Newspaper article International Herald Tribune

S.E.C.'S Enforcer Set to Leave Unit He Revamped ; Oversight Chief Is Given Credit for Taking Action against Powerful Banks

Newspaper article International Herald Tribune

S.E.C.'S Enforcer Set to Leave Unit He Revamped ; Oversight Chief Is Given Credit for Taking Action against Powerful Banks

Article excerpt

After becoming the public face of Wall Street oversight and reining in firms like Goldman Sachs, Robert S. Khuzami is walking away from the spotlight.

After becoming the public face of Wall Street oversight and reining in firms like Goldman Sachs, Robert S. Khuzami is walking away from the spotlight.

Mr. Khuzami, 56, a former terrorism prosecutor who revamped the U.S. Securities and Exchange Commission's enforcement unit in the wake of the financial crisis, said Wednesday that he was stepping down from the agency after a four-year tenure.

His departure signals the end of an important chapter in the history of the agency, which has been praised for taking action against some of Wall Street's largest banks after the 2008 financial crisis, but has also drawn criticism for not doing enough to punish top executives at those same firms.

Mr. Khuzami inherited a demoralized unit in 2009. It was much maligned for missing years of warning signs of the credit bubble and of Bernard L. Madoff's fraudulent investment operation.

An imposing presence with a piercing stare, Mr. Khuzami quickly reorganized the management ranks in the enforcement division, creating specialized units to track complex corners of Wall Street, and applied aggressive prosecutorial tactics to civil cases. Under him, the division has logged a record number of actions, many of them against companies at the center of the crisis.

"They know we're out there, and we're smarter and can cover more ground," Mr. Khuzami said in an interview.

His successor, who has not been named, will face significant challenges. For example, the enforcement unit must contend with the increasingly influential high-speed trading firms that, by some accounts, have destabilized the stock market.

The unit also faces lingering questions about its negotiating tactics. Some consumer advocates complain that the agency's headline- grabbing settlements have hardly made a dent in the billions of dollars of profits earned on Wall Street. The enforcement division notably butted heads with a prominent U.S. judge in New York, Jed S. Rakoff, who in 2010 called the agency's $150 million settlement with Bank of America over lax public disclosures "half-baked justice at best."

Mr. Khuzami's departure in about two weeks will be part of a broader exodus from the S.E.C. after the resignation of its chairwoman, Mary L. Schapiro, in November. Among the other people departing are the agency's head of trading and markets and its director of corporation finance. Elisse B. Walter, Ms. Schapiro's replacement as chairwoman, has named interim officials to those positions.

But officials say the enforcement division could struggle under a provisional leader. The chief of the unit, they note, is the top cop on Wall Street, effectively setting the tone for financial oversight.

Ms. Walter is weighing a short list of candidates to replace Mr. Khuzami, people briefed on the matter said. The list includes the enforcement division's chief litigation counsel, Matthew T. Martens, and Mr. Khuzami's current deputy, George S. Canellos.

As for Mr. Khuzami, described alternately as harsh or playful with his employees, he is positioned for a lucrative job at a white- shoe law firm.

"I don't know what I'm doing next, but I loved the last four years, and I'm sad it's ending," he said.

Mr. Khuzami, a native of Rochester, New York, had a bohemian upbringing that hardly hinted at a path to the S.E.C. His parents were ballroom dancers, his sister a muralist and his brother a drummer. They jokingly refer to Mr. Khuzami as "the white sheep" of the family.

He put himself through school by working odd jobs as a dishwasher, a bartender and an overnight dockworker. He was hired out of law school as a junior lawyer at Cadwalader, Wickersham & Taft in New York.

Mr. Khuzami then tried out for the U.S. attorney's office for the Southern District of New York under Rudolph W. …

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