Who says the best days of the big-firm partner are over?

Kirkland & Ellis officially announced Tuesday that Robert Khuzami, who ended his four-year run as director of the Securities and Exchange Commission’s enforcement division in January, has joined the firm as a partner in its government, regulatory, and internal investigations practice.

Joining Khuzami in making the move to Kirkland is Kenneth Lench, who will be a partner in the same group after closing out his 23-year SEC career last week when he stepped down from his post as head of the enforcement division’s structured and new products unit.
News of Kirkland’s hire of Khuzami and Lench was first reported by The New York Times’s DealBook, which—citing "lawyers briefed on the matter"—said the SEC's former top enforcer will receive $5 million per year in guaranteed compensation from the firm for the next two years.
The 56-year-old Khuzami—who will divide his time between New York and Washington, D.C., where his family currently lives—spoke with The Am Law Daily by phone Tuesday afternoon about how he decided “within the last few weeks” to join Kirkland. He says the firm's strength in the two cities where he will split his time helped him determine the next step in a 30-year legal career.
The relative absence of top-level (and high-paying) in-house legal jobs that are based in D.C. meant that Khuzami was likely to end up back in private practice once he left his government post. And having already spent seven years as a high-ranking in-house lawyer at Deutsche Bank, Khuzami says he welcomed the chance to try something different.
“A general counsel isn’t the focus of an organization’s efforts,” he says, noting that in-house legal departments are often understandably ancillary to most companies' business functions. While acknowledging that it’s “easy to commiserate about [large] firm life,” Khuzami says he expects that joining Kirkland's partnership will be “professionally rewarding” as he anticipates helping companies in various industries navigate their regulatory challenges.
Khuzami says that after stepping down from the SEC in January, there was a “significant amount of interest early on” for his services, with multiple Am Law 100 suitors making their pitches at a series of lunch and dinner meetings over the past few months. In the end, he spoke with roughly 30 Kirkland partners before choosing the firm as his new home.
“It’s kind of like getting married,” says Khuzami, when asked about the recruitment process. “You know she’s the one, but sometimes it takes a little longer to decide. Although if I had chosen to stay in New York I think I would have ended up at Kirkland anyway.”
Emphasizing Kirkland's track record of success when choosing a practice area— such as private equity and M&A, for instance—in which to invest, Khuzami says he was especially impressed by the firm's stated commitment to developing a strong government investigations practice.
Personal connections, Khuzami says, also played a key role in his decision. As a federal prosecutor in Manhattan in the 1990s, he tried terrorism-related cases with current Kirkland litigation partners Samuel Williamson, Henry DePippo, and Michael Garcia. (Garcia— who joined Kirkland in 2008 after serving as U.S. attorney for the Southern District of New York and is now leading a corruption probe for soccer’s global governing body—may not be long for Kirkland. The New York Post reported this week that he could emerge as the Republican challenger to New York Attorney General Eric Schneiderman, a Democrat, in next year's election.)
A son of ballroom dancers, Khuzami grew up in suburban Rochester and attended college in the area. After graduating from Boston University’s law school in 1983, he clerked for the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Missouri, before joining Cadwalader, Wickersham & Taft as a securities litigation associate in New York.
Khuzami left Cadwalader in 1990 for the U.S. attorney’s office in Manhattan, where he spent the next 11 years. He served as chief of the office's securities and commodities fraud task force during his last three years as a prosecutor, gaining expertise that—given federal regulators' reported interest in investigating how big banks store certain commodities like aluminum—could also prove valuable to the corporate clients he will now represent.
In 2002, former Cadwalader partner and onetime SEC enforcement director Richard Walker, who had been hired the year before as a top in-house lawyer at Deutsche Bank and is now the German banking giant’s global general counsel, hired Khuzami to serve as global head of litigation and regulatory investigations.
Two years later Khuzami was promoted to general counsel of the Americas, presiding over Deutsche Bank’s U.S. legal department during an economic boom spurred by mortgage securitizations, holding that position until the bottom fell out of the capital markets and he took the enforcement reins at the SEC in February 2009.
