Editor: Tell us about your career as a prosecutor.
Schoeman: I have just completed my second tour through the Eastern District U.S. Attorney's office. I first joined the office in 1998 as an Assistant U.S. Attorney. I spent about five years there trying cases and doing investigations. I focused initially on organized crime and then increasingly on securities fraud and other white collar crime. I left the government in 2003 to join Kramer Levin as part of the white collar group there where I worked on a number of terrific cases.
I returned to the U.S. Attorney's office in late 2007 to become the Chief Assistant U.S. Attorney for the Eastern District of New York working for the new acting U.S. Attorney Benton Campbell. I served in the U.S. Attorney's office until just recently when I returned to Kramer Levin. One of the nice things about going back to the Eastern District as the Chief Assistant is that I was exposed to all of the work of the office and I interacted a lot with other U.S. Attorneys offices, the Department of Justice in Washington and state investigative agencies. It was a terrific experience. The Eastern District is a very inviting place to work with the judges, the prosecutors, the defense lawyers and the court staff all being to some extent a family dedicated to getting quality legal outcomes. I found that it was nice to be part of that again.
My responsibilities as Chief Assistant were basically to be the number two person in the office and assist the U.S. Attorney in all aspects of running the office and supervising the work of both the criminal division and the civil division. I got exposed to all the different things that were going on in the office.
Some of the specific projects in which I was involved include a very interesting trial in front of Judge Gleeson in the Squawk Box case. There were six defendants from various Wall Street firms. That case was tried in April and resulted in the convictions of the six defendants. It involved the misuse of confidential information about pending block orders of stock. I also was heavily involved in a lot of the other work of the office including some of the litigation in the civil division. For example, I supervised the settlement in April 2009 of a major qui tam lawsuit against Quest Diagnostics, a large medical testing company, and its subsidiary, which resulted in a $300 million recovery after a lengthy investigation.
Editor: Please describe your firm's white collar group.
Schoeman: Kramer Levin has a very well-established white collar group, which includes about a dozen partners and a team of associates. We have a highly varied practice. A lot of our work is representing and advising corporations that are under investigation or those trying to avoid being under investigation or being charged with crimes. Our work includes both the adversary function of dealing with the government and also counseling with respect to internal investigations and corporate governance. Mixed in with that have been a healthy number of individual representations of senior executives and high-profile individuals. So it is a nice balance. We get to try a fair number of cases which is great if you are a former Assistant U.S. Attorney and that is what you like to do.
Editor: You were involved in a number of major cases at Kramer Levin before you rejoined the U.S. Attorney's office. Please describe a few.
Schoeman: I worked on a number of great cases. One of my most significant and gratifying experiences was representing Michael Eisner, former CEO of the Walt Disney Company, in a shareholder derivative suit. At the three-month trial in Delaware before Chancellor Chandler there were many celebrity witnesses who were on the board of Disney. I represented Clarence Norman Jr., former deputy speaker of the New York State Assembly, who was charged in four separate indictments by the Brooklyn District Attorney's office. He was acquitted in the trial that I handled but was unfortunately convicted in the three other cases where he was represented by other counsel. I represented an executive of a major corporation in a big FCPA investigation that resulted in the dismissal of all charges against him. Those were some of the highlights, but just a sample of my work during those years.
Editor: Describe the criticism of the DOJ's use of tactics such as seeking waivers of the attorney-client privilege and objecting to corporate payment of attorneys' fees incurred by the individual defendants and witnesses.
Schoeman: We witnessed over the last 10 years the pendulum swinging in both directions when it comes to waiver of the attorney-client privilege and payment of legal fees. There was a period of time when the DOJ was very aggressive in demanding a waiver in almost every case.
There has been a steady retreat from those practices resulting about a year ago in a revised set of policies that are now part of the U.S. Attorney's Manual and basically reflect that, in all but extraordinary circumstances, the DOJ will not seek waiver of attorney client privilege and will not hold the failure to waive or the payment of individual defendants' legal expenses against corporations that are trying to cooperate. That is a very substantial change in a very short period of time. It was obviously a response to criticism of overreaching in certain cases and I think does represent a return to a more reasonable approach.
There is still a lot of uncertainty about how the policy will be implemented because it does leave open the possibility that corporations may feel that they voluntarily need to waive because failure to waive the privilege will nonetheless be held against them. I think we need a little more track record to make sure that the new policy is being followed both in the letter and spirit.
I certainly think that the controversy about discouraging corporations from paying attorneys' fees for defense counsel is in the past. There is now a pretty strong consensus that the DOJ is not going to interfere with the ability of individuals to defend themselves in matters related to their employment.
Editor: What effect will the change from a Republican to a Democratic administration have on DOJ policies?
Schoeman: Bringing in a new leadership offers an opportunity for the DOJ to reflect on the experience gained and is likely to make it a little easier to discuss the issues openly and productively. On the other hand, we are in the middle of a major financial crisis, and there is great pressure on the newly arrived leadership to pursue cases of corporate wrongdoing aggressively.
Editor: Neil Barofsky, the new Special Inspector General of TARP, has vast powers. What kind of a job do you think he will do?
Schoeman: Because he is charged with overseeing what happened to the hundreds of billions of dollars of federal money paid out in connection with the TARP programs, the Special Inspector General has a very important mission. He has been very forthright and aggressive about telling people that where there has been fraud or abuse he is going to look into it. It is a very big job. His office is expected to aggressively investigate and pursue instances of fraud or abuse, which should serve as a deterrent to such behavior.
Editor: What are the implications of Judge Rakoff's recent opinion with respect to the settlement agreement between the SEC and Bank of America?
Schoeman: It's a notably strongly worded opinion that is unusually critical of both parties to a negotiated settlement. Usually, as the judge noted, courts are quite deferential to settlements. However, Judge Rakoff was clearly dismayed that the losing party was the shareholders whose money was being used to pay the fine.
The opinion reflects growing concern over the last few years that settlements with corporations where the corporation pays money and individuals aren't prosecuted are not the most effective means of deterrence and that they won't necessarily have the desired remedial effect on corporate conduct.
Judge Rakoff also expressed skepticism about whether a fine of $33 million would have a significant impact on Bank of America. However, I'm reluctant to speculate about the propriety of any individual conduct in the underlying matter.
Judge Rakoff's opinion will likely encourage other courts to probe more deeply into the background of settlements they are asked to approve.
Editor: In his healthcare speech, President Obama mentioned that his plan "would eliminate hundreds of billions of dollars of waste and fraud." Is this part of the reason that healthcare is the next big thing?
Schoeman: I think it's clear that the Department of Justice is going to ramp up their enforcement in the area of healthcare fraud. You are going to see both an increase in the number of healthcare fraud prosecutions and False Claims Act cases being brought in the civil division of the Department of Justice and the U.S. Attorney's offices because those cases can generate settlements worth hundreds of millions if not billions of dollars as we've seen recently.
Also, many states have implemented their own False Claims Act often mimicking all or part of the federal False Claims Act. There's an additional amount that states will be eligible to recover every time the federal government recovers money under its False Claims Act. The federal and state governments will continue to work cooperatively with each other to share in these mega-recoveries.
Editor: Do you feel that the Foreign Corrupt Practices Act will get more emphasis?
Schoeman: The Foreign Corrupt Practices Act will continue to be a significant source of cases for the Department of Justice. The numbers of cases have been ramping up for several years now, and I think that's going to continue. Like healthcare fraud, the Foreign Corrupt Practices Act is an area where the government gets a lot of bang for the buck. Violations uncovered as a result of government investigations result in monetary settlements that justify the resources that are devoted to them.
Published October 4, 2009.