The decision by President-elect Donald Trump to ask Preet Bharara to stay on as U.S. attorney in Manhattan sends a strong message that the Trump administration is going to be aggressive in prosecuting white-collar crime and corporate misconduct, according to former U.S. Attorney John Wood.
“Most U.S. attorneys are asked to resign when a new president enters office, and I expect that to be the case for most of the 93 U.S. attorneys across the country,” says Wood, now a partner in the Kansas City and Washington, D.C., offices of Hughes Hubbard & Reed.
But the decision to keep Bharara, a Barack Obama appointee, in the office “looks like a sign that Trump wants the Department of Justice to hold corporate executives, Wall Street firms and New York politicians accountable if they engage in illegal activity,” Wood adds.
Wood acknowledges that Trump is appointing several wealthy bankers and businesspeople to senior positions in his administration. For example, on Wednesday Trump named Steven Mnuchin, a former partner at Goldman Sachs Group Inc., to be Treasury secretary.
But Wood believes the president-elect still wants to hold the wealthy and powerful accountable “whether they are Wall Street bankers or Albany politicians.” And that’s just what Bharara has done in the past.
For instance on Wednesday the prosecutor’s civil fraud office announced a major verdict in a corporate misconduct case. A federal jury found companies formerly known as Allied Home Mortgage Capital Corp. and Allied Home Mortgage Corp., as well as Allied’s CEO, liable for financial fraud against the Federal Housing Administration mortgage insurance program for over a decade. The jury awarded over $100 million in damages against the three defendants, and a judge could triple the damage amount under federal law.
And last month Bharara announced the arrests of the former CEO of Philidor Rx Services along with a former executive of Valeant Pharmaceuticals International Inc. for allegedly engaging in a multimillion-dollar fraud and kickback scheme.
“The decision to keep Bharara suggests that the Feds will continue to keep the pressure on C-suite executives to adopt and maintain strong compliance programs for their companies,” Wood says. “So the message for in-house counsel and corporate executives is not only to follow the law, but also to get serious about having an effective compliance program to prevent wrongdoing from occurring in the first place.”