Khuzami's arrival at the SEC came at a low point in the agency's history as it struggled to rebound from scandals involving Bernard Madoff and R. Allen Stanford. In an August 2009 speech marking his first 100 days as head of enforcement, Khuzami had tough words for many of his former Wall Street colleagues among a packed reception hall of some 500 people at The Association of the Bar of the City of New York, warning that a period of aggressive enforcement was at hand after the excesses of the previous decade.
Asked about the challenges he faced in joining the SEC at a time when most of the attention focused on the regulator was negative, Khuzami says he takes pride in helping forge a response to the criticism in a “way that was thoughtful, responsible, and fulfilled our duty to investors.”
Khuzami and his team— some of whom were former partners at Am Law 100 firms—came up with a restructuring plan for the SEC that included developing new tools to become more responsive to complaints and building new units for specialized prosecutions.
Lench—a former assistant chief counsel in the enforcement division— was named to lead one of those units, a structured and new products division launched by Khuzami in January 2010. Later that year, Lench would be part of a Khuzami-led team that secured a record-setting $550 million securities fraud settlement with Goldman Sachs. (Fabrice Tourre, a former Goldman trader named as a defendant in that matter, is currently on trial in federal court in Manhattan.)
“Self-evaluation and introspection is hard work,” Khuzami says. “We had to ask ourselves how we could be better and look at what we did wrong. The holy grail of enforcement is deterrence.”
Khuzami did not complete his four years in public service without drawing criticism.
Jed Rakoff, a federal district court judge in Manhattan, famously tossed the SEC’s $285 million mortgage-backed securities settlement with Citigroup on the grounds that it wasn’t in the public interest. Others have claimed that while Khuzami focused on collateralized debt obligations issued by Goldman, he didn’t do the same for his former employer Deutsche Bank.
In an article published last year about whether the SEC gave preferential treatment to favored lawyers, The American Lawyer touched on a 43-page report issued by former SEC inspector general H. David Kotz in 2011 that exonerated Khuzami of going easy on two Citigroup executives as a result to his friendship with their lawyer, Paul, Weiss, Rifkind, Wharton & Garrison litigation of counsel Mark Pomerantz. (Khuzami and Pomerantz had worked together as federal prosecutors in Manhattan in the 1990s.)
Khuzami responds to questions about just how tough the SEC was on his watch by citing the dozens of cases brought by the enforcement division since the start of the financial crisis four years ago and the record fines collected during his tenure. When Khuzami stepped down in January, even Rakoff had kind words for his work, telling the Times that despite their differences he thought he had done a "terrific job."
In the six months since Khuzami left the SEC—“It’s amazing how busy you can be when you don’t have a job,” he jokes—the new Kirkland partner says he kept himself occupied by selling his New York apartment, buying a new home in Washington, D.C., visiting his wife’s family in southern Texas, and dealing with the death of his mother in April following a long illness.
Now ensconced at Kirkland—his first day was Monday—Khuzami says he is subject to “rigorous ethical restrictions” that he believes are of critical importance for those heading to the more lucrative side of the ever-spinning revolving door. Khuzami says conflict rules call for a one-year "cooling off" period on any contact with the SEC, a two-year ban on matters in which he may have had a supervisory role, and a lifetime ban on anything where he may have been directly involved.
As for how his job search unfolded, Khuzami says that he spoke with several recruiters, but that there wasn’t one individual that managed the process. His prior relationships with partners at a multitude of Am Law 100 firms, including Kirkland, left him with no lack of contacts.
On the Kirkland side of the hiring process, Jeffrey Lowe, global leader of legal search and consulting giant Major, Lindsey & Africa’s law firm practice group, was retained to serve as the firm's lead recruiter in the Khuzami sweepstakes. Lowe—who confirmed his hire but declined further comment when contacted Tuesday by The Am Law Daily—worked closely with litigation partner Eugene Assaf, a member of Kirkland’s management committee.
Khuzami and Lench are just the latest big lateral hires to join Kirkland in recent years. In 2009, Kirkland raided Skadden, Arps, Slate, Meagher & Flom for corporate partners David Fox and Daniel Wolf as the firm made a strategic decision to focus on getting more public M&A work. The hires have paid off.
