Uncertainty and confusion: Those are the two words that best describe the transition happening across the U.S. Department of Justice right now.
Following a Senate Judiciary Committee 11-9 vote last week confirming Alabama Republican Senator Jefferson “Jeff” Sessions as attorney general, many are wondering what the new leadership will mean for the Justice Department’s enforcement agenda moving forward. Sessions’ was sworn in on Feb. 9.
President Trump fired then-Acting Attorney General Sally Yates late last month after she refused to defend the administration’s controversial, temporary ban on migrating Syrian refugees and travel to the United States from seven Muslim majority countries. In the interim, Dana Boente, former U.S. attorney for the Eastern District of Virginia, currently serves as acting attorney general.
In addition to Sessions, President Trump will also nominate Rod Rosenstein, U.S. attorney for the District of Maryland, as deputy attorney general; Rachel Brand, a current member of the Privacy and Civil Liberties Oversight Board, as associate attorney general; and Steven Engel, a partner at law firm Dechert, as assistant attorney general for the Department of Justice’s Office of Legal Counsel.
Under the Obama Administration, the Department of Justice aggressively pursued violations of the Foreign Corrupt Practices Act, False Claims Act, and other corporate fraud, securing record fines and, some argue, even using unconventional tactics to pursue charges. The Department also greatly increased its collaboration with enforcement authorities in other countries.
Whether similar enforcement priorities and tactics will continue under the Trump Administration is far from certain and requires a careful, calculated reading of the tea leaves. “Any time there is an administration change and a change atop the Department of Justice with the attorney general, there’s going to be a shift in enforcement priorities,” says Ryan Hedges, a shareholder at law firm Vedder Price.
That being said, the former Obama Administration and the current Trump Administration appear to agree on at least one key enforcement priority: holding individuals accountable for corporate wrongdoing. “Individuals are going to remain in the crosshairs of enforcement activity,” Hedges says.
During his confirmation hearing, Sessions indicated as much: “[S]ometimes it seems to me … that the corporate officers who caused a problem should be subjected to more severe punishment than stockholders of the company who didn’t know anything about it,” he said, when asked whether investigations into corporate wrongdoing and the prosecution of culpable individuals would continue to remain a priority under the so-called “Yates Memo.”
Although it may be tempting to examine past actions and speeches of nominees, these generally are not the most reliable signs for predicting future behavior, says Michael Kelly, a partner with law firm Hogan Lovells. What Senator Sessions says in early speeches after he is confirmed as attorney general will be far more telling than anything he has said up until this point, he says.
“Individuals are going to remain in the cross-hairs of enforcement activity.”
Ryan Hedges, Shareholder, Vedder Price
Budgetary priorities are another telling sign for predicting what direction the Department of Justice may be heading. “Those priorities must inform how local U.S. Attorneys’ Offices decide how to carve out their resources and dedicate their staff to carry out the Department’s goals,” Hedges says.
Hence, certain areas of white-collar crime—healthcare fraud, securities and financial fraud, and bribery and corruption—are expected to remain high priorities. At the margins, however, when deciding how to allocate resources outside those key enforcement areas, that’s when budgetary priorities from Washington will really make a difference.
For example, the Trump administration has been very vocal about fortifying U.S. borders and making illegal immigration a top priority. If that’s the case, prosecutors may start to ramp up enforcement efforts for immigration-related violations, particularly in districts where immigration issues are highly concentrated—such as in California, Florida, New York, and Texas. The hiring of illegal immigrants, the falsifying of work authorization documents, and violations of import and export laws are all areas where prosecutors may focus their immigration-related enforcement efforts.
Kenneth Yeadon, former assistant U.S. Attorney for the Northern District of Illinois and a former SEC enforcement attorney, says it’s also telling that President Trump has requested that Preet Bharara stay on as the U.S. attorney in the Southern District of New York, a request that Bharara has accepted. “Mr. Bharara's tenure as U.S. Attorney has included a number of high profile insider trading and public corruption cases against individuals and cases against financial institutions. By retaining Mr. Bharara as U.S. Attorney, it appears that the new administration is likely to continue to prosecute those kinds of cases,” says Yeadon, now a partner at law firm Hinshaw & Culbertson.
A fair amount of Bharara’s early tenure in the securities enforcement space has been dedicated to the pursuit of insider-trading prosecutions. “We very well may see an upward tick in insider-trading prosecutions during the Trump administration,” Marc Berger, former assistant U.S. attorney for the Southern District of New York and Chief of that office’s Securities and Commodities Fraud Task Force, said in a podcast.
