Wall Street’s New Eliot Ness

HE WAS SPEAKING literally. “Some have asked, ‘Why use court-authorized wiretaps in insider-trading cases?’” he told defense attorneys at a speech this October to the New York City Bar Association. “It does not take a rocket scientist to understand that it would be helpful to have the actual recording of the communication.” He has a good ear for adjectives: He called insider trading unfair, unlawful, rampant and offensive. “We will use every aggressive and innovative method available,” he said.

“It’s as much about telling the world, ‘We’re doing something,’ as making the individual case,” said the bar’s president, Samuel W. Seymour, who worked for the Southern District from 1988 to 1991, and is now a partner at Sullivan and Cromwell, the white-shoe firm that’s long worked with Goldman Sachs. “It’s making people stop and think. That’s clearly his real goal. That’s why he made the speech, right?”

Like his colleagues, Rich Zabel, the criminal division chief in Mr. Bharara’s office, said that the Southern District’s only target is wrongdoing. “No one’s ‘going after’ Wall Street,” he said.

Nevertheless, the hedge fund world tends to consider it annoyingly overzealous to say their misdeeds are rampant. “If cases are brought that are inappropriate, then that would be a fair criticism,” said David Anders, who left the Southern District at the end of 2005 and is now a white-collar defense attorney at Wachtell, Lipton, Rosen & Katz.

His Southern District colleagues would point out that there have been 14 guilty pleas so far in the Galleon case, although that investigation began before Mr. Bharara rejoined the office. “Let’s see,” Mr. Anders said, “what the results are.”

Despite the recent raids and arrests, no power players, let alone someone like Mr. Cohen, the multibillionaire, have been charged. But just before the raids, the news of a historic insider-trading attack was leaked to The Journal. “No one hates leaks more than Preet and myself,” Mr. Johnson said. “Leaks are things that compromise our ongoing investigations; they jeopardize people’s security. They’re all bad for us. Not only do we resent the leaks, when appropriate we investigate and, when possible, prosecute.”

Others aren’t thrilled by them, either, and Southern District alumni like Debevoise & Plimpton’s Mary Jo White, the chief of the office until early 2002, have overheard criticism. “Sometimes it’s an inappropriate reaction,” she said, “and sometimes it isn’t.”

“He’s very aware of the power of this office,” Mr. Johnson said, speaking slowly and with care. “And,” he said, pausing, “he uses a tremendous amount of judgment,” pausing again, “in exercising that power. He exercises a tremendous amount of restraint,” pausing again, “in wielding that power, but he’s prepared to do it, and to use it aggressively when appropriate.”

 

THE BIGGER FISH are another problem. “Where Are the Financial Crisis Prosecutions?” said the headline of a recent Jesse Eisinger piece in ProPublica, which was run by The Times as “The Feds Stage a Sideshow, While the Big Tent Sits Empty.” The Times itself lodged a similar complaint the day earlier. “We shouldn’t be swayed by the winds out there that are looking for scalps in a particular area–or are looking for us to walk away from some other area,” Mr. Johnson said.

“Inevitably, he will not satisfy those who are out for blood,” said Viet Dinh, an assistant attorney general in George W. Bush’s administration and a longtime friend of Mr. Bharara’s.

“A lot of the stuff at the heart of the economic meltdown isn’t necessarily criminal conduct,” said Mr. Giuliani. If there was bad behavior in high finance, history will reflect that: “It is going to turn out to be, ‘Boy, they turned out to do something stupid, wrong and irresponsible, but it’s not a crime.’” Besides, he argued, Washington was more responsible than Wall Street for encouraging the real estate bubble. Hedge funds, he said, “didn’t have much to do with any of this.”

Either way, Mr. Bharara’s office has other targets to worry about, too. Among other things, there have been hefty public corruption cases against giants like Hiram Monserrate, Vinnie Leibell and Bernie Kerik; indictments this year against Gambino crime family members and the drug kingpin Christopher Coke; huge Madoff settlements; and omnipresent terrorism investigations.

“This is the dream job for him,” Mr. Johnson said. “His ambitions are not for Preet Bharara. His ambitions are for the Southern District of New York as a whole. And I think that’s a powerful thing.”

“He is restoring the Southern District,” Mr. Spitzer said, “to a point of visual primacy in the prosecutorial world. And, for that, he is to be complimented.”

mabelson@observer.com