New York partner and co-leader of the firm's national White Collar Defense and Corporate Investigations group John Carney provided insight for the March 2, 2009, Corporate Crime Reporter article, "Baker Hostetler’s John Carney on Schapiro, Khuzami and Creating a Criminal Unit at the SEC."
Carney, a former Securities Fraud Chief, Assistant United States Attorney and SEC Senior Counsel, was asked what he expects to see at the SEC under the guidance of SEC chair Mary Schapiro and the new director of enforcement Robert Khuzami. Carney said he sees a more nimble SEC emerging, based on two of Schapiro's first decisions: to allow the staff to negotiate corporate penalties without full Commission approval and to get a subpoena more quickly. These decisions have paved the way for a more aggressive SEC, according to Carney.
"At the Justice Department, the enforcement process is much quicker," Carney said. "There aren't these levels of review. Subpoenas can be issued almost instantaneously. Search warrants can be issued almost instantaneously. The result is that the criminal authorities can be more nimble. The drive is to try to keep the Commission as nimble as possible."Carney continued: "This would allow staff to get a subpoena in a matter of days instead of a matter of weeks. So, if there is a perceived issue, it will allow them to move faster in conducting an investigation. Chairman Schapiro is saying–'I'm going to unshackle the enforcement unit. If they want a subpoena, they will be able to get a subpoena.' They are going to be able to dig and go. Once they have the facts in front of them and are ready to negotiate, they are going to be able to negotiate with less process from above."
Carney said he also likes the idea of creating a criminal investigative unit at the SEC. "You would create your own army of special agents who would be accountants and analysts who would be carrying guns but they probably wouldn't use the guns very much. It would give the SEC a dedicated army of law enforcement officials who would only work securities fraud. While the FBI does a tremendous job investigating securities fraud–they are wonderful–they also have to worry about terrorism. They also have to worry about bank fraud. They have to worry about bank robbery and kidnaping. By having your own dedicated securities criminal law enforcement arm, they will stay on it, work those cases hard, embed themselves in big city U.S. Attorney's offices. There will be a separate director of criminal enforcement, who will set the priorities and agenda for that part of the SEC. I do think it could produce positive results," said Carney.
Carney also discussed corporate monitors and examiners, noting that the firm has developed a niche in the field. "We have been selected by the government to serve as monitors and examiners. We were the monitor for the Merrill Lynch case. We were the examiner for the Bank of New York case and for the Mellon Bank case. Right now, our partner Irving Picard, has been chosen by SIPC to be the trustee for the Madoff securities failure. We are responsible for the investigation and litigation surrounding the liquidation."