Robert Khuzami
Encyclopedia
Robert S. Khuzami is currently the director of the Division of Enforcement of the U.S. Securities and Exchange Commission. He is a former United States federal prosecutor and general counsel of Deutsche Bank AG.
and grew up in Rochester, New York
. The son of a Lebanese
immigrant, he grew up in an artistic family. His parents are professional ballroom dancers and had a dancing school, his sister is the muralist Vicki Khuzami
and his brother, Richard, is a musician and producer. After taking a few years off after high school, Khuzami enrolled in college, transferring to the University of Rochester
where he was elected to Phi Beta Kappa and graduated magna cum laude in 1979. He received a juris doctor
degree in 1983 from Boston University
School of Law. From 1983 to 1984, he was a law clerk
for John R. Gibson
of the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Missouri
and then went to work at Cadwalader, Wickersham & Taft as a litigation associate.
's Southern District of New York from 1991 to 2002. From 1999 to 2002, he was chief of that office's Securities and Commodities Fraud Task Force, where he prosecuted complex securities and white-collar crime
, including insider trading
, Ponzi scheme
s, accounting and financial statement fraud, organized crime
infiltration of the securities markets, and IPO and investment adviser fraud.
One of his cases involved Patrick R. Bennett, founder of Bennett Funding Group
, who was charged with running a pyramid scheme
and cheating 12,000 investors of $600 million. Bennett's first trial, in March 1999, resulted in a hung jury and the judge, Thomas P. Griesa
, declared a mistrial. Khuzami announced his intention to continue legal pursuit of Bennett on all counts for which the jury did not reach a decision. A second jury failed to reach a decision on 11 securities and mail fraud charges and a second judge, John S. Martin, Jr., declared a mistrial on the unresolved charges in June 1999. Bennett, who admitted to seven counts of lying to SEC prosecutors but otherwise maintains his innocence, was described by his lawyers as an inept businessman overwhelmed by an expanding company. In a practice then legal, the judge used his discretion to convict Bennett of stock fraud and money laundering. He was not convicted of running a Ponzi scheme, the main charge. Bennett was also ordered to forfeit $109 million, although he filed for bankruptcy in 1996 and was declared indigent and his lawyers were court-appointed. He was sentenced to 22 years, later extended to 30 because his then-wife did not turn over assets to repay investors.
Khuzami was selected by then-U.S. Attorney Mary Jo White
to work with Andrew C. McCarthy
and Patrick Fitzgerald
in the prosecution of the "Blind Sheikh", Omar Abdel-Rahman
, a career-changing case. At the time, the largest terrorism trial in U.S. history, ten defendants were convicted of operating an international terrorist organization responsible for the February 1993 World Trade Center bombing
and who planned simultaneous bombing attacks on FBI New York headquarters, the United Nations
and the Lincoln
and Holland Tunnel
s. Khuzami also prosecuted those accused of assassinating Meir Kahane
, and plotting the murders of Hosni Mubarak
of Egypt and the Secretary General of the United Nations. Khuzami also supervised some of the initial investigation in New York following the September 11, 2001 attacks.
to work at Deutsche Bank
in New York, where he supervised more than 100 lawyers and oversaw Americas-based litigation and regulatory enforcement. From 2002 to 2004, he headed their global litigation and regulatory investigations. He stayed at the bank until 2009. Walker, who had met Khuzami at Cadwalader, Wickersham & Taft when Walker was a partner there, later recommended him for the enforcement job at the SEC, a job he had once held himself.
to succeed Linda Chatman Thomsen
after the SEC had come under public criticism for failing to detect Bernard Madoff
's Ponzi scheme. His appointment was controversial because of his employment at Deutsche Bank, a global investment firm which did business with Goldman Sachs. He was portrayed as an outsider by some but had had eleven years' experience as a federal prosecutor.
Inheriting a demoralized agency ridiculed as ineffective, Khuzami began a broad reorganization of the top-heavy Enforcement Division. He left top salaries in place, but forced administrators back into investigations. He eliminated a layer of management and formed national units to concentrate expertise in five areas. He created a new system to collect, organize, investigate and data mine
tips and complaints, tens of thousands of which are received by the SEC every year. The new units focus on probes into investment advisers, investment companies, hedge fund
s and private equity fund
s; financial derivatives and other "complex financial products;" market abuses, such as large-scale insider trading
and market manipulation
s; municipal securities
and public pension fund
s; and violations of the Foreign Corrupt Practices Act
. Khuzami's initiatives are the largest restructuring of the Enforcement Division in its 40-year history.
