May, Norton Rose

Such practice has not been very common in the UK, though in recent years a number of firms have recruited from the SFO. White & Case brought in SFO assurance head Charlie Monteith as counsel in January 2012 and SFO fraud business group head Kathleen Harris joined Arnold & Porter as a partner the following month. In September, Kirkland & Ellis hired the head of the anti-bribery team at the SFO, Satnam Tumani, in London.

While some boutique firms are feeling threatened by the presence of City firms, others feel there is enough room in the market for both.

Fletcher says: ‘While there have been so many lateral hires, smaller firms don’t need to be worried as there will always be a need for individuals to be represented. City and American firms have traditionally acted for the companies and referred out individuals to firms like ours and specialist firms. I don’t think this will change. More companies being investigated means more individuals need representing.’

Nick Benwell at Simmons & Simmons agrees. He heads the crime, fraud and investigations group and says that although larger firms are expanding their practices through lateral hiring, a large chunk of work can always be referred out to boutique white-collar crime firms due to significant conflicts of interest.

 

 

He adds: ‘Where one firm may be acting for a corporate client, there may be a number of individuals within that company that also need representing. So it is very common for firms like us to refer work out to the boutique firms.’

Peters & Peters does not limit itself to acting for individuals. In fact, the majority of its clients are now corporate clients, including banks and well-known institutions. However, it also retains its traditional client base and acts for individuals, including those of former and current governments, Russian oligarchs and directors of large companies, as well as smaller clients who are being prosecuted or investigated by domestic and international financial bodies.

The firm recently worked on a case with US law firm Latham & Watkins where the Office of Fair Trading, DoJ and European Commission were investigating price-fixing allegations, in which the DoJ fined the Japanese-based manufacturing company Yazaki Corporation $500m. Business crime department head and partner Michael O’Kane at Peters & Peters led the advice on the UK criminal aspects of the case, and Marc Hansen of Latham & Watkins led the case on the international civil aspects in all investigating jurisdictions.

The real threat to the status quo will come if the larger firms start to represent individuals accused of crimes. But for now, they seem more interested in corporate crime than acting for individuals.

Ian Burton, senior partner and founder of BCL Burton Copeland, says: ‘Defending an individual does not incur such large fees. City firms will be more interested in doing the regulatory side of things to make sure the companies they work with are compliant and that there is appropriate co-operation with the authorities in investigations, rather than defending people who are accused of committing crime.’

White-collar forecast

The landscape of criminal law is changing. Nowadays, there are frequent areas of crossover with civil law. While the FSA can take regulatory action against individuals, it can also prosecute for insider dealing. That means a lot of litigators and regulatory lawyers suddenly find themselves needing to familiarise themselves with criminal prosecutions.

At the other end of the spectrum are the high street criminal practitioners, who are good with arrests and police work, but lack commercial work experience.

Frankland says: ‘There are very few lawyers that combine the skills of a corporate lawyer, understand commerce and have the appropriate police station experience. When the police turn up at 8am, there is not much point in calling one of the Magic Circle firms because they don’t have experience of dealing with arrests, or a client who is in the cells. They often don’t realise that the single most crucial stage of the whole criminal justice process is what happens at the police station.’

Frankland at Byrne and Partners says: ‘We know the anatomy of a criminal case as it goes through court. We know where the pressure points are and we can identify the mistakes prosecutors make. You don’t always win cases just because your evidence is better; you win because you expose the weaknesses, errors and failures in the way the case was brought to trial. Often the big firms don’t understand how that works, which is why they are trying to buy in highly skilled and experienced people like Stephen Pollard.’

The current market will likely mean rich pickings for criminal practitioners wherever they ply their trade. While City firms continue to expand, many specialist firms are also growing on the back of an influx of work. Byrne and Partners certainly has expansion in its sights, for example.

‘Although it’s harder to make profit because of the changes in the public funding system, there is still plenty of work out there,’ says Frankland. ‘While City firms are in competition, we also get a substantial amount of our work from them. We are anxious to build a closer relationship with the big players and establish an arrangement where we can look after the individuals that they cannot easily act for.’

In the case of the international players versus the boutiques, it may just end up a win, win situation. LB

jaishree.kalia@legalease.co.uk