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The Baker & McKenzie partner indicted Friday on stock fraud charges in the Eastern District of New York was previously tried and acquitted on similar charges in a 1991 case brought by federal prosecutors in Texas. Martin Weisberg, a corporate partner in Chicago-based Baker & McKenzie’s New York office, and five other men were charged Friday with participating in an illegal short-selling scheme that netted two Israeli investors $55 million. The counts in the indictment include securities fraud, conspiracy and money laundering, and the defendants could face decades in prison and millions of dollars in fines if convicted. Weisberg also faced conspiracy and money laundering counts 16 years ago in Texas. Of the seven people prosecuted at the time for allegedly participating in a currency-trading Ponzi scheme, he was the only one acquitted. At the colorful trial before Barefoot Sanders, the former chief judge of the U.S. District Court for the Northern District of Texas, American Bandstand’s Dick Clark testified on Weisberg’s behalf and the jury heard the law firm partner’s voice from secretly recorded meetings with an undercover federal agent in an Atlantic City hotel room. Weisberg had been a partner in the New York office of Philadelphia’s Morgan, Lewis & Bockius when he was retained in 1989 by William Gray of Horseshoe Bay, Texas, to launch a corporation specializing in “arbitrage” of the Mexican peso. In a January 1991 indictment, the government charged the arbitrage was in fact a Ponzi scheme in which investors were promised returns of up to 600 percent a year based on the supposed currency trades. Investors allegedly lost $27 million in the scheme. Weisberg left Morgan, Lewis, where he had been a partner since 1987, in February 1991, shortly before he was added to the indictment. According to court documents and interviews with lawyers involved in the 1991 matter, the government’s case against Weisberg focused on the assistance he allegedly rendered Gray in laundering money derived from the scheme. Gray was already under scrutiny from the Internal Revenue Service and state law enforcement, who raided his house and closed all of his accounts in February 1989. He sought alternative means of converting millions of dollars in investors’ checks into cash. Toward that end, Gray and Weisberg went to meetings in an Atlantic City hotel suite with a supposed money man who was in reality an undercover IRS agent. The agent helped move money out of the country and back to Texas. Gray also entrusted $1 million to a party in Indonesia who absconded with it. He also allegedly placed $1.5 million with Weisberg, who in turn put $900,000 into a Channel Islands account. Gray was found guilty on all counts and sentenced in October 1991 to 18 years in prison, from which he was released in 1998. Most of the other participants reached plea agreements. But Weisberg was acquitted. One of Gray’s defense lawyers, Charles Gordon Reed of Beaumont, Texas, said Monday he had been very surprised when Weisberg was acquitted. “I just think he must have known that this was an illegal enterprise,” said Reed. David Spears of New York’s Spears & Imes defended Weisberg at the Texas trial. “I thought the government had a weak case and it should never have indicted,” he said. Weisberg no doubt won some points with the jury when Clark appeared in the witness chair on the lawyer’s behalf. The celebrity and his production company were longtime clients of Weisberg, and Clark appeared at the trial as a character witness. The present case in Brooklyn centers on PIPE (private investment in public equity) transactions at two companies, New York health care software firm Ramp Corp. and Virginia-based wearable computer maker Xybernaut Corp., which Weisberg served as outside counsel. In such deals, large investors are allotted blocks of discounted shares, the sale of which are restricted. Prosecutors allege Weisberg and executives at the two companies allowed Israeli investors Zev Saltsman and Menachem Eitan to continue to invest in the PIPE deals, even though they knew the pair would illegally short-sell the stock, using the discounted shares to cover their positions. Weisberg allegedly received a kickback of $1.7 million for his assistance. Weisberg’s current defense lawyer, Elkan Abramowitz of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, did not return calls seeking comment Monday. On Friday, he said Weisberg would plead not guilty and would be vindicated. The Eastern District U.S. attorney’s office also declined comment. Weisberg resigned from Morgan, Lewis shortly before he was indicted in Texas. A spokeswoman at that firm Monday declined to discuss his tenure there. During most of the time period during which the alleged PIPE scheme took place, he was a partner at the now-defunct firm of Jenkens & Gilchrist Parker Chapin, most of whose lawyers launched a New York office for Troutman Sanders in April 2005. Weisberg was a partner at that firm for about a month and then joined Baker & McKenzie in 2005. Spokespeople at Troutman Sanders and Baker & McKenzie both declined to comment on the 1991 case. In a statement issued Friday, Baker & McKenzie said Weisberg had been put on leave pending the resolution of this matter. Anthony Lin is a reporter with the New York Law Journal, a Recorder affiliate.

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