As part of the restructuring, Khuzami also initiated a cooperating witness program designed to incentive persons with knowledge of securities laws violations to assist SEC investigations. He told The Washington Post
, "There is no substitute for the insider's view into fraud and misconduct that only cooperating witnesses can provide. That type of evidence can expand our ability to conduct our investigations more swiftly, and to act quickly to file charges, freeze assets and protect investors."
A former SEC investigator, Gary Aguirre
, who was fired after he questioned the SEC's failure to pursue an insider-trading case against John J. Mack
, describes the new program differently. Aguirre says it turns the SEC into a middleman between Wall Street firms and the Justice Department that will negotiate fines and circumvent a prison sentence. As Aguirre describes it, "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC. Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department." Khuzami has been criticized for the new policy, which Republican Senator Chuck Grassley
says the SEC's own enforcement manual prohibits and the senator has asked for an explanation of Khuzami's remarks.
on behalf of then-president George W. Bush
and for extension of the Patriot Act. On April 28, 2005, he testified before the United States House of Representatives
Subcommittee on Crime, Terrorism and Homeland Security
in support of the reauthorization of the Patriot Act. He also donated to the presidential campaign of John McCain
.
Award for Outstanding Public Service from the New York City Bar Association. In 2010, he was cited as No. 113 in The New York Observer's Power 150 and one of The American Lawyer
's Newsmakers.
Education and early employment
Khuzami was born in BrooklynBrooklyn
Brooklyn is the most populous of New York City's five boroughs, with nearly 2.6 million residents, and the second-largest in area. Since 1896, Brooklyn has had the same boundaries as Kings County, which is now the most populous county in New York State and the second-most densely populated...
and grew up in Rochester, New York
Rochester, New York
Rochester is a city in Monroe County, New York, south of Lake Ontario in the United States. Known as The World's Image Centre, it was also once known as The Flour City, and more recently as The Flower City...
. The son of a Lebanese
Lebanese people
The Lebanese people are a nation and ethnic group of Levantine people originating in what is today the country of Lebanon, including those who had inhabited Mount Lebanon prior to the creation of the modern Lebanese state....
immigrant, he grew up in an artistic family. His parents are professional ballroom dancers and had a dancing school, his sister is the muralist Vicki Khuzami
Vicki Khuzami
Vicki Khuzami was born in Brooklyn, New York and is an American illustrator, muralist and set designer. She has illustrated book covers, designed holiday store windows and painted murals at the United States capitol, for corporations and private individuals....
and his brother, Richard, is a musician and producer. After taking a few years off after high school, Khuzami enrolled in college, transferring to the University of Rochester
University of Rochester
The University of Rochester is a private, nonsectarian, research university in Rochester, New York, United States. The university grants undergraduate and graduate degrees, including doctoral and professional degrees. The university has six schools and various interdisciplinary programs.The...
where he was elected to Phi Beta Kappa and graduated magna cum laude in 1979. He received a juris doctor
Juris Doctor
Juris Doctor is a professional doctorate and first professional graduate degree in law.The degree was first awarded by Harvard University in the United States in the late 19th century and was created as a modern version of the old European doctor of law degree Juris Doctor (see etymology and...
degree in 1983 from Boston University
Boston University
Boston University is a private research university located in Boston, Massachusetts. With more than 4,000 faculty members and more than 31,000 students, Boston University is one of the largest private universities in the United States and one of Boston's largest employers...
School of Law. From 1983 to 1984, he was a law clerk
Law clerk
A law clerk or a judicial clerk is a person who provides assistance to a judge in researching issues before the court and in writing opinions. Law clerks are not court clerks or courtroom deputies, who are administrative staff for the court. Most law clerks are recent law school graduates who...
for John R. Gibson
John R. Gibson
John R. Gibson is a senior circuit judge on the United States Court of Appeals for the Eighth Circuit.- Early life and education :...
of the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Missouri
Kansas City, Missouri
Kansas City, Missouri is the largest city in the U.S. state of Missouri and is the anchor city of the Kansas City Metropolitan Area, the second largest metropolitan area in Missouri. It encompasses in parts of Jackson, Clay, Cass, and Platte counties...
and then went to work at Cadwalader, Wickersham & Taft as a litigation associate.
