Litigation

Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, reflected on his 25-year legal career in an interview with Lawdragon below. 

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For a litigator who has carved out a distinguished, 25-year career in law and is ranked among the best negotiators in the field, it stands to reason that Arthur Jakoby has learned how to spot a lie. People do it all the time – mostly little, sometimes devastatingly big and oftentimes with the best of intentions. Regardless of scope or motive, half-truths, inflated truths or flat-out lies are incredibly common and unquestionably human. Jakoby, however, requires one important thing if he is going to consider representing a client – the cold, hard and difficult truth.

“I cannot help clients unless they tell me the whole truth upfront,” says Jakoby. “This approach hasn’t just been good for my clients but has also earned me a reputation as an honest broker among prosecutors.”

That reputation has gone a long way for the prolific litigator and former SEC prosecutor. In his expansive career, Jakoby has successfully represented individuals, companies, board directors and corporate executives in an array of complex matters. From class actions to white collar defense to fraud and breach of contract – Jakoby has done it all, and masterfully so.

In 2013 Jakoby turned a potentially devastating loss for his clients, investors in a Madoff feeder fund, into an over $60M gain – one of the highest recoveries in the Madoff Ponzi scheme. It was a huge win for the seasoned litigator in the face of what is considered to be the largest financial fraud of all time.

Jakoby has a history of success as a teacher, too, as an instructor at Cardozo Law School’s Intensive Trial Advocacy Program, teacher of securities law and insider trading at NYU’s School of Continuing Education, and as a lecturer at New York Law School. He is currently chair of Herrick’s Title Insurance Litigation Group, which represents all major title insurance companies in New York and New Jersey.

“I approach cases with a belief that most government prosecutors want to do the right thing,” says Jakoby. “That belief has defined my style.”

After years in this business Jakoby has developed a deep understanding of complex human behavior and how easily and quickly things can derail. A lawyer first and a “therapist” second, Jakoby sits beside folks through what is often the worst times in their lives. He knows how sensitive it can be, how personal and how potentially life changing. If clients are able to trust him with the truth, he’ll bring his full force to the bench.

Lawdragon: Of all the work you’ve done in your impressive career, what is one of the most interesting matters you’ve handled?

Arthur Jakoby: It has to be my representation of investors in a Madoff feeder fund, for whom I turned a $165M loss into a gain of over $60M. It’s the best result that has been achieved for any victims in the global Madoff investor recovery effort.

My clients were investors in two Madoff feeder funds, many of whom lost all of their retirement money. One lost all the money his family had saved to comfortably support their special needs child for his entire life. They were devastating stories.

On top of that, the Madoff Trustee sued to claw back $28M from the Funds. We agreed to return $24M, but on one key condition: that when the Trustee calculates the Funds’ ultimate losses for purposes of making them whole by distributing funds the trustee recovers, he would not count any money we recovered from a third-party investment advisor. Eager to get money into his pot, the Trustee agreed. We ended up getting a $100M settlement from the advisor after we turned up emails showing they had known for years that Madoff was “likely” a fraud – and yet they never shared their concerns with the Funds’ managers or the investors. Pursuant to our agreement, the Trustee could not reduce my clients’ Madoff loss by the recovered $100M and thus we were entitled to a larger recovery from the Trustee.

I don’t think the civil enforcement actions the SEC has brought will go a long way toward clarifying the foggy legal landscape on which cryptocurrencies now operate.

To date, the Madoff Trustee has returned over $125M to my clients, on top of the $100M investment advisor settlement. In total, my clients have recovered over $225M, net of legal fees, on their $165M loss, for a 36 percent profit.

LD: Incredible result. Are there any trends you are seeing in your practice in terms of the types of matters keeping you busy these days?

AJ: Yes, definitely. Cryptocurrency is obviously a huge topic today, especially in securities enforcement. The SEC has been extremely active in that area, which is unsettled given that securities laws were written long before cryptocurrency existed. It will be interesting to see how the law changes to adapt to cryptocurrency over the years. I have been involved in a case pending in Singapore against a well-known cryptocurrency issuer, and I’m hardly the only lawyer being kept busy with cryptocurrency proceedings. As much noise as they are creating, however, I don’t think that the civil enforcement actions the SEC has brought in the United States are going to go a long way toward clarifying the foggy legal landscape on which cryptocurrencies now operate.

