More than a year after a judge declared a mistrial in the criminal fraud case against Dewey & LeBoeuf’s former leaders, Manhattan prosecutors are trying again with a new jury, seeking to simplify their arguments that the defendants lied to lenders and investors about the firm’s financial condition.
“The bottom line of this case is simple and straightforward,” Assistant District Attorney Gregory Weiss said in opening statements Tuesday. “These defendants and others were part of a scheme that involved lying to banks and insurance companies to get and keep money for their law firm.”
A defense attorney for one of the executives at trial, former chief financial officer Joel Sanders, shot back later in the day, suggesting that the government pressured Dewey accounting employees to testify against his client.
Prosecutors and two indicted ex-Dewey executives, Sanders and former executive director Stephen DiCarmine, are reprising their courtroom roles in what has become a greatly condensed case.
After complaints from legal observers and past jurors that the trial in 2015 was overwhelming to the jury, the charges have been winnowed down from about 50 each to just three counts each.
Sanders and DiCarmine are being tried for scheme to defraud, securities fraud under New York’s Martin Act and conspiracy charges. The lower level felony and misdemeanor counts don’t carry a mandatory prison sentence, unlike now dismissed larceny charges in the last trial.
Meanwhile, the firm’s top leader, ex-chairman Steve Davis, and another Dewey figure who was charged, junior manager Zachary Warren, are no longer facing trial, having signed deferred prosecution agreements.
Weiss’ opening statement on Tuesday followed the narrative that prosecutors have employed since charges were first brought in the wake of Dewey’s 2012 bankruptcy and collapse: “The pot of gold they were looking for never showed up and they continued to commit fraud,” Weiss said of Sanders and DiCarmine. “Year after year, the defendants turned to fraud, they continued to deceive Dewey’s investors and lenders.”
To avoid confusing the jury, he used analogies and examples to introduce some of the arcana of law firm finance and accounting. “Think about Dewey’s net income like a pizza before it gets sliced,” he said.
Weiss warned jurors that some of the case—accounting records and descriptions of different accounting adjustments used to commit the alleged crimes—would be, well, boring.
“Going through that stuff will take some time and it may not always take you on the edge of your seat,” he said, adding that he wasn’t going to discuss “every fraud implemented over the course of this scheme.”
Still, Weiss did explain some “nitty gritty” details Tuesday, including how the defendants allegedly had Dewey’s accounting department reclassify client disbursements as revenue and reverse credit card write-offs. During the more technical moments, a couple of jurors seemed to fight back drowsiness.
After Weiss’ statement, defense attorneys already jumped at an opportunity to move for a mistrial. Right after the jury left the courtroom for lunch, Andrew Frisch, representing Sanders, moved for a mistrial on the grounds that prosecutors, during their opening statements, insinuated that the defendants caused Dewey’s 2012 bankruptcy. Manhattan Acting Supreme Court Justice Robert Stolz denied the motion.
During his opening statement, Frisch immediately sought to undermine the upcoming testimony of cooperating witnesses who worked in Dewey’s accounting department. These witnesses ultimately pleaded guilty to crimes, and under cooperators agreements, will testify at trial.
Frisch told jurors that former Dewey finance director Francis Canellas, of all the cooperating witnesses, is “the most important by far.” He noted that after larceny charges were dismissed against Sanders and DiCarmine, Canellas withdrew his own larceny plea and pleaded to another crime ahead of his upcoming testimony in this trial.
Like the last trial, Frisch put blame for the case on “disgruntled partners” who complained about how Davis was running the law firm. He said they prompted a team of Manhattan prosecutors to begin investigating Davis and reach out to Dewey employees, including the cooperators.
Frisch also said jurors shouldn’t expect to hear about money being used for “wild parties at Manhattan night clubs.” Instead the firm made every interest payment to banks and investors while Sanders was CFO, Frisch said, and his client’s “extravagance” consisted of using his own money to get an apartment in Midtown so he could get to work earlier.
He said the banks and insurance companies that invested in Dewey–the alleged victims of the scheme–actually saw Dewey and its partners as a lucrative opportunity, as the firm brought in close to $1 billion in revenue and had clients such as the Kingdom of Saudi Arabia, JPMorgan Chase, MetLife, General Motors, Walt Disney and Michael Jackson.
Rita Glavin, DiCarmine’s attorney and a Seward & Kissel partner, is expected to deliver an opening statement Thursday.
Stolz instructed jurors before statements began that “there was a previous trial in this case” but that they were not to speculate as to the outcome of that trial or let it prejudice the result of this one.