Federal prosecutor
Khuzami was a prosecutor in the U.S. Attorney's Office in ManhattanManhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
's Southern District of New York from 1991 to 2002. From 1999 to 2002, he was chief of that office's Securities and Commodities Fraud Task Force, where he prosecuted complex securities and white-collar crime
White-collar crime
Within the field of criminology, white-collar crime has been defined by Edwin Sutherland as "a crime committed by a person of respectability and high social status in the course of his occupation" . Sutherland was a proponent of Symbolic Interactionism, and believed that criminal behavior was...
, including insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
, Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
s, accounting and financial statement fraud, organized crime
Organized crime
Organized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
infiltration of the securities markets, and IPO and investment adviser fraud.
One of his cases involved Patrick R. Bennett, founder of Bennett Funding Group
Bennett Funding Group
The Bennett Funding Group were the perpetrators of the second largest Ponzi scheme in U.S. history. The leasing & funding company was based in Syracuse, New York...
, who was charged with running a pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
and cheating 12,000 investors of $600 million. Bennett's first trial, in March 1999, resulted in a hung jury and the judge, Thomas P. Griesa
Thomas P. Griesa
Thomas Poole Griesa is a federal judge for the United States District Court for the Southern District of New York.Judge Griesa received an A.B. from Harvard University in 1952 and an LL.B. from Stanford Law School in 1958....
, declared a mistrial. Khuzami announced his intention to continue legal pursuit of Bennett on all counts for which the jury did not reach a decision. A second jury failed to reach a decision on 11 securities and mail fraud charges and a second judge, John S. Martin, Jr., declared a mistrial on the unresolved charges in June 1999. Bennett, who admitted to seven counts of lying to SEC prosecutors but otherwise maintains his innocence, was described by his lawyers as an inept businessman overwhelmed by an expanding company. In a practice then legal, the judge used his discretion to convict Bennett of stock fraud and money laundering. He was not convicted of running a Ponzi scheme, the main charge. Bennett was also ordered to forfeit $109 million, although he filed for bankruptcy in 1996 and was declared indigent and his lawyers were court-appointed. He was sentenced to 22 years, later extended to 30 because his then-wife did not turn over assets to repay investors.
Khuzami was selected by then-U.S. Attorney Mary Jo White
Mary Jo White
Mary Jo White was the first woman to be U.S. Attorney for the Southern District of New York, serving from 1993 to 2002.White was born in Kansas City, Missouri and grew up in McLean, Virginia. She received her B.S...
to work with Andrew C. McCarthy
Andrew C. McCarthy
Andrew C. McCarthy III is a former Assistant United States Attorney for the Southern District of New York. A Republican, he is most notable for leading the 1995 terrorism prosecution against Sheik Omar Abdel Rahman and eleven others. The defendants were convicted of the 1993 World Trade Center...
and Patrick Fitzgerald
Patrick Fitzgerald
Patrick J. Fitzgerald is the current United States Attorney for the Northern District of Illinois and a member of the U.S. Department of Justice Office of Special Counsel...
in the prosecution of the "Blind Sheikh", Omar Abdel-Rahman
Omar Abdel-Rahman
Sheikh Omar Abdel-Rahman , commonly known in the United States as "The Blind Sheikh", is a blind Egyptian Muslim leader who is currently serving a life sentence at the Butner Medical Center which is part of the Butner Federal Correctional Institution in Butner, North Carolina, United...
, a career-changing case. At the time, the largest terrorism trial in U.S. history, ten defendants were convicted of operating an international terrorist organization responsible for the February 1993 World Trade Center bombing
1993 World Trade Center bombing
The 1993 World Trade Center bombing occurred on February 26, 1993, when a truck bomb was detonated below the North Tower of the World Trade Center in New York City. The 1,336 lb urea nitrate–hydrogen gas enhanced device was intended to knock the North Tower into the South Tower , bringing...
and who planned simultaneous bombing attacks on FBI New York headquarters, the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
and the Lincoln
Lincoln Tunnel
The Lincoln Tunnel is a long tunnel under the Hudson River, connecting Weehawken, New Jersey and the borough of Manhattan in New York City.-History:...
and Holland Tunnel
Holland Tunnel
The Holland Tunnel is a highway tunnel under the Hudson River connecting the island of Manhattan in New York City with Jersey City, New Jersey at Interstate 78 on the mainland. Unusual for an American public works project, it is not named for a government official, politician, or local hero or...
s. Khuzami also prosecuted those accused of assassinating Meir Kahane
Meir Kahane
Martin David Kahane , also known as Meir Kahane , was an American-Israeli rabbi and ultra-nationalist writer and political figure. He was an ordained Orthodox rabbi and later served as a member of the Israeli Knesset...
