Barr, Berman in Standoff Over Attempted Ousting of U.S. Attorney

(Bloomberg) -- Attorney General William Barr’s sudden move to replace Geoffrey S. Berman, the chief federal prosecutor in New York, and Berman’s refusal to step down, sets up a showdown between two of the nation’s top law enforcement officials less than five months before the presidential election.

Barr’s surprise statement, issued after 9 pm Friday night, said Berman was stepping down and would be replaced by Jay Clayton, chairman of the U.S. Securities and Exchange Commission, following confirmation by the Senate.

Berman issued his own statement after 11 pm saying he’d received no notice the announcement was coming and that no intention of resigning.

“I learned in a press release from the Attorney General tonight that I was ‘stepping down’ as United States Attorney. I have not resigned,” Berman’s said in the statement. “Our investigations will move forward without delay or interruption. I cherish every day that I work with the men and women of this office to pursue justice without fear or favor -- and intend to ensure that this Office’s important cases continue unimpeded.”

Early Saturday, a DOJ official who wasn’t authorized to speak publicly said Barr wasn’t dissuaded by Berman’s pushback and planned to stick to his timeline -- installing an interim acting U.S. attorney on July 3, and seeking the Senate confirmation of his permanent replacement, extending the standoff.

‘Sovereign District’

The Manhattan U.S. attorney’s office is perhaps the nation’s most elite and storied law enforcement office, taking a leading role in prosecuting white-collar fraud on Wall Street, terrorist plots and attacks, political corruption and organized crime, among other things.

It cracked down on insider trading in the aftermath of the 2008-2009 financial crisis, eroded the influence of the mafia in New York, and prosecuted state and federal politicians for self-dealing. The office is fiercely independent, frequently referred to as the “Sovereign District of New York.”

But following the end of Robert Mueller’s investigation into Russian interference in the 2016 election, the New York office may have entered its trickiest phase, as the lead authority scrutinizing the conduct of the leader of the free world and his close associates.

Line prosecutors in the office were initially wary of Berman, who served as a volunteer for President Donald Trump’s presidential transition team and who was installed in the post on an interim basis and never confirmed by the Senate (he was confirmed by the judges of the New York federal court in alternative process).

But Berman, 60, has since won the admiration of prosecutors there for the work he’s overseen and his efforts to protect the office’s independence and integrity, especially amid ongoing chatter of political pressure from Washington.

Trump hasn’t commented on Barr’s move so far. The president flies to Tulsa on Saturday for his first campaign rally in three months.

Epstein and Andrew

In his ongoing investigation into the late Jeffrey Epstein’s sex crimes and those who enabled his behavior, Berman just this month publicly refuted a statement from Prince Andrew’s U.K. lawyers that he has repeatedly sought to talk to American investigators. In an extraordinary showdown, Berman issued his own statement that the prince has done nothing of the kind.

Much remains unclear in the immediate aftermath of Barr’s move, including whether the attorney general has the authority to remove the U.S. attorney for Manhattan, and whether the office was moving forward with an investigation or prosecution that angered Barr or Trump.

Since Trump took office, federal prosecutors in New York have pursued several investigations into the president, his companies, and people close to him. That includes the prosecution of Trump’s long-time onetime personal lawyer and “fixer” Michael Cohen, and a current investigation involving Trump ally Rudy Giuliani and efforts to secure political dirt in Ukraine on presidential rival Joe Biden.

Deutsche Bank

There has also been a long-running investigation into Deutsche Bank, a crucial financial backer of Trump’s companies. A forthcoming book by National Security Adviser John Bolton that’s dominated the news this week said Trump had previously sought to meddle with a case being pursued by the office.

Before Friday’s announcement, Barr had asked Berman to step aside and offered him other roles in the Justice Department, including head of the Civil Division at main Justice, said a Justice Department official familiar with the matter who asked not to be named. Berman declined, the person said.

Barr said in his statement at Berman would leave office July 3, and that the Manhattan office would be led on an interim basis by Craig Carpenito, currently the U.S. attorney for New Jersey.

