Richard Walker still remembers back when he was general counsel and then head of the Enforcement Division at the U.S. Securities and Exchange Commission. During that time, the agency introduced computers and Walker treated his like a big paperweight.
But eventually all financial transactions moved to the web—as did the fraud. And Walker, whorecently joined King & Spalding’s government investigations group in New York, said he found himself “ trying to keep pace with the growth of fraudulent activity on the internet. Everything now is web-based, including trading and fraudulent schemes.”
Walker spent 10 years at the SEC before he joined Deutsche Bank as general counsel in 2001. He spoke with Corporate Counsel Wednesday about how the challenges for general counsel have changed since the 2008 global financial crisis.
During his time at the SEC, which predated the accounting scandal at Enron Corp. in the early 2000s, Walker said enforcement focused on accounting and disclosure fraud.
“It was the longest bull market in history at the time,” he recalled. “So the kind of activities we looked at differed greatly from what happens when you have a crisis.”
As a general counsel at Deutsche Bank before 2008, Walker remembered it as an era of rapid transformation.
“Deutsche Bank was building itself into a global universal bank,” he said. “It was a period of substantial growth, with a maturing and growing legal function [that was becoming] a global legal function.”
Walker was based in New York but spent substantial time at the bank’s headquarters in Frankfurt and at what he called its “nerve center” of investment banking in London. He also found himself in other parts of Europe as well as Asia and Russia where the bank was growing its operations.
The economic collapse of 2008 was “a time of great anxiety, great fear,” he said.
“In the early days it was the issue of survival,” he remembered. “So when Lehman Brothers went out of business, everyone that had trading relationships spent long days and long nights scrambling to protect their positions. We were trying to create stability and deal with market rumors, which could have a devastating effect on a firm’s business.”
Eventually, said Walker, the banks were held accountable for their role in the crisis.
“The banks took a pounding,” Walker recalled. “All the banks had investigations that had to be dealt with. It was an extended period until life as we knew it resumed, if it ever resumed.” He spoke of the “massive transformation” in new compliance safeguards and systems that occurred.
Since the crisis, Deutsche Bank has taken its own pounding from regulators and the U.S. Department of Justice. When asked why the bank, which Walker left last year, endured so many penalties, the former GC replied that he doesn’t see Deutsche Bank as being too different from its counterparts.
“If you lined up all the financial institutions, including in the U.S., they basically all shared many common headaches," he said. “I don’t think Deutsche Bank was an outlier. I don’t know if one emerged any worse than the others.”
He said the U.S. banks were investigated and penalized first, sharing the glare of the spotlight. And by the time regulators got around to Deutsche Bank, “the spotlight didn’t seem to be shared any more.”
But Walker said he never felt that they at Deutsche Bank were “singled out” as a foreign bank, or that there was “any unfairness” in the penalties levied on banks at the time.
The major challenges for general counsel of financial institutions today continue to be many, he said, ranging from the enhanced regulation stemming from the Dodd-Frank Act, to oversight that is “more demanding than ever before.”
At King & Spalding, Walker now focuses on crisis management, domestic and cross-border government and internal investigations, corporate governance counseling and complex financial litigation matters.
And he sympathizes with today’s GCs who must face emerging challenges, including a major one that involves his old friend, the computer. “Cybersecurity is a day-to-day worry for any general counsel,” he said, “irrespective of what industry you’re involved in.”