, and plotting the murders of Hosni Mubarak
Hosni Mubarak
Muhammad Hosni Sayyid Mubarak is a former Egyptian politician and military commander. He served as the fourth President of Egypt from 1981 to 2011....
of Egypt and the Secretary General of the United Nations. Khuzami also supervised some of the initial investigation in New York following the September 11, 2001 attacks.
General counsel
In 2004, Khuzami was hired by Richard H. WalkerRichard H. Walker
Richard H. Walker is an American lawyer. He is general counsel of corporate and investment banking at Deutsche Bank and former director of the United States Securities and Exchange Commission , Division of Enforcement, where he worked for ten years...
to work at Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
in New York, where he supervised more than 100 lawyers and oversaw Americas-based litigation and regulatory enforcement. From 2002 to 2004, he headed their global litigation and regulatory investigations. He stayed at the bank until 2009. Walker, who had met Khuzami at Cadwalader, Wickersham & Taft when Walker was a partner there, later recommended him for the enforcement job at the SEC, a job he had once held himself.
SEC Division of Enforcement
Khuzami was appointed by U.S. Securities and Exchange Commission (SEC) Chairman Mary SchapiroMary Schapiro
Mary L. Schapiro is the 29th chairperson of the U.S. Securities and Exchange Commission .She is the immediate past chairperson and CEO of the Financial Industry Regulatory Authority , the securities industry self-regulatory organization for broker-dealers and exchanges in the United States, and...
to succeed Linda Chatman Thomsen
Linda Chatman Thomsen
Linda Chatman Thomsen was the Director of the Division of Enforcement for the U.S. Securities and Exchange Commission from 2005 until early 2009. Since arriving at the SEC in 1995, she has worked under four SEC Chairmen: Arthur Levitt, Harvey Pitt, William H. Donaldson, and Christopher Cox. ...
after the SEC had come under public criticism for failing to detect Bernard Madoff
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
's Ponzi scheme. His appointment was controversial because of his employment at Deutsche Bank, a global investment firm which did business with Goldman Sachs. He was portrayed as an outsider by some but had had eleven years' experience as a federal prosecutor.
Inheriting a demoralized agency ridiculed as ineffective, Khuzami began a broad reorganization of the top-heavy Enforcement Division. He left top salaries in place, but forced administrators back into investigations. He eliminated a layer of management and formed national units to concentrate expertise in five areas. He created a new system to collect, organize, investigate and data mine
Data mining
Data mining , a relatively young and interdisciplinary field of computer science is the process of discovering new patterns from large data sets involving methods at the intersection of artificial intelligence, machine learning, statistics and database systems...
tips and complaints, tens of thousands of which are received by the SEC every year. The new units focus on probes into investment advisers, investment companies, hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s and private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s; financial derivatives and other "complex financial products;" market abuses, such as large-scale insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
and market manipulation
Market manipulation
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency...
s; municipal securities
Municipal bond
A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...
and public pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s; and violations of the Foreign Corrupt Practices Act
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act of 1977 is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.- Provisions and scope...
. Khuzami's initiatives are the largest restructuring of the Enforcement Division in its 40-year history.
As part of the restructuring, Khuzami also initiated a cooperating witness program designed to incentive persons with knowledge of securities laws violations to assist SEC investigations. He told The Washington Post
The Washington Post
The Washington Post is Washington, D.C.'s largest newspaper and its oldest still-existing paper, founded in 1877. Located in the capital of the United States, The Post has a particular emphasis on national politics. D.C., Maryland, and Virginia editions are printed for daily circulation...
, "There is no substitute for the insider's view into fraud and misconduct that only cooperating witnesses can provide. That type of evidence can expand our ability to conduct our investigations more swiftly, and to act quickly to file charges, freeze assets and protect investors."
A former SEC investigator, Gary Aguirre
Gary J. Aguirre
Gary J. Aguirre is an American lawyer, former investigator with the United States Securities and Exchange Commission and whistleblower. After working in a law firm briefly, he became a public defender, then worked as a trial lawyer in California. Having reached his professional and financial...
, who was fired after he questioned the SEC's failure to pursue an insider-trading case against John J. Mack
John J. Mack
John J. Mack is the current Chairman of the Board at Morgan Stanley, the New York-based investment bank and brokerage firm. Mack announced his retirement as Chief Executive Officer on September 10, 2009, which was effective January 1, 2010. Former Co-President James P...