Clayton is a corporate lawyer with no background in criminal law, and Carpenito has never worked as a prosecutor in New York. The arrangement does not follow the typical pattern, in which the number-two prosecutor in the office serves in an acting capacity as U.S. attorney until a new chief prosecutor is confirmed.

The dueling statements stunned people in legal and political circles and raised questions about the move, including from Preet Bharara, Berman’s predecessor, whom Trump fired in 2017 after he refused to quit.

Jerrold Nadler, chairman of the House Judiciary Committee, which has oversight of the Justice Department and had a lead role in Trump’s impeachment, said on Twitter that he would invite Berman to testify at a hearing on June 24.

SDNY was pursuing several probes of the president’s business and his inaugural committee. As well as its investigation into Giuliani, it has charged two of Giuliani’s associates. In his congressional testimony, Cohen, whose conviction on campaign finance violations and other charges was secured by SDNY prosecutors, said he was cooperating with them on matters he couldn’t discuss.

In charging Cohen in late 2018, prosecutors said he acted at the direction of “Individual 1,” whom they didn’t identify. But Cohen later said that individual was Trump.

Trump and Erdogan

The office has charged Turkey’s state-owned Halkbank with helping Iran evade sanctions on billions of dollars in oil funds. The bank has pleaded not guilty. According to Bolton’s forthcoming book, Trump in 2018 told Turkey’s President Recep Tayyip Erdogan at a Group of 20 meeting that he thought Halkbank “was totally innocent of violating U.S. Iran sanctions.”

Bolton wrote that, “Trump then told Erdogan he would take care of things, explaining that the Southern District prosecutors were not his people, but were Obama people, a problem that would be fixed when they were replaced by his people.”

Carpenito, 46, has led the U.S. attorney’s office in New Jersey since January 2018. After the Covid-19 pandemic began, Barr appointed him to lead a national task force to fight hoarding and price gouging of materials like personal protective equipment, face masks and ventilators. He previously worked as a federal prosecutor under Chris Christie, who led the office before serving as governor of New Jersey, helping to secure a high-profile accounting fraud conviction against Cendant Corp. Chairman Walter Forbes, who was sentenced to more than 12 years in prison.

Clayton’s nomination could take weeks or months if there is opposition in the Senate, and may not even get acted on in the summer months leading into election season.

“The whole thing stinks,” said Mimi Rocah, a former federal prosecutor in the office. “Firing a U.S. attorney that has been working on investigations surrounding the president suddenly, and then circumventing the U.S. Attorney’s people by putting in an outside U.S. Attorney raises alarm bells.”

That appointment also raised questions for Dan Goldman, a former federal prosecutor from the U.S. attorney’s office in Manhattan who served as a House Intelligence Committee lawyer and grilled a dozen witnesses during the panel’s public impeachment hearings. He said on Twitter that what happened Friday wasn’t standard procedure.

Clayton didn’t have an easy time during his 2017 confirmation hearing for SEC chairman in the Senate.

Democratic Senators, including Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts, repeatedly said Clayton’s Wall Street relationships were a worry. Before joining the SEC, Clayton was a partner in New York for the law firm Sullivan & Cromwell, representing some of the financial industry’s most well known banks and hedge funds, including Goldman Sachs Group Inc. and Pershing Square Capital Management.

Warren on Saturday called the attempted ouster of Berman “a naked abuse of power.”

According to a Justice Department official, Barr has known Clayton for years and holds him in high regard. Clayton was getting ready to leave the administration and go back to New York, the person said. He expressed interest in SDNY and the Attorney General thought it was a good idea, according to the official.

On enforcement matters at the SEC, Clayton, a political independent, has been willing to penalize firms accused of wrongdoing over Republican objections. During his tenure, the agency has also rewritten conduct standards for brokers and taken steps to clamp down on fees that stock exchanges charge. An SEC spokesperson for Clayton didn’t immediately respond to e-mailed messages seeking comment.

(An earlier version of this story corrected a quote from Bolton’s book.)

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