SEC Revolving Door Leads To $5 Million Payday For Former Chief Enforcer

The name Robert Khuzami is well-known to Zero Hedge readers: the former top SEC enforcer is perhaps best known not for what he did (judging by how many Wall Street bank executives ended up in jail following the Great Financial Crisis, very little), but for what he didn't - namely pursue any action against his former employer, Deutsche Bank, where he was a general counsel and where under his watch Greg Lippmann was "shorting your house." The reason, among others, extensive deferred comp linked to DB stock as we reported all the way back in May 2010. But Bob didn't care about what he did, or didn't do at the SEC - he was much more interested in what he would do after he left the regulator, which he did in January of this year. Because Bob, courtesy of his DB days, realized the massive paycheck potential of a revolving door job at the head of the government's enforcement unit. Sure enough, as the NYT reports, he has capitalized on just that following a $5 million a year contract (with a 2 year guarantee) with legal behemoth Kirkland & Ellis where he will be a partner and "will represent some of the same corporations that the S.E.C. oversees."

More from the NYT:

When he left his role as Wall Street’s top federal enforcer, Robert S. Khuzami began a long courtship with a who’s who of the legal world.


The calls rolled in from financial giants like Visa and Bridgewater, and from white-shoe law firms, like WilmerHale. Some offered outsize paydays, others promised an office not only in New York but also in Washington, where his family lives. They all wanted the benefit of his experience as a terrorism prosecutor and enforcement chief at the Securities and Exchange Commission.


Six months later, lawyers briefed on the matter say, Mr. Khuzami has accepted a job that pays more than $5 million a year at Kirkland & Ellis, one of the nation’s biggest corporate law firms. In doing so, he is following the quintessential Washington script: an influential government insider becoming a paid advocate for industries he once policed.

Flip-flopping at its best... or rather worst.

“It’s both aggressive enforcement and vigorous defense that are critical to justice and fairness,” Mr. Khuzami, who will start in Kirkland’s Washington office around Labor Day, said in an interview.

As well as the SEC revolving door at its best... or rather worst.

Critics say this revolving door — common at the S.E.C. — undermines the agency’s independence and links it inextricably to Wall Street. Mr. Khuzami, who spent 17 years in the government and has publicly called for lawyers to build public and private experience, called defense work essential to the justice system.

Khuzami has been around the Wall Street block.

Mr. Khuzami’s name has circulated around Wall Street for decades. After putting himself through University of Rochester working as a truck driver and overnight dockworker, Mr. Khuzami went to law school at Boston University and ultimately became a junior lawyer at Cadwalader, Wickersham & Taft in New York, where he handled securities cases and commercial disputes.


The job paved the way for him to join the United States attorney’s office in Manhattan, where he ran a securities task force. During his 11-year tenure at the office, he also prosecuted terrorism cases, including the conviction of Omar Abdel-Rahman, tied to the 1993 bombing of the World Trade Center.


Mr. Khuzami returned to the financial world in 2002, arriving at Deutsche Bank, where he eventually became general counsel for the firm’s American businesses. Mr. Khuzami helped steer the bank through the financial crisis and an investigation into its tax shelters.

When the S.E.C. was reeling from the crisis, the agency turned to Mr. Khuzami to revamp its enforcement unit. He joined at a time when some lawmakers wanted to abolish the agency, making it a curious choice for Mr. Khuzami, who already possessed a coveted job.


“When he went to the S.E.C., this was not a guaranteed happy ending,” said Richard Walker, Mr. Khuzami’s boss at both Deutsche Bank and Cadwalader. But his prospects improved. Mr. Khuzami drew praise for creating units to track complex corners of Wall Street and applying prosecutorial tactics to civil cases. Under Mr. Khuzami, the enforcement division logged a record number of actions, including a case against Goldman Sachs.


When Mr. Khuzami announced his departure from the S.E.C. in January, the offers came pouring in. All told, lawyers say, he fielded more than 20 inquiries. About a dozen were serious. In addition to WilmerHale; Paul, Weiss, Rifkind, Wharton & Garrison; and Cravath, Swain & Moore, he heard from Latham & Watkins; Skadden Arps; Fried Frank; and his alma matter, Cadwalader. Kirkland’s interest came through an independent recruiter.


Visa and Bridgewater, the giant hedge fund, were among the companies that approached Mr. Khuzami for in-house counsel jobs. The fervor grew so great that Fox Business declared it the “biggest bidding war on Wall Street.”

Some, like Khuzami, "embrace" the revolving door farce that characterizes all government agencies:

The revolving door at firms like Kirkland has alarmed some watchdog groups. The Project on Government Oversight, a nonprofit group, released a study this year highlighting a pattern of former S.E.C. officials securing favorable results from the agency.


“It can really help a Wall Street bank to show they’re represented by the former top cop on Wall Street,” said Michael Smallberg, an investigator at the group. “It’s not like you see an equal number of S.E.C. lawyers going to represent shareholders and whistle-blowers.”


Mr. Khuzami, however, has embraced the revolving door, delivering speeches outlining its benefits. Anyone required to shine a light on the darkest corners of Wall Street, he argues, must know how it works.

Others, however, with a semi-working frontal lobe, realize that all of the above is precisely the reason why the SEC will never truly prosecute those responsible for Wall Street's criminal ways: after all who will dare to bite the hand that might one day feed them?

And that is why, despite all Copperfieldian distractions to the contrary, nothing will ever change until not only Wall Street, but its regulatory system is either eradicated (as all it does is consume taxpayer funds with no practical results), or rebuilt from scratch.