Photo by Erica Freudenstein.
Gary Naftalis is among the very best at convincing state and federal prosecutors not to charge clients under investigation, which is one of the reasons why he's made the last four Lawdragon 500 guides (and is in the running again this year). Of course, sometimes that's impossible, and Naftalis - a veteran partner at - Kramer Levin Naftalis & Frankel and firm co-chair - is back in the news along with his client.
Such is the case with Rajat Gupta, the former - Goldman Sachs director whom Naftalis will defend against insider trading chargers. The Times' Dealbook section ran a flattering piece on the likeable Naftalis, who is referred to as an elder statesman and as "Columbo with a law degree."
Below is the Q&A with Naftalis we did in preparation for last year's magazine, in which he discussed the importance of credibility with prosecutors and regulators, his favorite trials and his love of class rock music.
Gary Naftalis doesn't come across like the type of guy who thrives on slugging it out with the nation's best lawyers in the most contentious and lengthy bet-the-company cases. Perched in his office at Kramer Levin Naftalis & Frankel high above midtown Manhattan, Naftalis is extremely casual, quick to laugh and eager to stray into topics not directly related to his practice, such as rock music or his four children, two of whom are lawyers.
But Naftalis' long list of victories suggests he is one of the toughest and most effective white-collar litigators of the past quarter century. He boasts a particularly impressive track record of convincing prosecutors and regulators not to bring charges against clients caught up in complex investigations. He was able to convince then-U.S. Attorney Rudy Giuliani not to bring criminal charges against the Kidder Peabody firm during the massive insider trading scandal of the late 1980s. More recently, in 2004, he convinced the SEC not to bring charges against former Global Crossing Chairman Gary Winnick.
Last year, he won dismissal of the New York Attorney General's case against former New York Stock Exchange Compensation Committee Chairman Kenneth Langone over the compensation approved for NYSE Chairman Richard Grasso. He also convinced the Manhattan District Attorney not to bring criminal charges against the City of New York over the deadly fire at the Deutsche Bank building, even though lapsed building inspections contributed to the tragedy. Among his famous trial victories, Naftalis successfully defended Disney CEO Michael Eisner in a 2005 Delaware bench trial against claims related to the termination of Michael Ovitz.
Lawdragon: First off, how did you become a lawyer?
Gary Naftalis: Events in people's lives often occur because of serendipity or accident. When I graduated from college, I thought that I would pursue a career in the diplomatic corps. I took an internship at the State Department, and while that was a great experience it convinced me that I didn't want to be a foreign service officer. So I went to graduate school in history and thought I would become a professor. During Christmas break after my first semester, I ran into a friend who was a third-year law student. He said, "Why do you want to do that? You should go to law school." He thought it would be more exciting, that I would be better at it. I ended up taking the law boards. It wasn't a well-thought-out plan. It wasn't one of these things like, "Oh, when I was six I knew I wanted to be a lawyer." It just sort of happened. Things just happened for the best, for me at least.
LD: Contractors were charged in the Deutsche Bank fire case. How were you able to prevent the City of New York from being charged?
GN: That's part of what I can't talk about. But in these kinds of cases generally, when you're representing an individual or a corporation who is under investigation, what you want to do is convince the prosecutor or the regulator that criminal charges should not be brought, either based on the facts, the law, or the equities based on possible collateral consequences. In Kidder Peabody, for example, we were able to convince the U.S. Attorney - who at the time was Rudy Giuliani - not to prosecute, and it saved the firm. In the financial services industry, an indictment can be a death warrant. It's really a life or death issue for your client.
LD: What else goes into convincing a government entity not to bring charges in a case?
GN: Credibility is the key to being a lawyer, as it is to a large number of other professions. If you make representations that turn out not to be accurate, or if you take positions that are over the top or not supported by the facts, you will not get a good reception. You can't invent things. But when you're talking to a prosecutor or regulator who exercises discretion whether or not to bring a case, if you credibly explain why they might lose for the following reasons or why if they bring a case it will cause damage to innocent people, they're going to take you seriously.
With the government, if you're dealing with a line lawyer, such as an assistant U.S. attorney or a staff lawyer at the SEC, you can properly ask to take an appeal if the line lawyer wants to prosecute. My own practice is that I only take an appeal up to the U.S. Attorney in a very small number of cases. It's not every case that you have as good a position. I don't take an appeal just for the sake of taking an appeal, that doesn't do your clients any good. In the Kidder Peabody case, we were able to make a presentation and convince Rudy Giuliani to change his mind and overrule his staff, who wanted to prosecute.
LD: Is this a tough time to defend financial-fraud cases, given the current level of anger directed at the financial industry?
