Tuesday, April 13, 2010

Mendelsohn To Paul Weiss

The Wall Street Journal is reporting (see here) that Mark Mendelsohn (DOJ Deputy Chief - Fraud Section responsible for overseeing FCPA prosecutions) is headed to the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.

According to a source, Mendelsohn "stands to earn $2.5 million annually." The WSJ notes that this is a significant sum "particularly for a lawyer arriving at firm without a ready list of clients."

The WSJ notes that "Mr. Mendelsohn has overseen a hot field in prosecution in recent years" and that "it has been up to the Justice Department - and specifically to Mr. Mendelsohn - to interpret the law."

The WSJ notes that "corporations are likely to be eager for his inside views on how the Justice Department goes about deciding which cases to investigate and prosecute among the many that it comes across every year."

According to the WSJ, Mendelsohn was courted by several other firms.


  1. Dear Professor Koehler (Michael):

    Thank you for your willingness to apply the Socratic method outside of the classroom.

    Do you know whether hemlock has an odor?

    I have no doubt that Mr. Mendelsohn has been a dedicated civil servant who has reinvigorated the prosecution of FCPA violators.

    Unfortunately, I fear that many if not most large corporations regard bribes merely as a cost of doing business in much of the world. It is important not to forget that bribery is only one form of corruption. Remember that lobbying would be illegal in most countries.

    I would like to raise some issues for discussion:

    1) What is the likely impact on individuals who while working as government regulators or attorneys know that they have the potential to earn very high salaries in the private sector -- might they not have an incentive not to alienate or be overly strict with their prospective clients at the public's expense?

    2) Since the public is the "client" of such civil servants, what fiduciary, ethical and other obligations do lawyers and other regulators have when advising or defending their new clients so that they do not have a conflict of interest to their former client(s)?

    3) How can the public have confidence that potential conflict of interest situations will not have an impact on the behavior of government employees?

    4) What is the relationship between the monetary value a former government employees bring their new employer that can justify a salary many times their past salaries other than the "contacts" that they made when they were employed by the government on behalf of the public? Are the laws being enforced really so complex that they cannot be "learned" in a relatively short time by most intelligent individuals? Some political appointees move from federal department to federal department -- is the practice of law somehow different or lawyers incapable of learning something new?

    5) Should the public be subsidizing the training of lawyers and other professionals who in the future defend similar parties to those whom in the past were regulating or prosecuting? Might those who invested in the former government employees have a moral claim to a percentage of new fees generated?

    Finally, query when government officials speak at conferences where the attendees are paying large sums of money and may constitute future employers or clients, does this not present the appearance of impropriety. Should it not be the case that whenever a public official speaks at an event that such event be open to the public free of charge?

    These are complex moral issues -- I will pose them to my class tonight?

    Best personal regards,

    A fellow skeptic

  2. This sort of situation where former government employees later work for the companies they once prosecuted seems to present ethical problems similar to the conflict of interest rules under the ABA's model code of professional responsibility. While there are many ways to distinguish these situations from conflicts with former private clients, there do seem to be similar ethical issues involved. I would not be surprised if this type of arrangement becomes a target for further regulation, whether by the legal profession itself or by the legislature.

  3. Thanks to A fellow skeptic & Anonymous for raising some excellent questions. I think we need to change the laws so that these government employees must wait at least two years before being eligible to accept employment like this. I am planning to write my senators on this one and encourage everyone else who feels strongly to do the same. The government loves regulating everyone but itself, and it's time for that to change.

  4. Query how are foreign government officials responsible for enforcing their equivalent of the FCPA, if they have one, and business persons going to react upon learning of Mr. Mendelsohn's personal decision to step down as head of DoJ's FCPA office to join a private law firm where he is likely to make incredible sums of money. With envy? Anger? Amusement?

    Statutorily mandated cooling off period and the use of "Chinese Walls" do not guarantee the public's interest. Mr. Mendelsohn's future employer and prospective client no doubt are aware that he will be able to provide advice that is not in the public domain as to how DoJ reaches its decisions in FCPA matters.

    On occasion, on behalf of private sector clients, he will be dealing with friends and colleagues on matters involving millions if not billion of dollars. His counterparts at DoJ will almost certainly know what he received after he left his position. Will his new clients get a better "result" than they would have had they retained another law firm or lawyer. Such clients are likely to have that expectation particularly since his counterparts in the government will gain some appreciation of the market value of their connections and expertise.

