“Enforcement activity is coming with more frequency, and the penalties being demanded are exponentially greater,” said Cohen, who represents some of the nation’s largest banks.
These days, he added, multiple agencies are filing cases against banks for the same violation, a practice that has dragged out litigation.
Consider JPMorgan, which is being investigated by nearly a dozen state, federal and international authorities for its $6.2 billion trading blunder, known as the London Whale. Since disclosing the trading losses last year, the legal headaches for the bank have mushroomed, with probes launched into a wide range of business practices.
That, in turn, has prompted the bank to negotiate the deal with the Justice Department to hand over at least $11 billion to settle several cases at once.
The London Whale case was notable because the SEC got JPMorgan to admit wrongdoing last week in its handling of the trading losses, a reflection of White’s demand that companies admit wrongdoing in certain civil settlements.
The new policy at the SEC is a departure from a long-standing practice at the agency. Before White came on board, Rakoff twice threatened to derail SEC settlements with banks because they neither admitted nor denied the government’s allegations.
“There has been a public hunger for ascertaining whether this unbelievable crisis is something that happened by accident or was the result of serious misjudgment or fraudulent actions,” Rakoff said in an interview. “There is a public interest in having the truth come out.”
White said her decision to press firms for admissions stemmed from her days as U.S. attorney.
“Public accountability is very important in enforcement, particularly if there is egregious misconduct,” White said in an interview. “We don’t want to lose the benefits of no admit, no deny settlements, but will push for admission where warranted.”
Getting firms to admit wrongdoing can be tricky. A statement acknowledging fault could open a company up to a flood of civil lawsuits. Companies may push for the case to go to trial rather than concede wrongdoing.
White said that’s fine with her. “The world needs to know that we will go to trial,” she said. “Being prepared to take a case to trial, when there is credible evidence, can be used as leverage. It sends a message.”
Following a similar approach in New York, Bharara’s office has obtained admissions in 22 civil cases, including settlements with Deutsche Bank and Citigroup, in the three years since establishing a civil fraud unit. The federal prosecutor said he wants Wall Street firms to have the equivalent of a rap sheet.
“There are too many industries where no one ever gets treated as a repeat offender because there was never any previous record of their bad conduct,” he said. “Part of the job is to just have the truth out there for people to judge whether an institution has learned anything from prior enforcement actions.”
The actions of federal regulators and prosecutors are starting to assuage concerns that the government is too lenient on Wall Street. There are some, however, who remain skeptical that policy changes will bring about the reckoning the public deserves.
“It can’t possibly,” said William K. Black, a law and economics professor at the University of Missouri in Kansas City. “By now there would have been thousands of criminal referrals in the pipeline and criminal cases.”
Bharara isn’t so quick to dismiss the possibility of his office filing criminal charges against banks.
“You never take anything off the table,” he said. “There are cases that get brought sometimes because circumstances change for a person, and they decide to come in and cooperate and bring in their files and notebooks.”