WASHINGTON — As a federal prosecutor in New York, Robert Khuzami had vast powers to use against white-collar criminals and terrorists.
He could wiretap suspects, send FBI agents to their homes and threaten them with decades behind bars.
“Those tools are devastating,” he said in an interview.
As the new enforcement director at the Securities and Exchange Commission, he doesn’t have those powers. What he does have is a mandate to restore the reputation of an agency whose image as a force against financial crime has been tarnished by the Bernard Madoff fraud.
While working within the SEC’s legal limits, Khuzami, 52, is likely to borrow from his prosecutor’s past. With 700 lawyers at his disposal, he is charged with investigating violations of securities laws and frauds at the nation’s public companies and financial firms.
The enforcement team can investigate financial crimes, file civil lawsuits, reclaim stolen funds and assign penalties with the approval of the agency’s five commissioners, who are nominated by the president. But Khuzami may seek to shake up the division, changing how it operates and putting “more arrows in the SEC quiver,” he said.
“We’ll distinguish ourselves in the future by being fast and furious,” Khuzami said. “And to do that means examining our process and procedures top to bottom, to be as nimble and thorough as we can.”
He isn’t ready to fully reveal his playbook yet. But one of the ideas being considered is jettisoning the enforcement division’s internal organization, which is largely haphazard, for a model like the one used by U.S. attorneys in which specialized groups of lawyers work on cases of similar nature. The SEC also might consider paying whistle-blowers for a wide range of information (it can only do so now for insider trading) and pressing for access to information usually reserved for criminal prosecutors, such as grand jury testimony.
In the interview, Khuzami pledged to bring cases in a timely fashion, and said he wants the SEC to become more of a deterrent to financial crime, noting there are too many white-collar criminals who “feel emboldened to resist, litigate or attempt to hold out for a better deal” with the agency.
Khuzami joins the SEC at a tough time for the agency, with many people inside and outside the SEC accusing it of not moving aggressively enough against financial crime. The Madoff case was a major embarrassment for the agency. Khuzami declined to address the case.
Meanwhile, state attorney generals including Andrew Cuomo in New York have been quick to steal the agency’s thunder, loudly announcing subpoenas or threatening the barons of Wall Street.
