A White-Collar Windfall: But Where's D.C.?

October 13, 2008
Legal Times
By Brian Katkin


It was American International Group’s turn to be blasted by angry lawmakers.

Rep. Carolyn Maloney (D-N.Y.) accused ex-CEO Martin Sullivan of “gambling billions, possibly trillions of dollars.” Before Sullivan answered, Steven Ross, a partner at Akin Gump Strauss Hauer & Feld, sprung forward and whispered into his client’s ear.

“I wouldn’t refer to it as gambling,” Sullivan then responded, cautiously. “You know, those transactions were individually underwritten very
carefully.”

Until now, much of the legal action surrounding the mortgage meltdown and economic crisis has been centered in New York. Last week, the venue shifted to Washington and by extension into the familiar territory of D.C.’s white-collar bar. Yet, very few Washington white-collar lawyers have been called upon for a role in the saga. Of the cadre of lawyers involved in last week’s congressional hearings involving AIG and Lehman Brothers, only three from D.C. had a significant role.

Still, some of D.C.’s best-known litigators expect that to change in the weeks and months to come. Congress and federal agencies are simply in the early stages of the investigation process. “A lot of New York firms have gotten involved, but there is certainly going to be a heavy dose of Washington lawyers getting involved, too,” says Robert Bennett of the D.C. office of Skadden, Arps, Slate, Meagher & Flom. “There are so many pieces to these cases that there is going to be a lot of work for a lot of lawyers.”

The D.C. outposts of some firms, including Skadden, say they’re already involved or have been contacted about representing executives and companies pulled into the scandal. “In the last couple weeks we’ve got calls from a financial services industry company and a hedge fund company,” says Abbe Lowell, a partner in the Washington office of McDermott Will & Emery. “This is just at the front end. There are some executives out there who know they’re next on the spot.”

WELCOME TO WASHINGTON

For now, New York firms have taken the lead in congressional inquiries. New York firms such as Simpson Thacher & Bartlett; Wachtell, Lipton, Rosen, & Katz; and Allen & Overy all had more lawyers present at the two hearings before the House Oversight and Government Reform Committee dealing with the bailout of AIG and collapse of Lehman Brothers than D.C. firms.

In addition to Ross and an Akin Gump associate, the only other D.C. lawyer who had a role in the hearings was Stanley Brand of The Brand Law Group, who represented Lehman Brothers.

The Akin lawyers were a logical choice for Sullivan. Ross, who heads Akin Gump’s public law and policy practice, was general counsel to the House from 1983 to 1993, and has since served as counsel for a number of companies appearing before the House oversight committee. Earlier this year, Ross represented Countrywide Financial during a similar congressional probe.

Ross declined to speak about his representation of AIG, but said: “Congressional investigations of financial and New York matters have always fallen under my unique and specialized practice.” Akin Gump has a relationship with AIG dating back to 2005, when the firm registered to lobby for the insurance giant.

Brand was general counsel to the House from 1976 until 1983. He, too, has represented companies under investigation by the committee, including Arthur Andersen, Major League Baseball, and HUD developers in a recent contracting scandal. A spokesperson for Lehman Brothers said Brand was primarily responsible for gathering and reviewing documents requested by lawmakers.

Both Ross and Brand were small parts of larger teams. Sullivan was also represented by lawyers from Wachtell, and the other former AIG CEO, Robert Willumstad, by a team from Simpson Thacher. Lehman Brothers CEO Richard Fuld had a team from Allen & Overy, and Lehman itself was separately represented by Simpson Thacher.

That said, the committee chairman, Rep. Henry Waxman (D-Calif.), has promised additional hearings, and Washington lawyers say they are better positioned to deal with probing lawmakers.

“That expertise is located in Washington and will be incredibly valuable to these senior executives,” says Bobby Burchfield, the managing partner at McDermott Will & Emery. “You need a sophisticated, wise attorney to walk you through the pros and cons of testifying to Congress, and to achieve both goals: not being indicted and not damaging your reputation. It’s a difficult balance.”

BATTLE FOR WALL STREET WORK

The hope among D.C. lawyers is that by getting a piece of the Capitol Hill work, they’ll be called upon to defend executives or companies who come under criminal investigation. “Here’s how it works: Congress calls for the scalps, the Department of Justice goes after the scalps, and then it’s left to the trial lawyers to see if any of them can still stand to go on,” Brand says.

Orrick, Herrington & Sutcliffe partner Michael Madigan agrees. “Congressional hearings are closely followed by criminal investigations—one usually follows the other like night follows day.”

Lynn Turner, the former chief accountant of the Securities and Exchange Commission, said on Oct. 7 that investigations of AIG by government agencies are already under way.

The U.S. Attorney’s Office for the Southern District of New York will likely take the lead in such probes, meaning D.C. firms must compete for representation with more familiar Wall Street firms. That competition may be particularly hungry for white-collar work because their New York corporate clients are doing very few transactions.

Caplin & Drysdale’s Bernard Bailor, for one, expects D.C. firms to pick up business from smaller hedge fund groups. “D.C. has developed close relationships and done a lot of work with the various federal entities that are going to be involved, like the Department of Justice and the SEC,” Bailor says. “A lot of the criminal cases might end up in New York but, for the civil and regulatory work that’s going to need to be done, D.C. is still the center of the universe.”


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