By Aruna Viswanatha
WASHINGTON (Reuters) - The fight against Wall Street crime, long the domain of New York prosecutors, is increasingly being pursued out of Washington, as lawyers at the Justice Department's headquarters build expertise and gain the clout needed to grab high-profile cases.
The shift has also prompted New York's top law firms to recruit from Washington, making those prosecutors more desirable as they head to private practice.
The change has been years in the making.
The U.S. Attorney's office in the Southern District of New York - often referred to as the "Sovereign District" since its prosecutors have a reputation for independence from headquarters - sits steps away from Wall Street. It has built expertise in the financial markets and in targeting financial fraud.
But in recent years, the DOJ's criminal division has gained similar experience through cases against money launders and market manipulation.
The probes ended up producing cases including last year's $1.2 billion settlement with HSBC Holdings plc for ignoring ill-gotten gains that flowed through its branches and a $619 million deal with ING Bank, which violated sanctions by routing Cuban and Iranian wire transfers through the United States.
The DOJ's criminal division was also awarded the task of leading the probe and prosecuting the manipulation of benchmark interest rates including Libor. The result was some of the largest penalties to date, including a $1.5 billion deal between DOJ, Washington commodities regulators and UBS last December.
"Traditionally, that's the kind of case that might have been brought by a U.S. Attorney's office, but got those cases," said white-collar defense lawyer Steven Peikin, a partner at Sullivan & Cromwell in New York.
These cases have positioned the division for new financial fraud investigations that would have otherwise gone to New York.
In one recent example, Manhattan federal prosecutors were interested in investigating allegations that banks manipulated foreign exchange rates, another financial inquiry that came to the attention of U.S. and European authorities earlier this year, people familiar with that probe said.
The Attorney General ultimately decided to keep the inquiry at the Criminal Division in Washington, the sources said.
"One of our goals starting in '09 was to make the criminal division a center for criminal justice policymaking and enforcement. I think that absolutely happened," said Lanny Breuer, who led the division for four years and left earlier this year for the law firm Covington & Burling in Washington.
"I saw when I left and I am very aware of what law firms want. There is a premium on Washington experience," Breuer said.
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Top law firms are looking to hire additional white-collar attorneys to capitalize on this trend, according to legal recruiters, including New York firms that have long counseled financial institutions and other corporate clients but have historically had little Washington presence.
Two such firms, Cravath, Swaine & Moore and Davis Polk & Wardwell both hired Washington-based officials in the past month to boost their white-collar enforcement defense practices.
Other firms, including WilmerHale, Hogan Lovells and O'Melveny & Myers are also expanding their groups.
Washington experience has become so coveted that some prosecutors have commuted from New York for it. John Buretta, who left the department in October, traveled each week from New York, where his family is, to help run the criminal division.
"The reason everyone does it is because there is great enforcement work being done there...the magnitude of the cases, especially over the last several years has been very significant," Buretta said.
Last month, Buretta joined Cravath, which does not have an office in Washington and rarely recruits from outside the firm.
Multiple prosecutors from the division are planning to leave the department soon, people familiar with their moves said, and will be in big demand from top law firms, according to lawyers in the field and legal recruiters.
Officials who will depart soon include Charles Duross, who has run the foreign corruption unit; Mythili Raman, who currently leads the criminal division; and Denis McInerney, who has run the division's fraud section, people familiar with the moves said. All declined comment through a spokesman.
"Until recent years, the elite Wall Street firms really didn't focus much on Washington at all, and that's changed," said Stephen Nelson of recruiting firm McCormick Group, who specializes in placing lawyers in D.C.
(Reporting by Aruna Viswanatha, additional reporting by Casey Sullivan; Editing by Karey Van Hall and Leslie Gevirtz)