Big Law

Ex-SEC Enforcement Chief Jumps to Big Law for $5 Million a Year


Robert Khuzami speaks during a House Financial Services Committee hearing in Washington, D.C in 2012

Photograph by Andrew Harrer/Bloomberg

Robert Khuzami speaks during a House Financial Services Committee hearing in Washington, D.C in 2012

They’re celebrating in Chicago, as that city’s well-known corporate law firm Kirkland & Ellis has won the services of ex-SEC enforcement chief Robert Khuzami.

Much of the media coverage of Khuzami’s career move understandably focuses on the tension generated by a former Wall Street cop switching sides to defend the financiers he used to police. Intriguing questions arise about whether the government can have any hope of keeping up with deep-pocketed miscreants when its most talented investigators and prosecutors tend to trade on their reputations to win well-compensated perches in the private sector. When asked, Khuzami offered the classic lawyer’s answer: “It’s both aggressive enforcement and vigorous defense that are critical to justice and fairness,” he told the New York Times.

Here’s another issue raised by the Khuzami news: Is Big Law setting a trap for itself with ever-escalating partner pay? Kirkland & Ellis reportedly has guaranteed Khuzami more than $5 million a year. That’s impressive, even by Kirkland & Ellis’s lavish standards. According to American Lawyer, the 1,600-attorney firm paid average per-partner profits (or PPP) of $3.25 million in 2012, good for a rank of No. 7 on the closely watched AmLaw 100. (New York’s Wachtell, Lipton, Rosen & Katz was No. 1, with PPP of $4.98 million.)

With gross annual revenue of nearly $2 billion, according to American Lawyer, Kirkland & Ellis will not go broke paying Khuzami what the firm has promised. From all appearances, Kirkland is thriving financially. The Big Law industry overall, however, has hit choppy water, as I explained in May in a Bloomberg Businessweek cover article. (On July 21, the New Republic published a substantial piece on the same theme.)

One of the central reasons that many once-august corporate law firms are now struggling for stability is PPP envy—the obsession with which firms are paying star partners how much. That jealousy leads to interfirm bidding wars and a constant churn of departures, arrivals, and pay squabbles.

“For the past 20 years,” Steven Harper writes in his insightful recent book, The Lawyer Bubble: A Profession in Crisis, leading a firm up the AmLaw 100 “has been regarded as a badge of honor for the managing partner who could achieve it.” Harper mourns this tendency. He blames it, in part, for the collapse of such storied firms as Dewey & LeBoeuf and the widespread misery in his former profession. Harper, you see, is a recently retired corporate litigator and partner at Kirkland & Ellis.

Barrett_190
Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, which tells the story of the Chevron oil pollution case in Ecuador, will be published by Crown in September 2014.

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