LD: Is this the type of practice you imagined yourself having while in law school?

AJ: Absolutely, yes. I was always interested in cases involving financial fraud, and when I was at the Benjamin N. Cardozo School of Law, I received the opportunity to intern at the SEC. We were working on insider trading cases at a time just before the Ivan Boesky scandal, when insider trading became daily news. I enjoyed it so much I asked to join the SEC after law school and stayed for four years. I was doing exactly what I wanted to be doing as a prosecutor. And I knew that at some point, I would move over to private practice and help clients navigate issues from the other side. It’s great when reality matches your vision.

LD: How has your practice changed since the early part of your career?

AJ: The biggest change by far is the fact that everything is electronic now. For litigators, email has been a complete game-changer. In the past, to build a case you had to rely on the credibility of people – and people often lie or slant the truth. Now, people put everything in emails and text messages (and even if they think they’re deleted, you can find them).

The digital revolution has also made the practice of law so much faster and easier. People complain about the electronic tether, but the convenience of being able to respond to a message anywhere and anytime is priceless.

LD: Is there a matter or client in your career that stands out as a “favorite” or one that is more memorable for certain reasons?

AJ: If I had to pick a favorite, it’s probably the Madoff recovery, but I have had many memorable cases that are important to me for different reasons. In one of them, a lawyer had represented a broker-dealer client in a successful lawsuit and was keeping the funds in an escrow account. When the FBI asked him about trading activity in the account, he lied in a misguided attempt to protect his client. He then got a call from the U.S. Attorney and knew he was in trouble. He was terrified and asked me to represent him. I convinced him to cooperate and spoke with him daily, concerned he was suicidal. I was not just his lawyer but also his therapist; consulting with him and his wife to convince him that he could overcome this adversity. He ended up getting just two years of probation – which I later reduced to just one year of probation – and has moved on successfully in a new career. We remain friends.

When the FBI asked him about trading activity in the account, he lied in a misguided attempt to protect his client. He then got a call from the U.S. Attorney and knew he was in trouble.

LD: How would you describe your style as a lawyer?

AJ: When I was a prosecutor, I was a tough one. But I was also trying to do right, and now that I’m on the defense side, I approach cases with a belief that most government prosecutors want to do the right thing. That belief has defined my style. I have represented a lot of clients who appeared guilty from the outside but were far less culpable given all the facts. I have been able to achieve great results for them by believing in prosecutors’ goodwill and laying all our cards on the table for them.

I think of the client, long ago, whose partner had participated in a scheme involving phony equipment leases. He came to see me with his partner after they received a subpoena from the SEC. They both told me that they had no idea why the SEC had subpoenaed them and that they had done nothing wrong. I warned them that I cannot help clients unless they tell me the whole truth upfront. One partner was actively running the business while the other, a practicing lawyer, was far less involved in the business. They did not retain me on the spot but when they were driving home together after the meeting, my client’s partner, who was the one actively running the business, referencing my warning about being honest with any attorney they retained, confessed that he had secretly been involved in the scheme and explained what he had done. The crooked partner waived any conflict so that I could represent his innocent partner.

The very next day I met with the U.S. Attorney’s office to provide a no-name proffer in anticipation of bringing in my client to lay out what he knew. It turned out that the U.S. Attorney’s Office had an active investigation against both partners and were preparing to arrest both partners the very next day. That night, my client met with the U.S. Attorney’s Office and by the end of the interview the U.S. Attorney’s Office was convinced that my client was innocent and thus they proceeded only against the crooked partner and went out of the way to shield and protect my client. The publicity of an arrest would have ended my client’s legal career. Today, he is an incredibly successful lawyer and we are close friends.

That approach, which I often take, hasn’t just been good for my clients, but has also earned me a reputation as an honest broker among prosecutors.

LD: What do you do for fun when you’re outside the office?

AJ: I love skiing. Since my wife doesn’t ski, almost every year in the spring, I go somewhere out West with either my daughter or son for a ski trip. Last year, I skied Aspen with my daughter – it was great.

Read more in Lawdragon here.