Fox and Wolf have worked on several major deals this year for Kirkland, including counseling The Blackstone Group on its bid for computer maker Dell, Vista Equity Partners on its $906 million buy of cybersecurity software maker Websense, M&A adviser Duff & Phelps on its $665.5 million sale to a private equity consortium, Bristol-Myers Squibb on a $482 million Latin American medicine licensing agreement, and the board of clothing company rue21 on its $1.1 billion sale to private equity firm Apax Partners.
In December, Kirkland added to its M&A team with the high-profile poaching of former Cravath, Swaine & Moore transactional partner Sarkis Jebejian, who took with him clients such as Chicago-based consulting giant Accenture to his new firm.
Other notable lateral hires by Kirkland include the addition of former Serious Fraud Office bribery and corruption head Satnam Tumani as a London-based litigation and dispute resolution partner in September; the hire of ex–Latham & Watkins M&A partner Taurie Zeitzer in New York last summer; and bringing on a four-partner IP team led by by Leora Ben-Ami from Kaye Scholer in New York last May.
So far this year, Kirkland has hired former Skadden corporate partner Rick Madden in Los Angeles and brought back tax partner Daniel Meehan in Chicago from Cooley, where he had headed the latter's tax group.
Mark Filip, the Chicago- and D.C.–based head of the Kirkland’s government enforcement and internal investigations group, says Khuzami and Lench will work closely with their new colleagues in the firm’s litigation department.
“The big difference between government investigations in 2003 and 2013 is that when they come in you don’t know whether it’s going to be civil or criminal,” says Filip, a former Skadden partner and deputy U.S. attorney general during the second Bush administration, who made his own high-profile move to Kirkland in May 2009. “Nowadays there’s a constant overlap between civil, criminal, and regulatory matters, and we think [Khuzami and Lench], both of whom obviously have unique talents in the SEC area, will help us bridge that gap.”
Both lawyers will be richly rewarded by their new employer. Khuzami and Filip cited Kirkland policy in declining to discuss the former SEC lawyer’s reported $5 million compensation package. But last year the 1,520-lawyer firm saw gross revenue rise 11 percent, to more than $1.9 billion, while profits per partner jumped 7 percent, to $3.25 million, according to the most recent Am Law 100 financial data. Last year, Kirkland also topped The American Lawyer's list of most valuable firms.
Kirkland has long been known as an “eat-what-you-kill” firm in terms of partner pay, although in a feature story by The American Lawyer published earlier this year about the firm’s financial performance since corporate partner Jeffrey Hammes became chairman of its global management executive committee in 2010, senior writer Susan Beck reported on efforts to foster a more collegial working environment among partners.
In her story, Beck also notes that Kirkland’s compensation spread—the difference between the highest-paid equity partner and lowest “nonshare” or nonequity partner—is roughly 8:1, a ratio that allows the firm to dangle higher pay packages to lure prospective lateral hires.
Khuzami is the latest in a series of high-profile ex-government lawyers to join the ranks of The Am Law 100. Last year Skadden snagged Patrick Fitzgerald, a former U.S. attorney for the Northern District of Illinois, who once worked with Khuzami as a federal prosecutor in Manhattan on the prosecution of Omar Abdel-Rahman, an Islamic extremist also known as “The Blind Sheikh.”
Fitzgerald, now a Skadden partner in Chicago specializing in civil litigation, government enforcement, and internal investigations, is being paid roughly $3 million per year by the firm, according to a cover story this year about his hire in The American Lawyer’s Lateral Report.
With Khuzami off the job market, attention will now turn to Matthew Martens, the SEC’s chief litigation counsel and one of the government’s lead lawyers currently prosecuting ex-Goldman trader Tourre on securities fraud charges.
Reuters reported in May that Martens had already been fielding inquiries from about a half-dozen Am Law 100 firms. Martens, busy battling Tourre’s defense lawyers in federal court in Manhattan, did not respond to a request for comment about any potential frontrunners for his future services.