, describes the new program differently. Aguirre says it turns the SEC into a middleman between Wall Street firms and the Justice Department that will negotiate fines and circumvent a prison sentence. As Aguirre describes it, "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC. Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department." Khuzami has been criticized for the new policy, which Republican Senator Chuck Grassley
Chuck Grassley
Charles Ernest "Chuck" Grassley is the senior United States Senator from Iowa . A member of Republican Party, he previously served in the served in the United States House of Representatives and the Iowa state legislature...
says the SEC's own enforcement manual prohibits and the senator has asked for an explanation of Khuzami's remarks.
Major cases through 2010
Khuzami has been involved with numerous important cases at the SEC.- In June 2009, the SEC sued Angelo MoziloAngelo MoziloAngelo R. Mozilo was the chairman of the board and chief executive officer of Countrywide Financial until July 1, 2008. Condé Nast Portfolio ranked Mozilo second on their list of "Worst American CEOs of All Time".-Life and career:...
, former CEO of mortgage lenderMortgage loanA mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
Countrywide FinancialCountrywide FinancialBank of America Home Loans is the mortgage unit of Bank of America. Bank of America Home Loans is composed of:*Mortgage Banking, which originates purchases, securitizes, and services mortgages. In 2008, Bank of America purchased the failing Countrywide Financial for $4.1 billion...
, and two other former officers, charging that they misled investors about the quality of Countrywide's loans while knowing the company was fueling its growth by letting its underwritingUnderwritingUnderwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
guidelines deteriorate and originating a growing number of risky subprime loans. In October 2010, the SEC settled the lawsuit and Mozilo was required to pay a fraction of the $521.5 million he had earned, just $67.5 million in penalties and disgorgement.
- In August 2009, the SEC filed a suit against Bank of AmericaBank of AmericaBank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
, alleging that the bank failed to disclose $3.6 billion in bonuses that Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
paid its employees. In January 2010, the SEC filed another suit against the bank, alleging it failed to disclose extraordinary fourth-quarter 2008 losses at Merrill Lynch prior to a December 5, 2008 shareholder vote to approve a merger between it and Merrill Lynch. In February 2010, Jed S. RakoffJed S. RakoffJed Saul Rakoff is a United States District Judge for the Southern District of New York.-Biography:Rakoff was born in Philadelphia, Pennsylvania August 1, 1943. Rakoff graduated with honors in English literature from Swarthmore College , earned his M. Phil. from Balliol College at Oxford University...
, a federal judge derided, but approved a settlement to resolve the lawsuits, having rejected a previous settlement for $33 million as too small. He called the new agreement "inadequate and misguided" because the penalties were "very modest."
- In October 2009, relying on informants and wiretaps, Raj RajaratnamRaj RajaratnamRaj Rajaratnam is an American former hedge fund manager and founder of the Galleon Group, a New York-based hedge fund management firm. On October 16, 2009, he was arrested by the FBI on allegations of insider trading, which also caused the Galleon Group to close. He stood trial in U.S. v...
and his hedge fund, Galleon GroupGalleon GroupGalleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. The firm was at the center of a 2009 insider trading scandal that resulted in investors pulling capital from the firm rapidly...
, were charged with an insider trading scheme that generated more than $25 million in illicit gains. Six others involved in the scheme were also charged, including senior executives at IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, Intel and McKinsey & CompanyMcKinsey & CompanyMcKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions...
.
- In December 2009, three former executives of New Century Financial Corporation were charged with conspiring to mislead investors by not disclosing dramatic increases in the rate of borrowers who were defaulting almost immediately on their loans.
- In April 2010, the SEC filed a suit against Goldman Sachs and one of its vice presidents, Fabrice Tourre, alleging that the firm misled investors with respect to a subprime mortgage product. The SEC charged that Goldman and Tourre did not inform clients that what they bought was crafted in part by hedge fund manager John PaulsonJohn PaulsonJohn Alfred Paulson is an American hedge fund manager, he is the founder and President of Paulson & Co., a New York-based hedge fund....
, who was betting the product would fail. In July 2010, Goldman Sachs agreed to pay $550 million to settle the case, among the largest penalties ever assessed in the 76-year history of the SEC, although just 1% of Goldman's market value at the time and 2% of its cash balance in March 2010, and considered to be a "slap on the wrist". The penalties prompted a sigh of relief from Goldman and Wall StreetWall StreetWall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
. In announcing the settlement, Khuzami twice referred to it as "more than half a billion dollars", but Michael J. Driscoll, a professor and former senior managing director at Bear StearnsBear StearnsThe Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
called it "a steal". A former SEC commissioner, Paul AtkinsPaul AtkinsPaul Atkins is an American cinematographer specializing in natural history films. Atkins is known for the footage of killer whales preying on seal pups in the BBC's The Trials of Life , for which he won a British Academy of Film and Television Arts award...
