"As the work was expanding, the larger firms tended to represent the [corporate] entities, so there was a need to partner with smaller firms to represent the individuals," he said."
Large Firm Referrals
Richard Holwell, a former Southern District judge who last year co-founded Holwell Shuster & Goldberg, said competition from large firms is a "double-edged sword." While firms commonly refer individuals to boutiques, they often take the more lucrative roles by representing the company or board of directors, he said.
For his firm, which focuses on financial markets litigation and regulation, about 75 percent of new matters, including investigations, have been referred from major law firms such as Jenner & Block; Willkie Farr & Gallagher; White & Case; and Kasowitz, Benson, Torres & Friedman, said Holwell.
"It's typically a conflict situation," he said. "They represent a party that is adverse to their client or a situational conflict where they're representing commercial banks in general." Sometimes, he said, there is the need for independent counsel separate from a corporate entity's own lawyers.
Representing individuals in investigations, many of them referred from big firms, is a reliable form of revenue for small firms with few conflicts of interest.
If there's a major investigation of a financial institution, each executive may need his or her own counsel, said Jon Harris, of Harris, O'Brien, St. Laurent & Houghteling, a boutique focusing on litigation and white-collar work. Harris said a large portion of his work in investigations comes from large firm referrals.
"It's a great spot for firms like ours because [the financial institution will likely] not hire us to represent them in a $1.5 billion Libor rating scandal," Harris said. "They're going to hire a massive firm."
But the company might have 15 traders, he said.
"Those folks need lawyers," he said. "It's a good business of law firms of this size."
Anello said investigations are one of the largest drivers of business for his firm, which represents both companies and individuals subject to the internal investigations, he said. Often, cases are referred by a company's in-house lawyers and its outside counsel, Anello said.
At Molo's firm, more than half of the white-collar defense and investigation work comes through referrals, he said. Other matters come directly from a private equity fund or hedge fund, he said.