Former Mayer Brown partner Joseph Collins was convicted on Nov. 16 of helping top executives at Refco conceal a $2.4 billion fraud from investors and purchasers of the financial services firm.
In the fifth day of deliberations, a jury in Southern District Judge Loretta Preska’s courtroom emerged to find the veteran lawyer guilty of conspiracy, two counts of securities fraud, two counts of false filings with the Securities and Exchange Commission and two counts of wire fraud.
Collins, of Winnetka, Ill., was acquitted of two counts of wire fraud and a single count of bank fraud.
It was a crushing disappointment for Collins, 62, who had been found guilty three years ago in a verdict that was vacated in January by the U.S. Court of Appeals for the Second Circuit.
Collins showed little emotion when the jury returned its decision. Collins legal team was led by William Schwartz and Jonathan Bach of Cooley.
"We are disappointed in the jury’s verdict and intend to appeal it," Schwartz said.
The prosecution team consisted of Southern District Assistant U.S. Attorneys Harry Chernoff, Michael Levy and Edward Imperatore.
Southern District U.S. Attorney Preet Bharara said in a statement that Collins used his law license to help orchestrate an accounting fraud "that left a major commodities firm in tatters."
"Over and over and over again, Collins ignored his duties as an officer of the court by actively participating in the crimes of his client—telling blatant lies, falsifying important documents, and concealing others," Bharara said. "In addition to the staggering losses and financial disarray caused by his actions, Collins gave the legal profession a black eye, something that is intolerable to this office and to the vast majority of attorneys who serve their clients and the courts ethically and honorably every day."
Collins faces a top prison term of 20 years on each of the fraud counts when he is sentenced by Preska on March 20. He received seven years in 2010 following his 2009 convictions that were later vacated.
The guilty verdicts followed a somewhat truncated second trial with fewer counts and less testimony, but one which, by all appearances, lacked the drama in the jury room that ultimately ended with the Second Circuit ordering a new trial.
Collins was Mayer Brown’s lead lawyer for Refco, a financial services firm that imploded after revelations that then-CEO Robert Bennett and other top executives misrepresented Refco’s financial condition to both Thomas H. Lee Partners, which purchased a majority stake in Refco in 2004, and investors who bought shares in Refco’s initial public offering in 2005.
Prosecutors alleged that Collins drafted the documents and gave the legal advice that Bennett and others relied on to mask the fraud and assure investors that all was well. They also alleged that Collins played a key role in the deception that persuaded the Austrian bank BAWAG to provide a huge loan to the company in 2002.
In his first trial, Collins, represented by Schwartz and Bach, testified over several days, taking the witness stand to declare that Bennett and his cohorts concealed from him the fact that ostensibly two-way loans had an unseen, third prong that hid the firm’s massive debt.
"They lied to me about the purpose" of the loans, Collins told the jury during his 2009 trial. "They lied to me about the third leg. They never told me they were hiding it from their auditors" (NYLJ, June 19, 2009).
Collins testified he didn’t know that Refco was parking debt in a holding company, RGHI, which was partially owned by Bennett, in a series of sham loan transactions. He testified that it was not his job to police the company and that he didn’t structure or even spend much time reviewing the loans, leaving the bulk of the work to Mayer Brown associates.
Instead, Collins said, he relied on representations about the loan made by Bennett and others, including Tone Grant, the former president of Refco Group Ltd.
Bennett is serving a 16-year prison sentence after pleading guilty. Grant was found guilty by a jury and was sentenced to 10 years behind bars.
Change in Strategy
The second trial, which began on Oct. 10, was different from the first in a number of critical aspects.
Collins elected not to testify this time. Schwartz and Bach, declined to comment on the change in strategy.
But Preska allowed prosecutors to read to the jury portions of Collins’ testimony from the first trial, about one hour’s worth, and show the jury a videotaped deposition of Collins.
In the first trial, lawyers who testified for the government, including John Sullivan of McDermott Will & Emery and Jay Tabor of Weil, Gotshal & Manges, were allowed by Judge Leonard Sand to offer opinion testimony. This time, Preska indicated that opinion testimony would not be allowed, and the government declined to offer it.
In the first trial, two government cooperators, former Refco Executive Vice President Santo Maggio and former CFO Robert Trosten, both testified against Collins.
Maggio, whom Schwartz said was an "admitted perjurer," was a contentious witness, at one point barking on cross-examination, "This is crap!"
Maggio died before the Collins retrial, but Preska allowed prosecutors, over the objection of the defense, to read some of his testimony from the first trial implicating Collins.
The first trial was interrupted by the week-long illness of Judge Sand. Judge Robert Patterson spent a long weekend reading up on the case and reviewing the transcript before stepping into Sand’s shoes and presiding for the remainder of the trial.
The second trial was also interrupted for a week—this time by Hurricane Sandy.
Collins was convicted in the first trial on conspiracy and two counts each of wire fraud and securities fraud, but the jury failed to agree on nine other counts (NYLJ, July 13, 2009).
It was Patterson who sentenced Collins to seven years in prison in 2010, rejecting a longer sentence sought by the government on the theory that Collins was motivated to assist the fraud because of the millions in fees earned for Mayer Brown and himself.
"I don’t believe Mr. Collins committed these crimes for greed or money because he would have been paid through his firm" anyway, Patterson said. "I think this is a case of excessive loyalty to his client" (NYLJ, Jan. 15, 2010).
Errors by Patterson in dealing with a fractious jury led the Second Circuit to vacate Collins’ convictions and order a new trial.
On the sixth day of deliberations, the jury foreman sent Patterson a note saying that Juror #4 claimed that Juror #9 twice threatened to cut off his finger.
The note also said there had been some concern about Juror #4 bartering his vote.
During deliberations on July 2, 2009, the foreman wrote, Juror #4 "changed his vote on a charge, bringing a unanimous decision. However [Juror 4] then attempted to make his vote contingent upon the room agreeing blindly on a charge to be voted on later. He wanted to barter."
It was one of a stream of notes from the jury during deliberations. Patterson, however, neglected to tell counsel about the note and instead opted to speak privately with the juror, who told the judge he felt "insulted and threatened" by others on the panel.
The circuit vacated the convictions in January, with Judge Denny Chin writing that the trial judge’s failure to disclose the contents of the note and his decision to have an ex parte conference with the troublesome juror deprived Mr. Collins of the right to be present at his own trial.
While Chin credited Patterson for "trying in good faith to ease serious tensions in the jury room and deal with accusations of misconduct," he said the court could not say with "fair assurance" that "the errors in this case did not substantially affect the verdict" (NYLJ, Jan. 10).
Chin said the circuit could not ignore the possibility that Juror #4, having been told the importance of reaching a verdict, "walked out of the ex parte conference with the impression he should not stand in the way of a prompt resolution of the case."
@|Mark Hamblett can be reached at email@example.com.