Stillman & Friedman Merger With Ballard Spahr Shows Growing Status of Corporate Criminal Defense

There once was a time when most of New York’s top law firms shunned criminal defense work, turning up their noses at assignments they viewed as unprofitable and déclassé.

Out of this void emerged an elite corps of small firms that specialized in defending corporate executives and Wall Street financiers under government scrutiny. The lawyers at these firms relished representing the accused, and did not mind scuffing up their white shoes while butting heads with prosecutors.

On Monday, one of those lawyers, Charles A. Stillman, will announce that his firm, Stillman & Friedman, has combined with Ballard Spahr, an old-line Philadelphia firm looking to enter the New York market and expand its criminal defense practice. Reflecting the strength of the Stillman & Friedman brand, Ballard’s New York office will be called Ballard Spahr Stillman & Friedman.

“hey’re a perfect fit,” Mark S. Stewart, chairman of Ballard Spahr, said of the 14-lawyer firm. “It’s easy to go out and get bodies, but rare to get the judgment our clients will be getting with Stillman & Friedman.”

The combination speaks to a shift that has taken place over decades, of corporate firms making a core business line out of white-collar work, including conducting internal investigations, handling foreign-bribery cases and representing executives in a number of scandals. As firms struggle to increase revenue, they realize that representing business people behaving badly is good for the bottom line.

It also represents a generational shift. Mr. Stillman rose to prominence in the 1970s and 1980s alongside a number of other criminal defense lawyers, including Stanley S. Arkin and Robert G. Morvillo, who died last year at 73. These ! lawyers â€" most of them former prosecutors at the United States attorney’s office in Manhattan â€" dominated the market for white-collar cases. Today, flotillas of large-firm lawyers do criminal defense work.

“For guys like Charlie and me, the game has changed,” said Mr. Arkin, 75. “What was once a niche practice is now a big business for virtually every national firm.”

As evidence of the transformation, Gerald L. Shargel, a renowned criminal defense lawyer who has represented Mafia figures and corrupt politicians, shut down his four-lawyer practice in June and joined Winston & Strawn, a 900-lawyer firm.

Large firms have benefited from taking on a variety of white-collar defense assignments, and the work is worldwide. With Fortune 500 companies growing inexorably across the globe, they need help navigating a thicket of international laws and regulatory regimes.

There is also a steady stream of financial scandals like the insider trading investigations or the controversy surounding Libor, the global benchmark interest rate. These representations can generate big revenue.

Take, for instance, the defense of Rajat K. Gupta, the former Goldman Sachs board member convicted of leaking the bank’s boardroom secrets to a hedge fund manager. Mr. Gupta’s defense, led by Gary P. Naftalis of Kramer Levin Naftalis & Frankel, has cost more than $35 million, according to court filings.

Today, even the leadership at several top firms comes from the white-collar criminal defense bar. Dechert L.L.P. is led by Andrew J. Levander, who represents, among others, Jon S. Corzine, the former chief executive of the collapsed brokerage firm MF Global, which regulators sued last week.

The new chairman of Milbank, Tweed, Hadley & McCloy! , Scott A! . Edelman, has a specialty in defense work. And the global head of litigation at Skadden, Arps, Slate, Meagher & Flom is David M. Zornow, who was the firm’s first white-collar criminal defense lawyer when he joined in 1989. All are former federal prosecutors.

While there remain successful white-collar criminal defense boutiques across New York, they now routinely find themselves in competition with the city’s biggest firms. The smaller firms consistently land work representing individuals, but acknowledge that it is difficult to win business on laborious, document-intensive assignments that require many lawyers, like internal investigations and Foreign Corrupt Practices Act cases.

Still, “there will be plenty of business available to firms, both big and small, that have a reputation in the field,” said Elkan Abramowitz, a partner at Morvillo Abramowitz Grand Iason & Anello, a 37-lawyer firm.

Mr. Stillman, 75, has built a sterling reputation over four decades. A Brooklyn native and ormer federal prosecutor, he has had numerous prominent clients, including Clark M. Clifford, a former defense secretary later charged in the Bank of Credit and Commerce International scandal; Sol Wachtler, the former chief judge of New York’s highest court, who was accused of trying to extort money from his onetime mistress; and Mark H. Swartz, the former chief financial officer of Tyco, who served prison time after being convicted of looting his company.

In an interview, Mr. Stillman said that Ballard â€" a 500-lawyer firm with 13 offices across the country â€" first approached him about the idea of combining. But he also said that he and his partner, Julian W. Friedman, had for years considered merging with a big firm because of the changes they were seeing in the profession.

“We had heard enough times, ‘We want you to handle this litigation but you’re not big enough,’ that we had to consider a bigger platform to serve our clients,” Mr. Stillman said.

He recently lost! a big cl! ient to a large firm. He had represented Mathew Martoma, a former portfolio manager at SAC Capital Management charged in a vast insider-trading scheme. But in April, Mr. Martoma, whose trial is scheduled for November, switched lawyers, replacing Mr. Stillman with Richard M. Strassberg of Goodwin Procter, a firm with roughly 800 lawyers.

“I would have liked to try that case,” Mr. Stillman said. “Do I think he made a mistake? I’m not going to address that.”

Stillman & Friedman also suffered a loss in 2011 when a well-known partner, Paul Shechtman, left the firm to join Zuckerman Spaeder, a firm with about 100 lawyers and with headquarters in Washington.

For Mr. Stillman, a prime reason to combine with Ballard was to ensure that his firm will be well positioned for the future when he retires. All eight of his partners will become Ballard partnrs. The five other lawyers are also moving, as is the support staff, including Mr. Swartz, the former Tyco chief financial officer, who is employed by the firm as a clerk while on work-release.

“I’d like to know that I helped my colleagues get to a place where they could live happily ever after,” Mr. Stillman said. “I owe it to them.”