The inside world of insider-trading counsel

When former Assistant US Attorney Peter Romatowski was prosecuting an insider-trading case in 1985, he faced a pair of formidable opponents: his former bosses. The defense attorney for R.Foster Winans, a Wall Street Journal reporter accused of insider trading, was Don Buchwald, former deputy chief of the criminal division at the US Attorney's Office in the Southern District of New York. The lawyer for David Carpenter, Mr. Winans's roommate, was Jed Rakoff, who had been chief of the securities fraud unit in the same office.

Now, in private practice, both Mr. Buchwald and Mr. Rakoff were using the skills that Mr. Romatowski so respected - but on the opposite side of the courtroom.

Mr. Winans was convicted (now on appeal before the Supreme Court), but not without a tough fight.

``In some ways, it was more rough and tumble'' because the two opposing lawyers knew each other, Romatowski says.

Today, Romatowski is one of several attorneys hired by Ivan Boesky, who last November agreed to pay a $100 million penalty for insider trading.

Romatowski finds himself squaring off against Charles Carberry of the hard-charging Securities and Commodities Fraud unit at the US Attorney's office in New York. Romatowski describes his former collegue as a ``sensational'' litigator who can ``motor through sophisticated fraud investigations'' faster than anyone.

Romatowski isn't the only attorney battling a former colleague. The crackdown on insider trading is providing something of a reunion for former prosecutors.

Almost without exception, those fingered in the Securities and Exchange Commission investigation are knocking on the doors of 20 or so defense counsel who have roots in just two alma maters: the US Attorney's office in the Southern District of New York or the SEC.

``You can make a lot more money if you go straight to the bigger [private] firms,'' says Lee S. Richards III, a former assistant US attorney and currently representing Daniel Silverman, who is charged with insider trading in the ``Yuppie Five'' case.

``But if you want to become the best trial lawyer you can be, the US Attorney's office in the Southern District is the place to be. It's where you become a better lawyer and a better-known lawyer.''

The SEC also turns out top-notch lawyers, he says, but SEC lawyers do not get trial experience, since the US Attorney's office brings criminal cases in behalf of the SEC.

All this cross-pollination may sound a little too chummy. But the attorneys, recalling how they once treated former government lawyers, disagree.

``The advantage of having a so-called friend at the SEC or US Attorney's office is exaggerated,'' says David M. Brodsky, a former assistant US attorney who is now a New York-based private securities lawyer. ``People tend to be harder on friends for fear of being accused of favoritism.''

Knowing the people may not help, but knowing the system does. An SEC investigation is ``radically different'' from an average civil case and must be handled with kid gloves, says Ralph Ferrara, former general counsel at the SEC, now a securities lawyer.

From his prosecution days, Romatowski says he has a better sense of where the government will look for evidence, and whether the government is likely to turn up violations.

Mr. Ferrara usually advises cooperation. ``I tell my clients ... `If you want to win over the hearts and minds of the people across the table from you, [answering] yes or no won't do it. We have a story to tell.'''

And stories have been told. Dennis Levine, a former Drexel Burnham Lambert brokerage employee who is paying $12 million in penalties and was sentenced to two years in jail last week for passing stolen information, fingered arbitrageur Ivan Boesky. Mr. Boesky, in turn, told of illegal dealings - complete with dark alleyway meetings and suitcases full of money - with Martin Siegel, head of investment banking and informal head of risk arbitrage at Kidder, Peabody & Co. Mr. Siegel then led prosecutors to Robert Freeman at Goldman, Sachs & Co. and Richard Wigton and Timothy Tabor at Kidder. These last three were arrested earlier this month and accused of swapping information, but deny wrongdoing.

Thus far, the sentences have been considered light - mainly repaying money earned illegally and spending a little time in jail, if any. Most give credit to shrewd calls by their lawyers, ``copping a plea early,'' as one lawyer put it, before the government decides it does not need the cooperation. Most say sentences will be getting tougher.

While the insider-trading cases may cast government lawyers in a flattering light, the US Attorney's office - and to a slightly lesser extent the SEC - have long been known as premier trial-lawyer training grounds.

Entry competition is stiff. Even Supreme Court law clerks get turned down for positions at the US Attorney's office, and the waiting list is long. The SEC's division of enforcement has seen a 42 percent increase in job applications from attorneys with at least two years' experience - and for a job that pays about $27,000.

But, lawyer Brodsky says, ``four or five years there offers more advanced training than, say, working as an associate for seven years at a major law firm.''

Some defense lawyers wax nostalgic for the job (if not the pay). ``When you appear at the other side of the table, you're representing a client's interest,'' Ferrara says. ``You tend to miss the opportunity of having no other interest in mind than the public interest.''