Fraud Supervisor Exits Challenge DOJ White-Collar Office (1)

The Justice Department’s criminal fraud section, which has handled some of its most complex corporate enforcement cases, has experienced an exodus of supervisors as a tight budget climate makes replacing them difficult.

At least five managers announced their departures in September alone, following a handful of other veteran exits—mostly to law firms—earlier this year.

Such turnover isn’t necessarily significantly higher than in past years at an office that’s served as a talent pipeline for Big Law and in-house legal departments. Budget tightening and pre-election exits are affecting personnel headcounts at many DOJ offices.

But the loss of experienced trial lawyers at the Washington-based unit responsible for overseas bribery and market integrity prosecutions underscores what section alums say is uncertainty over whether it will remain a leading destination for cutting edge corporate investigations. The latest exits include people with extensive trial backgrounds, who were counted on to coach less experienced line attorneys.

“In terms of their ability to really play a critical role in major corporate prosecutions, I think this recent spate of turnover is really one in a sequence of events that’s impacting them,” said Hui Chen, co-founder of CDE Advisors who formerly was a fraud section compliance consultant and DOJ prosecutor. “People move up quickly and most of the time these days they didn’t come from a trial background.”

The latest exits include former acting litigation chief Courtney Howard, who’s now associate general counsel for defense contractor RTX, and assistant chief Leslie Garthwaite, the director of corporate investigations at utility Exelon Corp. Principal assistant deputy chief Mark Cipolletti and assistant chief Scott Armstrong, who is now a principal at McGovern Weems, also have left.

While they can be backfilled with line attorney promotions, some DOJ veterans said it’s unclear where the funding will come from to offset net losses with external hiring or whether the section’s leadership might not be prioritizing appointing new assistant chiefs.

The Justice Department didn’t provide a comment for this article.

Attorney General Merrick Garland said in April that DOJ anticipated an overall workforce reduction of 4,813 in fiscal 2024 under the continuing resolution enacted by Congress. Republicans have proposed further downsizing of DOJ for fiscal 2025, which started Oct. 1. That’s among the disagreements with Democrats that forced lawmakers to pass a short-term spending measure that largely maintains present spending levels until Dec. 20.

The challenges filling new fraud vacancies come as other white-collar prosecution offices have grown in recent years. The Civil Division’s consumer protection branch, which also pursues criminal matters, and the National Security Division’s export control section, are among the teams with surging headcounts.

Some private lawyers said that makes it harder to predict where the fraud section will fit in the broader DOJ enforcement picture.

3% Fund

The fraud section is also experiencing a uniquely burdensome and less visible financial strain, according to four former DOJ officials.

A little-known pot of money—called the 3% fund—that the Criminal Division has relied upon to supplement congressional appropriations with proceeds from deferred prosecution agreements has been declining in recent years, said those former DOJ officials, who spoke on condition of anonymity to discuss internal processes.

Since early in the Biden administration, Deputy Attorney General Lisa Monaco has directed prosecutors to toughen settlements that would’ve previously been DPAs, or fines without criminal charges, by turning them into guilty pleas. That’s made the latest resolutions reached by the fraud section ineligible for the fund’s coffers, the former DOJ attorneys added.

The effort to crack down on white-collar crime has had the unintended consequence of depleting a fund that the fraud section had been drawing from for much of its hiring, as well as retaining expert witnesses and other expenses.

Trial Changes

Many of those departing held the title of “assistant chief,” a mid-level supervisory position with newly tightened responsibilities, according to multiple former DOJ lawyers.

Fraud Section Chief Glenn Leon informed managers this year that assistant chiefs were to no longer litigate their own cases at trial, the lawyers said. The move was intended to free up supervisors to focus on advising less-experienced trial attorneys, but the attorneys said it was met with skepticism by those who’ve seen past attempts to impose similar mandates fail whenever a high-profile trial emerged that demanded a seasoned lawyer.

“People have tried this before and it hasn’t worked out,” said Alison Anderson, a former fraud section supervisor. “That is because at trial the fraud section was going up against big law firms on complex corporate cases against employees of a Fortune 500 company who are very well funded so they needed the experience of the assistant chiefs at trial.”

Anderson, now a partner with Boies Schiller, has observed the fraud section’s docket encompassing fewer of the complicated, resource-intensive trials this year.

“But instead, in the last few years, the majority of the trials they’ve been doing have been smaller, more straightforward PPP and Covid fraud cases,” she added.

One exception is the foreign bribery trial scheduled to begin in March of two former Cognizant Technology Solutions Corp. executives, a case with major implications for the white-collar bar. Two of the fraud section attorneys who’d previously been preparing to try it, Gerry Moody and Sonali Patel, were among the assistant chief departures in recent months—to Akin Gump and Mayer Brown, respectively.

Boeing, RTX

The fraud section has advanced several of the department’s most noteworthy corporate deals this year. That includes reaching a settlement with Boeing Co. in which the plane maker pleaded guilty to a criminal conspiracy tied to two fatal crashes, and entering late negotiation stages of a nine-figure settlement with RTX, formerly Raytheon, over pricing for missile and defense services.

Contrary to the narrative that a potential Donald Trump presidency has DOJ lawyers racing to the exits, fears of political intrusion aren’t the primary motivating factors for those leaving the fraud section of late, legal recruiters and former DOJ attorneys said. Numerous section alums said the office has been relatively insulated from political swings in prior administration transitions, including in the previous Trump administration.

However, if the Republican nominee wins another term in November, that may add to the challenges of attracting top legal talent to replace those who’ve jumped, said Louis Manzo, a fraud section trial attorney through June.

“There’s some concern that if Trump wins there probably will not be a substantial interest in joining the department,” said Manzo, now a Beveridge & Diamond principal. “Sophisticated litigators are going to look at the priorities of the administration and ask themselves, ‘why would you want to be a part of this?’ and also wonder how hamstrung they’re going to be in going after corporate fraud.”