As the US Army engages in introspection with respect to its internal oversight in the wake of the Fort Hood massacre and the SEC does the same after the Madoff disaster, the government is clearly announcing that it will require no less of private sector supervisors than it will of itself. In a recent example, the SEC is compelling the former general counsel and CEO of San Francisco investment bank Merriman Curhan Ford to pay for its failure to properly supervise David “Scott” Cacchione, who pleaded guilty to fraud in March for emailing customer accounts to William “Boots” Del Biaggio III in connection with a scheme to scam banks out of $50 million worth of loans: “When you find major frauds at a broker dealer like this, you’re going to naturally look at ‘Where is the supervision?'” said Michael Dicke, the enforcement director of the San Francisco office.

Needless to say, the plates of BigLaw managers are currently overflowing with challenges as they struggle to keep operations viable in the midst of the most tumultuous economic climate in decades. Indeed, those managers deserve great admiration and respect for implementing painful cost-cutting measures and alternative billing and compensation structures to make their operations leaner, meaner and more competitive. This acknowledgement notwithstanding, the issue of internal oversight reform should not be fed to Fido as criminal wrongdoing at our firms is by no means diminishing and it will not be long until the SEC attempts to penalize our law firm executives when their underlings get mixed up in fraud under their roofs.

One simple suggestion that we have consistently offered our BigLaw clients is that they promote more former prosecutors who have already joined their respective folds to positions of management and oversight within their firms and that they hire one or two on a full-time basis with the primary responsibility to ensure that the line between right and wrong is not being crossed, in much the same way that financial institutions employ full-time compliance officers. While the implemention of such measures will never completely eradicate fraud even at our most respected firms, they will certainly minimize the scourge of BigLaw criminality as well as the possibility that the SEC will be able to attribute responsibility for transgressions to law firm captains already working overtime to keep our ships steady and afloat.

With this note, we wish you all a happy, festive and well deserved Thanksgiving holiday!