Below is an excerpt from the opening statement of Attorney General-Designate Jeff Sessions at the U.S. Senate confirmation hearing on Jan. 10.
The Office of the Attorney General of the United States is not a political position, and anyone who holds it must have total fidelity to the laws and the Constitution of the United States. He or she must be committed to following the law. He or she must be willing to tell the President “no” if he overreaches. He or she cannot be a mere rubberstamp. He or she also must set the example for the employees in the Department to do the right thing and ensure that, when they do the right thing, they know the Attorney General will back them up, no matter what politician might call, or what powerful special interest, influential contributor, or friend might try to intervene. The message must be clear: Everyone is expected to do their duty. That is the way I was expected to perform as an Assistant United States Attorney. That is the way I trained my assistants when I became United States Attorney. And if confirmed, that is the way I will run the Department of Justice.
In my over 14 years in the Department of Justice, I tried cases of nearly every kind—drug trafficking and very large international drug smuggling cases, firearms cases, other violent crimes, a series of major public corruption cases, financial wrongdoing, and environmental violations.
Our office supported historic civil rights cases and major civil cases. Protecting the people of this country from crime, and especially from violent crime, is a high calling of the men and women of the Department of Justice. Today, I am afraid, that has become more important than ever.
Source: Sessions' testimony
In light of the U.S. Supreme Court’s decision in the case Salman v. United States, this upward tick in insider-trading prosecutions is likely to occur “not just in the Southern District but across the country, both criminally and civilly,” added Berger, who is now a partner at law firm Ropes & Gray.
In Salman, the U.S. Supreme Court effectively lowered the bar for prosecuting insider trading. “It is now easier in some respects for enforcement folks to police illegal insider trading than it had been a year or so ago,” Berger said.
In fact, in response to the court’s decision, Bharara issued a statement calling the ruling “a victory for fair markets and those who believe that the system should not be rigged.”
Bharara will also continue to aggressively pursue sanctions violations. “Over the last few years, beginning in 2013, the Southern District of New York has entered into settlements with a number of large financial institutions for sanctions violations,” Berger noted. “I think it’s safe to say that Preet takes these cases extremely seriously and will continue to vigorously pursue them.
And the nominees are …
Unlike Trump’s controversial nomination of Sessions, whose character and integrity is questioned by many, Trump’s nominees for other top spots in the Department of Justice have garnered a lot of respect both within and outside the government. “These nominees have a long track record of accomplishments,” Kelly of Hogan Lovells says.
What makes Rosenstein—Trump’s pick for the second highest post in the Justice Department—uniquely suitable for that role is that he is the longest-serving U.S. attorney in the Department, having served under three presidential administrations. He was first confirmed to his current post in 2005 under the Bush administration.
Such a feat is highly unusual for a U.S. attorney. The fact that he has bi-partisan support “probably bodes well for his confirmation,” Hedges of Vedder Price says.
Among Rosenstein’s enforcement priorities are civil rights violations, intellectual property fraud, environmental crimes, and fraud and corruption, to name just a few areas.
Then there’s Rachel Brand, Trump’s pick for associate attorney general. Like Rosenstein, Brand also has a strong track record at the Department of Justice, including serving as assistant attorney general for legal policy. In that capacity, she served as chief policy adviser to the attorney general, handling a broad range of national security, law enforcement, and civil justice issues.
Earlier in her career, Brand served as associate counsel to President George W. Bush. She was a law clerk to Justice Anthony Kennedy of the U.S. Supreme Court and to Justice Charles Fried of the Supreme Judicial Court of Massachusetts.
Steven Engel, Trump’s nomination for assistant attorney general, also appears to be an uncontroversial pick. Prior to joining Dechert in 2009, Engel served as deputy assistant attorney general for the Justice Department’s Office of Legal Counsel, where he provided legal advice to senior policymakers on the most difficult and critical issues facing the Executive Branch, including matters pertaining to financial issues, national security, constitutional law, congressional oversight, and executive orders.
Dechert Chairman Andrew Levander vouched for Engel as someone with a “keen intellect, strategic skills, and passion for the law that he will bring to the job.”
A trial and appellate advocate, Engel has handled a wide range of civil litigation matters, including in the areas of administrative, commercial litigation, and securities law. He also previously clerked on the U.S. Court of Appeals for the Ninth Circuit for now-Chief Judge Alex Kozinski and on the U.S. Supreme Court for Associate Justice Anthony Kennedy.
Although the broader enforcement priorities of the Department of Justice may change, the day-to-day core functions of the prosecutors who sit on the front lines will remain true: protecting the public, deterring wrongdoing, and awarding restitution and disgorgement to victims of corporate fraud.