Elizabeth Anne Holmes, former CEO of now-defunct Theranos Co. (Photo: Jason Doiy/ALM)

As Silicon Valley technology companies face increasing government scrutiny, experienced white-collar practitioners are becoming hot commodities among the law firms seeking to represent tech-focused clients.

In recent months, several Am Law 100 firms have hired former government prosecutors to bolster their white-collar defense capabilities in the Bay Area. They include David Callaway, a former chief of the criminal division of the U.S. Attorney's Office for the Northern District of California who joined Goodwin Procter from Baker McKenzie in May; Marisa Chun, a former DOJ lawyer who joined Crowell & Moring in April from McDermott Will & Emery; and Jina Choi, a former director of the San Francisco regional office of the SEC who joined Morrison & Foerster in March. 

“I have certainly noticed an uptick in the growth of white-collar practices within law firms already here in the Bay Area,” said Robb Adkins, managing partner of Winston & Strawn's San Francisco office, who has been building out the firm's white-collar practice. 

According to data compiled by ALM Intelligence, 19 law firms made a total of 31 white-collar lateral hires in the Bay Area within the first half of 2019, including six partners. In addition to Callaway, Chun and Choi, Christopher Cox joined Hogan Lovells, Jennifer Lee joined Arent Fox and Michael Shepard joined King & Spalding, all at the partner level.

During the same six-month period last year, 11 firms made 22 lateral white-collar hires in the Bay Area. 

Adkins noted that U.S. Attorney David Anderson of the Northern District of California has indicated a push to target white-collar crimes. Also, Adkins added, “white-collar practices at law firms globally have been on the rise for the past few years.”

Readying for More Investigations

Historically, regulators have been reluctant to interfere with the complex world of pre-IPO financing and private market transactions in Silicon Valley. As The Information reported last October, the Northern District U.S. Attorney's Office, based in San Francisco, saw the number of white-collar crime prosecutions plunge from a peak of 354 in 1995 to 72 in fiscal 2018.

However, as Silicon Valley companies grow in size, they are also facing new regulations and compliance regimes that come along with the “growing pains,” Adkins said.

Recent actions by the U.S. Department of Justice and the U.S. Securities and Exchange Commission against a few Silicon Valley tech giants indicate that more enforcement actions could follow. Anderson, who took office in January, announced a new strike force in March to go after sophisticated white-collar crimes in Silicon Valley. 

That may not result in more criminal charges, Adkins said, but it may lead to a lot more grand jury investigations.

With the new task force in place, prosecutors in the Northern District may deploy techniques more traditionally associated with investigating organized crime, such as using search warrants and wiretapping, Adkins explained. And it could make more work for defense attorneys, he added. As a white-collar attorney, Adkins said he spent much of his time working on investigations “that never see the light of the day.”

“That is a somewhat underappreciated aspect of the white-collar practice,” he said, referring to “how much communication there often is between government enforcement, prosecutors and regulators and those like myself who represent clients who are being investigated.”

Jeffrey Tsai, a former senior official in Kamala Harris' Attorney General's Office, who joined DLA Piper last March from Alston & Bird, said he, too, has noticed the Justice Department seeking new approaches to prosecuting white-collar crime.

Tsai said white-collar prosecution activity has mirrored the growth of businesses within the region over the course of the years. “Much like the story of Northern California itself, you are seeing peaks in the Valley. Among those peaks, you see some of the things that are splashed across headlines across the world,” he said.

Although not all white-collar investigations lead to criminal charges, a handful of recent cases involving Silicon Valley companies have been substantial enough to generate headlines.

Theranos founder Elizabeth Holmes is facing fraud charges, along with her former chief operating officer, Ramesh “Sunny” Balwani.

Uber, which went public in May at a market value of almost $74 billion, has also been under the spotlight as federal prosecutors investigate its business practices. For example, its high-profile trade secret case against Alphabet's self-driving unit Waymo has led to a criminal investigation of Uber, though no indictment has been issued.

Facebook has also been the subject of high-profile investigations over how it handles user data.

Trade Secrets Crimes on the Rise

Tsai said there has been an increasing focus from prosecutors on criminal trade secret cases, especially directed toward foreign economic espionage. 

“Silicon Valley is the epicenter for new ideas and big ideas,” Tsai said. But as a “byproduct” of that Silicon Valley tech economy, he added, “there is an increasing amount of competition for the talent, the brains, to run these ideas.”

And as that talent moves around, it opens the door to trade secrets violations, he said.

According to a recent analysis by NBC Bay Area, indictments related to allegations of economic espionage and theft of trade secrets are up 45% in the past five years.

Court records analyzed by NBC Bay Area also show that Silicon Valley powerhouses such as Apple, Genentech, Cisco and Intel have all brought IP theft allegations against other entities in recent years.

Federal prosecutors in other jurisdictions are also honing in on trade secrets theft. 

“The Department of Justice as a whole is focused on actors from overseas, especially Asia, [and] being more specific, China,” said Covington & Burling partner Douglas Sprague, who was a federal prosecutor for nearly 15 years before joining Covington & Burling in 2015. 

Sprague, a former chief of the economic crimes and securities fraud section for the U.S. Attorney's Office in San Francisco, also said he has also seen more economic espionage cases being brought to the attention of state and federal authorities.

While it's taking place everywhere, he said, “Silicon Valley is ripe for that type of conduct to be investigated.”

Read More

Big Law Doubles Down on White-Collar, Investigations Practices