, said he was "embarrassed, as an American," describing the suit as "basically playing for headlines with very little substance." Eliot SpitzerEliot SpitzerEliot Laurence Spitzer is an American lawyer, former Democratic Party politician, and political commentator. He was the co-host of In the Arena, a talk-show and punditry forum broadcast on CNN until CNN cancelled his show in July of 2011...
said Goldman's reaction was "OK, we'll pay you $550 million to settle the Abacus case — that's a small price to pay for the $12.9 billion we got for the AIG bailout."
- In July 2010, CitigroupCitigroupCitigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, with a market cap of $120 billion, agreed to pay a $75 million penalty to the SEC for its failure to adequately disclose its exposure to subprime mortgage debt in 2007Subprime mortgage crisisThe U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
. Citigroup advised investors it held $13 billion in subprime investments when in fact it was more than $50 billion. Fines for misconduct were also assessed against the former chief financial officer, Gary CrittendenGary CrittendenGary L. Crittenden is an American financial manager formerly employed as the chairman of Citi Holdings, a unit of Citigroup, and serving on the boards of Staples Inc., Ryerson, Inc., TJX Companies, and Utah Capital Investment Corp...
, and director of investor relations, Arthur Tildesley.
- In September 2010, John Flannery, a former chief investment officer of State Street Bank & Trust Company, and James Hopkins, a former product engineer there, were charged with misleading investors about the bank's exposure to subprime investments. Earlier in the year, the SEC announced a settlement in which State Street agreed to pay $313 million in connection with the charges.
- In December 2010, the SEC, the Department of JusticeUnited States Department of JusticeThe United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
and other federal and state agencies announced the results of "Operation Broken TrustOperation Broken TrustOperation Broken Trust, the largest investment fraud sweep by the Federal government of the United States, was conducted between August 16 and December 1, 2010. The stated purpose of the operation was to "root out and expose" investment scams within the U.S. and to educate the public...
," a coordinated effort by the Financial Fraud Enforcement Task Force to target investment fraud. The operation resulted in prosecutions against 310 criminal defendants involving $8.3 billion in losses and civil actions against 189 defendants involving $2.1 billion in losses for fraud schemes that victimized more than 120,000 people throughout the country.
Republican politics
Khuzami spoke before the 2004 Republican National ConventionRepublican National Convention
The Republican National Convention is the presidential nominating convention of the Republican Party of the United States. Convened by the Republican National Committee, the stated purpose of the convocation is to nominate an official candidate in an upcoming U.S...
on behalf of then-president George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
and for extension of the Patriot Act. On April 28, 2005, he testified before the United States House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
Subcommittee on Crime, Terrorism and Homeland Security
Homeland security
Homeland security is an umbrella term for security efforts to protect states against terrorist activity. Specifically, is a concerted national effort to prevent terrorist attacks within the U.S., reduce America’s vulnerability to terrorism, and minimize the damage and recover from attacks that do...
in support of the reauthorization of the Patriot Act. He also donated to the presidential campaign of John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
.
Recognition and awards
In 1996, Khuzami was awarded the Attorney General's Exceptional Service Award and in 1997, he received the Federal Law Enforcement Foundation's Federal Prosecutor Award. In 2001, he received the Henry L. StimsonHenry L. Stimson
Henry Lewis Stimson was an American statesman, lawyer and Republican Party politician and spokesman on foreign policy. He twice served as Secretary of War 1911–1913 under Republican William Howard Taft and 1940–1945, under Democrat Franklin D. Roosevelt. In the latter role he was a leading hawk...
Award for Outstanding Public Service from the New York City Bar Association. In 2010, he was cited as No. 113 in The New York Observer's Power 150 and one of The American Lawyer
The American Lawyer
The American Lawyer is a monthly law magazine published by ALM. It was founded in 1979 by Steven Brill. Features include the annual AmLaw 100 Survey and AmLaw 200 Survey , "The View From the Top", their annual poll of law firm chairpersons, and their "Corporate Scorecard"...
's Newsmakers.
External links
- Matt Taibbi, "Is the SEC Covering Up Wall Street Crimes?" Rolling Stone (August 17, 2011). Retrieved August 18, 2011