    Mr. Mendelsohn's personal decision is not likely to have a positive impact on foreign anti-corruption efforts of DoJ or the State Department (including USAID) -- it is likely to reduce the effectiveness of such efforts -- in effect costing the U.S. taxpayer millions of dollars.

    One wonders what people at NGOs like Global Integrity or Transparency International think in private about his career choice? Will they have the courage to express their views?

  5. The concern I have relates to the old Andre Agassi -- Nikon commercial that "perception is reality". A US civil servant, goes into the private section and makes more than 10X his government salary. If that happened in any West African country, I think most Americans would perceive that "the fix is in" in some way or another. The amount of money reported that the US governmental employee will receive from his private sector employer is so great to appear unseemly.

    I understand that the former DOJ employee may not negotiate with the government for one year after his or her departure. I also understand that the insight and experience of a former DOJ employee can be of immense assistance(and appropriate use) by a major law firm. I also understand that the former DOJ employee is well within his legal rights to seek employment, at the highest pay rate possible in the publice sector. So while the reality is that he is worth every dime to the law firm, the perception may not be the same.

  6. Thank you for sharing this information. I am not certain how much of an impact his hiring will have, other than on his own bank account. I know these kinds of moves often raise suspicions doubts and questions among different observers.

    I am a -perhaps idealistic- believer that the government and public servants should have nothing to hide, that anything that helps citizens and private entities better understand the laws and agencies that govern them is a good thing. If Mendelsohn gets generously compensated after years serving the public interest in exchange for "insider tips" that should be public knowledge and fully transparent, then good for him.

    I am far more concerned about moves in the other direction, and which are often much less publicized. From Goldman Sachs to the Treasury, from Citibank to FINCEN, from GM to the FTC, from PWC to the SEC, etc. I believe these create real conflicts of interest that have an actual (and in many cases quantifiable) adverse effect on public interest.


  7. More than 10X his government salary? By my calculations, its more like 20X! Outrageous and wrong. This is proof that corruption and arrogance have permeated all levels of government and we need serious change.
    Herve, I am puzzled by your comments and that you express concerns about the same thing going on in other branches of government, but not the DOJ? What am I missing here? The DOJ should be held to a higher standard in my opinion.

  8. What is everyone's problem?

    We live in a country where greed is good.

    Shouldn't Mr. Mendelsohn after working hard for the government for many years be able to cash in so that he can buy a larger house, several luxury cars, a boat, and stay at 5 star hotels, etc.

    Of course, once he is working for a large law firm it will likely pay his country club dues since he'll need some place where to entertain the corporate officers and directors as well as corrupt officials he will want as clients -- has to justify his salary to his new partners.

    It is not as if he is depriving his former colleagues of playing golf -- they will still have public courses to use. Frankly, golf is rather boring and provides little exercise. I hear that in some sections of hell it is all one gets an opportunity to do.

    I am sure Mr. Mendelsohn's family will be proud of the choice has made. He will have achieved a lot in life. He doesn't have to give any more speeches about the importance of not violating the law at conferences where the food is not very good.

    He has provided us a new example of how professionals can rationalize their gaming of the system -- yet few have the courage to call it corruption. Maybe, he may end up leaving all of his wealth to charity or set up a foundation like Bill Gates (who actually created something), but I doubt it.

    Why should we be troubled that he makes more money than the President? At least he is not making millions like investment bankers and henge fund managers whose incompetence and arrogance cost the taxpayer billions of dollars?

    Perhaps, behavior like his and other former public officials may stimulate some members of Congress to actually represent their constituents, close some gaping loopholes, and actually look out for the public interest.

  9. "Herve, I am puzzled by your comments and that you express concerns about the same thing going on in other branches of government, but not the DOJ? What am I missing here? The DOJ should be held to a higher standard in my opinion."

    I wasn't differentiating between branches of government. Rather about moves from the government to the private sector versus from the private sector to the government.


  10. From the universal tenor of the comments, maybe I can sum up the sentiment: "It smells."

    When analyzing a prospective foreign third party arrangement one always asks the question as to whether or not their is a true "value for money " proposition. If there is no true “value for money” proposition there is a Red Flag that should prompt closer scrutiny.

    What is the "value for money" proposition in this hiring. During a time when equity partners are fired for not pulling their weight, what value does he bring to the table to justify the salary? It would have been interesting to be at the management committee meeting to hear that explained. Was it explained with a straight face or with a wink and a nod?

    It is sad that, but for Mike Koehler, we are all posting anonymously. That in itself is a telling comment.