GN: It's a big challenge. I think there is a tendency to try to find a criminal remedy or solution for an economic catastrophe or failure. Sometimes there is a connection between the two. The obvious example is Bernie Madoff - with his guilty plea, we know that he was involved in swindling people and that there was fraud. But not every economic failure has a criminal overtone, and sometimes things just collapse because of the economy or all kinds of other innocent reasons. The criminal solution does not always apply. What we're facing is a populace that feels that, well, somebody must have done something wrong, there has to be a crime. That's not always appropriate.
LD: How did you go about defending Langone? That seemed to be a contentious case.
GN: That's a case we felt really strongly about. Ken Langone, who is a very honorable person, was unfairly singled out; he was the only the director sued. I thought their whole theory was legally and factually wrong, so we defended him very aggressively and took something like 60 depositions. These depositions showed that the Attorney General really didn't have a case. Justice triumphed in the end by the case getting thrown out. The new Attorney General did the thoroughly responsible thing by not pursuing an appeal for the sake of pursuing an appeal.
LD: Out of all the trials you've done, do any stand out?
GN: I loved the Disney trial. That was just a great experience. We were on trial for a four-month period in Delaware. It was a fascinating case. We felt we had a very strong position, and we were able to convince the court that Disney's officers and directors had acted properly and responsibly in hiring and firing Michael Ovitz. I tried the case with a lot of great lawyers from the Delaware bar and in front of a great judge.
One of the interesting aspects was that it was the first case I've tried with cameras in the courtroom. I always had a kneejerk reaction about that - sort of the old conservative view that cameras should be kept out. But nobody paid attention to them or acted any differently. You just had to be careful not to talk on the side in case it got picked up by the mic. I really changed my mind; I think it's healthy for people to see what goes on in the courts. They get a better impression of how it works, and the system works pretty well.
LD:Just covering a long trial as a journalist can be exhausting. How do you not get beaten down in such long trials?
GN:Part of life is learning from experiences. You need to understand that every day in court isn't going to be the same. Some days are exhilarating and some are tough. Some days are more tiring when you're just sitting there listening to the other side eliciting damaging evidence against your client. But trying cases is one of the most exciting things a lawyer can do. The adrenaline gets you through. I always exercise in the morning - I try to get up early and get on the elliptical trainer. There's something to be said about eating right and exercising.
LD: Do you have a favorite part of doing trials?
GN: I'm sort of like a kid in a candy store - I like it all. But I really like giving opening statements. I've always thought that lawyers don't pay as much attention to openings; everybody gets excited about summations, when you really get to argue to the jury. But opening statements set the stage for the whole trial. That's your first chance to talk to the jurors and establish a relationship with them, both on the part of yourself and your client. You get to give them a framework, a review of what the evidence will be from your point of view. That's a real opportunity for you as a lawyer to connect with the jury and have them understand how the evidence actually helps your client.
LD: What advice do you give young lawyers when it comes to trials?
GN: Everybody gets influenced by watching lawyer TV shows or movies. People seem to think that you have to act in a certain way. But to be effective in court, you have to be yourself. If you're someone who is dramatic, then you'll be dramatic; if you're low key, then you should be low key. You can be as effective in front of a jury by lowering your voice as you can by raising your voice.
Doing things in your own style is part of being credible. When you're dealing with a jury or judge, you have to persuade them that what you're saying is the truth and can be relied upon. And so how do you do that? The jury doesn't know who the heck you are. You have to be sure not to cut corners or make representations that are not accurate. During my opening statement, I always make sure that everything I say is held up by the evidence; you can't overstate anything. There's also something to be said for juries liking you. People who act uncivil or angry or throw their papers around aren't going to win popularity contests - why would somebody like you if you behave like that? If they hate the lawyer, it's going to rub off on the client.
LD: Talk to me a little about your kids being lawyers.
GN: I have four kids: two are lawyers, my third son is a teacher, and my daughter is a senior in college so the jury's still out on what she's going to do. I've never pushed them, law is just something they gravitated to. It's thrilling to watch them develop as terrific young lawyers. They've really made their own niche. My son Ben is an Assistant U.S. Attorney in the Southern District of New York, and I've gone down to watch all of his trials. His twin brother Josh is an associate at Wachtell Lipton, and he just tried his first case and argued his first appeal. As a father, I find following their cases and careers even more exciting than my own.
LD: We spent a lot of time talking off-the-record about music. On the record, who would you say your favorite artists are?
GN: I love classic rock - Dylan, Springsteen, Clapton, Roy Orbison, the Rolling Stones, the Beatles, Led Zeppelin, etc. I listen to them when I drive and exercise. If I had to choose, Dylan and Springsteen are my favorites. Their music is really timeless. Putting on a trial is a lot like putting on a concert or a play - so I really respect great performers that make it look easy.