From Milbank to the SEC—and Back Again: A Chat with George Canellos
Published: Jun 24, 2015
What’s it like going from private to public law practice—and back again? Milbank, Tweed, Hadley & McCloy associate Jillian Trezza sat down with partner George Canellos, who heads the firm’s Litigation group, for a chat about his career highlights, working at the SEC, and—last but not least—why he has monkeys in his office.
Jillian: George, you first came to Milbank as a partner in 2003, and you’re known for your work with the Securities and Exchange Commission. But your enforcement background is much more extensive—can you talk about that?
George: I’ve had two law enforcement roles, one as a Federal Criminal Prosecutor at the US Attorney’s Office for the Southern District of New York, where I worked from 1994 to 2002, and the other working for the SEC from 2009 to 2014. In the first job, I was a criminal prosecutor and in the second I was a civil prosecutor.
Jillian: A criminal prosecutor—like, “Law and Order” style?
George: Well, I wore lots of different hats since there are many different types of federal crimes. For one, I tried a double murder and aid of racketeering case with my co-counsel Tom Arena, now my partner here at Milbank. We tried someone for killing two people point blank on 116th Street. It was a completely thrilling case—you would think it wouldn’t be very challenging since the defendant was caught running from the murder scene with a hot 357 in his hand, but he was acquitted!
Jillian: How did that happen?
George: Actually it was a simple self defense argument—certainly not the first time that’s been trotted out. He said they shot first. There was a gang war going on and other complicating factors, including our witnesses being career criminals who admitted that they were shooting at the defendant but claimed he shot first. Proof beyond a reasonable doubt is a really high burden to meet.
Violent crimes are one end of the spectrum, but most of my early career was devoted to white collar crimes ranging from fraud on the government, bribery, corruption, to securities and bank fraud, which are what I ended up focusing on.
Jillian: And after that you moved into private practice at Milbank. What was that transition like?
George: It was relatively easy. There were two people that I knew really well at the firm: Scott Edelman, who’s now our firm’s chairman, and Tom Arena, who I mentioned. Scott and I were good friends when we were both junior associates at Wachtell Lipton. A lot of our bond derived from shared suffering—working on one particular case from hell that I blame Scott to this day for assigning me to. Tom and I were also close and we tried this case together—there’s a lot of bonding that comes from working on trials.The extraordinary thing about these trials is the outcome is so definitive. Someone wins and someone loses. You’re either absolutely elated that the gods favored you, or you’re absolutely depressed because you feel like your entire quest was for naught.
Jillian: So, talk about your early work at Milbank.
George: When I joined, the department was still very small, in growth mode. Scott and Tom were relatively young partners, both with great reputations, doing a lot of work that was up my alley. So I felt like it was a really warm and friendly group, small and manageable while also part of a large full-service firm. We were nimble in our decision-making and I felt from the moment I started that I was working with friends.
One of the first things I did was to try a bankruptcy case with Tom Arena. I remember thinking that if someone had told me what bankruptcy law was all about I might have picked it as my career. We have people here like Andy LeBlanc who specialize in this. It’s really exciting litigation, many of the cases go to trial—and they go to trial in this lifetime, rather than the next! Huge issues of significance are resolved rather quickly and efficiently in a very dynamic forum.
Jillian: What other types of work did you do during your first stint at Milbank? What put you on the path toward the SEC?
George: Pretty soon after coming to Milbank, I was doing white collar and government related work, often enforcement work, where we were opposite the SEC, the NY Attorney General and other securities regulators in many cases. Many cases were in the intersection of criminal and civil where there were parallel SEC and US Department of Justice criminal investigations.
Jillian: So you did that for six and a half years, and then left the firm in 2009 to head the SEC’s New York Regional Office for about three years.
George: Yes, I was a civil prosecutor, meaning I brought actions to enforce violations of the securities laws seeking civil remedies—for example fines, or expelling people from the securities industry, and the like.
Jillian: But you were in New York, not DC?
George: Yes, New York is the biggest regional office of the SEC; this is where the securities industry is. You have dual responsibilities in the regional offices, enforcement and examinations. We had oversight responsibility for something like 2,000 investment advisors with assets under management of around $13 trillion. It’s fascinating because you are essentially trying to ascertain where the risks are in the industry, where violations of law may have taken place. After that I went down to Washington to work as co-director of the SEC’s enforcement division.
Jillian: Which was more exciting—civil enforcement or criminal enforcement?
George: While I won’t pick sides, I will say this: criminal enforcement of the securities laws, which I did earlier in my career, doesn’t really involve a lot of judgment about what is or isn’t a violation. Your exercise of discretion as a criminal prosecutor turns on such issues as the quality of the proof—whether someone has ill-gotten gains—but essentially most of what you’re dealing with are “take the money and run” kinds of fraud. The sole question is, can I prove beyond a reasonable doubt that this person knew what he was doing is wrong or that he’s the person who did it.
In the civil arena there are interesting judgment calls involving half-truths, or even whether something that is true is actionable or not. Some of the statutes even vest the SEC with discretion to bring action on a strict liability basis—there’s no need to prove that the defendant knew what he was doing was wrong or even that he acted negligently. Against the backdrop of statutes that cast an incredibly broad net of potential liability for so many people and companies, you need to make very challenging decisions about how to exercise your discretion. Do you bring a case or don’t you bring that case? Do you bring the case against the company that violated the law, the employee or employees of the company who caused the company to violate the law, or both of them? What sanctions do you seek? Mild discipline or a career-ending ban on employment in the securities industry? A fine of $10,000 or a fine of $10 million? Your decisions in these civil cases help to guide the levels of care that are observed in the industry.
And then there’s the whole investigative and detection part of the job. The SEC’s exam staff is policing every financial institution looking for potential wrong-doing. The enforcement staff also plays a key role in surveillance. As a supervisor, your job is to deploy your scarce resources—including manpower, technology, and industry knowledge—as creatively and efficiently as possible with the goal of detecting and preventing as much wrongdoing as possible, or at least the important stuff. One of the things we developed was a “whistleblower” program designed to incentivize people—thousands and thousands of them—to use their eyes and ears to detect violations of law and bring them to the SEC’s attention.
Jillian: So it’s the opposite of “See no evil. Hear no evil. Speak no evil.”
Jillian: And yet you have this statue of the three monkeys here on the window sill in your office—what’s that about?
George: I got those three monkeys from my wife for my birthday just before I started as an associate many moons ago. It just seemed like they had some significance to the law—well, I wasn’t really sure at the time, so I planted them in my office and they’ve offered me good karma ever since. When I went into law enforcement I started placing hats from various government organizations on them and from time to time I’ve upgraded or changed the hats. Some people have particular views about which organization or entity’s hat--like a law firm or the US Attorney’s Office, or FBI or SEC--should go on which monkey. And from time to time certain visitors reposition the hats. I don’t know if there’s much logic to it!
Jillian: Well, you must have your own opinion. Which hat belongs on which monkey?
George: I’m pleading the Fifth on that one.
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