The well-oiled revolving door between prosecutors' offices and elite law firms' white-collar practices has been spinning a bit more slowly lately, some legal industry observers say.

The slowdowns in white-collar enforcement activity and litigation more broadly have coincided with diminished hiring demand from law firms, said law firm recruiters, with some exceptions for lawyers focused on the tech industry. Meanwhile, some traditional white-collar defense attorneys are shifting their practices to focus on other areas.

Two recruiters said it has gotten tougher out there for prosecutors who are looking to join the defense bar, at least in the New York City area.

“The market is tight,” said Patty Morrissy of the recruiting firm Mlegal Group, speaking of the New York market for fresh white-collar talent. “Was it easier 10 years ago to come out of the U.S. Attorney's Office into a law firm? Probably.”

Morrissy and others said the softer demand for people who are on their way out of government isn't a hard-and-fast rule, noting that lawyers who rose to prominent positions or developed a particular specialty during their time in government may still have an edge.

Firms are still hiring, but Jeff Liebster, a recruiter at Major, Lindsey & Africa, said they are being more choosy in the white-collar arena. “Firms are not building benches. Firms are responding to strategic needs,” he said.

Rebecca Roiphe, a law professor at New York Law School who studies the legal profession, said demand for former prosecutors at law firms has had dry spells before. While she said she couldn't speak to the current market for talent, she said it was plausible that an enforcement slowdown could eventually impact it.

“The gold-standard job after working in the Southern District [of New York U.S. Attorney's office] is you go to Paul Weiss or Cravath or Wachtell,” she said. “But you know, there are other jobs out there. … Those people are not unemployable. They just have to be open to doing other kinds of work, or be open to going to another kind of firm.”

The enforcement activity slowdown has been evident for a while. Most recently, Wachtell, Lipton, Rosen & Katz, in a client memo last week, summed it up when the firm noted that the past two years have brought a “significant drop … in both the number of white-collar prosecutions and the scale of corporate fines and penalties.”

But white-collar practice heads and office leaders say they are keeping their lawyers busy with burgeoning areas of business like internal investigations, health care fraud and Foreign Corrupt Practices Act compliance and enforcement. And the trial skills that former prosecutors hone in court are useful in civil litigation.

“We do a fair amount of civil work, so that keeps us busy,” said Elkan Abramowitz, partner at Morvillo Abramowitz Grand Iason & Anello. “Also, we've been involved in some flukey stuff—corruption and stuff like that—and it doesn't fit into any economic trends.”

Michael Himmel, who leads the white-collar group at Lowenstein Sandler, said his lawyers are busy with criminal antitrust, FCPA, health care and securities matters. “While there may be [fewer cases being brought], it hasn't impacted my group. We're as busy as we've ever been,” he said.

A 20-year low in prosecutions

The upbeat attitude from by white-collar defense leaders comes amid a slide in federal fraud prosecutions. TRAC, a law enforcement monitoring project at Syracuse University, reported last year that the number of new federal prosecutions for white-collar crimes were on track to hit a 20-year low.

In the Wachtell memo, the firm urged clients to take the opportunity afforded by the decline in white-collar enforcement to invest in their compliance programs. The firm noted that having an effective and “robust” program can cut in a company's favor when the Justice Department starts sniffing around and could result in fewer penalties.

Helping big companies build and adjust their compliance programs is nothing new, but at top-tier law firms, it is increasingly the kind of work that former civil and criminal enforcers find themselves handling. “For most white-collar practitioners at big, full-service law firms, you do investigations, you do regulatory litigation,” said a partner at one such firm. “I do financial-type litigation. I [do] compliance-type advising.”

The reasons for the white-collar enforcement slowdown are debated. Some observers believe the Trump administration has eased up on enforcement as part of the traditional Republican pro-business tilt.

But some attorneys point to other factors. The head of the New York office of a large law firm, who declined to be named, said the departures of enforcement-minded leaders such as Mary Jo White at the Securities and Exchange Commission and Preet Bharara from the U.S. Attorney's Office in Manhattan played a bigger role in the slump.

Another factor is that cases have grown more complicated, former enforcement attorneys say. Potential illegality that involves novel financial products or crosses borders takes more time to investigate. Ike Sorkin, a partner at Mintz & Gold who previously worked as a federal prosecutor and the leader of the SEC's New York office, noted that the SEC's head count hasn't risen that rapidly even as its responsibilities have exploded.

“You can't put a cop on every corner,” he said.

Hiring Factors

Leaders of white-collar defense practices and firms that tend to hire lawyers from the government had differing views about whether the decline in white-collar enforcement had changed hiring dynamics. Some said the supply of potential hires hasn't fluctuated much either way recently, but the New York office leader who wasn't willing to be named said there were more prosecutors on the market these days who simply weren't must-hires.

Steven Molo, founding partner of Molo Lamken, said his firm took a very individual-specific approach to hiring, but he said other firms trying to hire prosecutors out of government could benefit from the caution that their competitors may be exhibiting because of the decrease in white-collar enforcement.

Brad Karp, chairman of Paul, Weiss, Rifkind, Wharton & Garrison, noted his firm's recent hires of Jeannie Rhee, who worked on special counsel Robert Mueller's team, and former Attorney General Loretta Lynch. He said other firms may “hire based on more immediate market demands and consequently have slowed their hiring of white-collar,” but said there has long been an “ebb and flow” to enforcement and said his firm didn't make partnership decisions based on “short-term market dynamics.”

To be sure, hiring from the government isn't coming to a halt.

In May, Eversheds Sutherland added Sarah Paul, a former prosecutor who pursued Swiss banks. Lowenstein has been on a roll, most recently hiring Rachel Maimin from the Southern District of New York U.S. Attorney's office and Greg Baker of the SEC. Proskauer Rose hired longtime federal prosecutor Hadassa Waxman in March, and Lisa Zornberg, the SDNY's last criminal chief, recently moved to Debevoise & Plimpton.

Other prosecutors who worked on the Mueller probe have also been snapped up. Besides Rhee joining Paul Weiss, Andrew Goldstein landed at Cooley and Zainab Ahmad joined Gibson, Dunn & Crutcher.

On the West Coast, the lateral market for such talent has been heating up in recent months as firms gear up to represent tech giants in a range of high-profile and nonpublic investigations involving theft of trade secrets, privacy and other matters. On top of that, on Tuesday, the Justice Department said its antitrust lawyers would be investigating “search, social media, and some retail services” online platform companies—without naming Google, Facebook or Amazon.com—to see whether enforcement action is warranted.  

“The federal government has set its enforcement sights on the tech industry,” Karp said, “setting the stage for what is likely to be a bruising, multi-year battle.”

Christine Simmons contributed to this report.