Ex-Prosecutor Khuzami Said to Be SEC Enforcement Pick
By David Scheer and Jesse Westbrook
Feb. 7 (Bloomberg) -- Former federal prosecutor Robert Khuzami, now a Deutsche Bank AG lawyer, is the leading candidate to succeed Linda Thomsen as head of enforcement at the U.S. Securities and Exchange Commission, according to two people familiar with the matter.
Khuzami, 52, may meet senior SEC officials as soon as next week, one of the people said, declining to be identified because the personnel talks aren’t public. He spent 11 years at the U.S. Attorney’s Office in Manhattan, where he headed the white-collar crime unit, before taking a job at Deutsche Bank in 2002.
He would join SEC Chairman Mary Schapiro, 53, at an agency scarred by its failure to detect Bernard Madoff’s alleged $50 billion Ponzi scheme. Enforcement chief Linda Thomsen, 54, who remains on the job, was scolded by lawmakers along with other senior agency managers this week for failing to be more forthcoming about the pursuit of the fraud.
Khuzami’s “deep background” in criminal enforcement would help bolster perceptions that the agency can track down rule- breakers, said James Cox, a law professor at Duke University in Durham, North Carolina. In addition, “a person familiar with the internal operations of a universal bank will be extraordinarily useful,” he said.
Khuzami, didn’t respond to a telephone message seeking comment. Deutsche Bank spokesman Ted Meyer declined to comment. The bank promoted Khuzami to become its New York-based general counsel for the Americas in 2004, the Frankfurt-based company said in a statement at the time. SEC spokesman John Nester declined to comment.
General Counsel
Schapiro yesterday named David Becker, 61, a partner at Cleary Gottlieb Steen & Hamilton in Washington, to become the SEC’s chief legal officer and senior policy adviser. Andrew Vollmer has been acting general counsel since Jan. 21.
Khuzami received an undergraduate degree from the University of Rochester and a law degree from Boston University in 1983. He joined the U.S. Attorney’s Office for the Southern District of New York, which covers Manhattan, in 1990, where he helped try terrorism cases and later focused on white-collar crime including securities fraud cases. He left the prosecutor’s office in 2002.
In 1997, Khuzami received the Justice Department’s highest citation, the Attorney General’s Award for Exceptional Service. The New York City bar association granted him the Henry L. Stimson award for outstanding public service in 2001.
Thomsen, a former assistant U.S. attorney in Maryland, joined the SEC as a trial lawyer in 1995 and climbed the ranks. She oversaw its investigation of Enron Corp., the energy trader that went bankrupt in 2001.
Thomsen Tenure
During her tenure as director, investigators have cracked down on insider trading, corporate bribery of foreign officials and backdating of employee stock options. Last year, the SEC and state regulators forced banks to buy back more than $50 billion in auction-rate securities to settle claims that the firms falsely touted the investments as safe, cash-like investments.
Thomsen’s time in the job also has been marked by wrangling among the agency’s commissioners over whether to scale back fines of publicly traded companies. Some commissioners have been concerned that sanctions can punish shareholders already hurt by fraud. In 2006, then-Chairman Christopher Cox, a Republican, enacted a policy requiring that the panel set ranges for the penalties before Thomsen’s staff could begin settlement talks.
After sanctions dropped 51 percent in fiscal 2007, Senate Banking Committee Chairman Christopher Dodd and committee member Jack Reed, both Democrats, asked the Government Accountability Office last year to examine whether investigators have adequate enforcement resources.
Madoff Arrest
Madoff was arrested Dec. 11 after allegedly admitting his investment advisory business was “all just one big lie.” U.S. lawmakers have held three hearings to examine the SEC, including why investigators in New York, alerted to the suspected fraud by a money manager, decided to close an inquiry in 2007. The agency hasn’t indicated that Thomsen was aware of the decision.
“You have single-handedly diffused the American public of any sense of confidence in our financial markets if you are the watchdog,” Representative Gary Ackerman, a New York Democrat, said at a Feb. 4 hearing where Thomsen and senior SEC officials testified. “You have totally and thoroughly failed in your mission.”
Schapiro, nominated by President Barack Obama and sworn in Jan. 27, yesterday announced steps to speed up enforcement cases as she seeks to restore the agency’s reputation. She scrapped Cox’s policy requiring pre-approval for fines against public companies.
Schapiro is described as politically independent on the SEC’s Web site. Khuzami contributed $2,300 to Republican presidential nominee John McCain’s campaign, according to Federal Election Commission records. McCain, a U.S. senator from Arizona, lost to Democrat Obama. |
