When the United States Court of Appeals for the Second Circuit upheld the conviction of Mathew Martoma yesterday, Preet Bharara might have breathed a sigh of relief. As the US Attorney for the Southern District of New York from 2009 until this past March, when President Trump fired him, Bharara led a crackdown on insider trading. Martoma, a former S.A.C. Capital portfolio manager, represents one of Bharara’s standout successes: one of the largest insider-trading cases the government has ever brought, involving an alleged two hundred and seventy-five million dollars in illegal profit. Bharara’s anti-corruption campaign resulted in dozens of guilty pleas and convictions of hedge-fund traders, analysts, and corporate executives at publicly traded companies, as well as the indictment of S.A.C. Capital, Steven A. Cohen’s former hedge fund. (Cohen himself was never charged.) In February, 2012, Bharara landed on the cover of Time magazine, with the headline “This Man Is Busting Wall Street.” He seemed poised to follow the path laid by another US Attorney, Rudy Giuliani, who rode a sort of Wall Street-sheriff reputation to national prominence and a political career. In recent months and years, though, incursions on Bharara’s record have piled up, casting his legacy into doubt, or at least undermining some of his signature accomplishments. Seeing Martoma’s conviction from 2014 upheld may go a long way toward preserving his legacy.
In addition to the insider-trading cases, Bharara’s office saw remarkable achievements in the realm of public corruption, leading to successful prosecutions of two of the most powerful politicians in New York State: Sheldon Silver, the speaker of the State Assembly, and Dean Skelos, the State Senate majority leader. Bharara’s fearsome reputation led to speculation that Trump saw Bharara as a threat to his Administration well ahead of firing him (along with forty-five other US Attorneys). Since then, several of Bharara’s most high-profile cases have unravelled. On July 13th, an appeals court overturned the 2015 Sheldon Silver conviction, citing a Supreme Court decision that narrowed the definition of public corruption by tightening the list of government actions that count as inappropriate favors. On August 8th, prosecutors dismissed charges that had been filed against the financier Benjamin Wey, who had been accused of a multi-million-dollar stock-manipulation scheme, after a judge ruled that the F.B.I. had violated his rights in searching his home and office in Manhattan. Yet another case fell apart in July, involving two traders who had been accused of contributing to $6.2 billion in losses in 2012 at JPMorgan, in the so-called London Whale case.
Bharara’s record takes on further complications when you examine his thinner accomplishments in other areas of the business world. He was sworn in as a US Attorney in 2009, in the throes of the financial crisis, which had exposed rampant mortgage fraud and other abuses at major banks and investment firms. Working Americans were being turned out of their homes as real-estate prices collapsed, and outrage toward the financial industry ran high. In December of that year, President Obama famously referred to financial executives as “fat cats” who were disconnected from the realities that many Americans faced as they lost their homes and watched their retirement savings evaporate. The expectation was that Bharara and other prosecutors and regulators would aggressively pursue charges against many of the top executives who had contributed to the conditions that led to the crisis. But, while the hedge-fund and insider-trading crackdowns continued energetically, the anticipated flood of financial-crisis cases never materialized. Instead, the Manhattan US Attorney and the Justice Department pursued cases against companies, rather than individuals, leading to tens of billions of dollars in fines and settlements with the likes of JPMorgan Chase, Bank of America, Citigroup, and others. No top-level bankers reached criminal trials or went to prison, or even faced the possibility of either, leaving the public with a sense that the financial industry operated with a degree of impunity. Many observers believe that these circumstances contributed to the economic schisms that led to the rise of President Trump. (For more on this, see Jesse Eisinger’s recent book, “The Chickenshit Club.”)
Since being relieved of his duties, Bharara joined the N.Y.U. School of Law as a scholar in residence, announced plans for a memoir, and revealed that he would be teaming up with his brother, Vinit Bharara, who runs a media company called Some Spider Studios. He has also been tweeting like crazy. The crucial question, however, concerns his old job, which remains unfilled.
The Southern District of New York is one of the most important outposts of the Department of Justice, where many of the most significant cases involving terrorism, narcotics, public corruption, and financial crime have been built and tried. Although Bharara’s approach to policing white-collar crime found many critics, he was an effective, ambitious prosecutor, someone who strongly believed in the concept of justice and fairness, and who targeted corrupt Democrats as well as Republicans. How the President chooses to replace him will tell the world a great deal about the future of justice and the rule of law in Trump’s America.
“The US Attorney’s Office for the Southern District of New York was the first US Attorney’s office to become essentially nonpolitical,” the federal judge Jed Rakoff told me back in March, when Trump first informed Bharara that his services were no longer required. “There have been several attempts over the decades to re-politicize it. Although each of the prior attempts failed, one always has to be concerned about that possibility.” Concerns that the office could become a place where investigations are suppressed, and political favors repaid, are real. Until Trump appoints Bharara’s successor, we won’t know how worried we need to be.
Published in Daily Times, August 28th 2017.