Former Dewey & LeBoeuf leaders and an employee enter Criminal Court for arraignment Thursday. From left: Steven Davis, two police officers, Joel Sanders, and Zachary Warren. (NYLJ/Rick Kopstein)
A day after Dewey & LeBoeuf’s former leaders were indicted on grand larceny and fraud charges, criminal defense experts weighed in on the challenges and strategies in defending such cases, especially when damning emails are presented as key evidence.
“I’ve defended cases with bad emails, and it’s tough because it’s physical,” said Charles Stillman, managing partner of Ballard Spahr’s Manhattan office. “You can cross-examine the witness. You can’t cross examine an email.”
“Those are fingerprints,” he continued. “A jury is going to decide whether those emails reflected a criminal state of mind, or were just sent with a degree of foolishness.”
The firm’s ex-leaders—Steven Davis, Stephen DiCarmine and Joel Sanders—and client relations manager Zachary Warren were criminally charged Thursday with taking part in a scheme to defraud and steal from investors and others. The Securities and Exchange Commission has also filed a civil fraud complaint against five former Dewey officials.
The indictment by the Manhattan District Attorney includes examples of emails that the attorneys sent related to allegedly fraudulent conduct, such as, “Can you find another clueless auditor for next year” and “We came up with a big one. Reclass disbursements.”
The four pleaded not guilty.
“When you send an email, it’s there forever. They never disappear. So you’re telling clients all the time, don’t say stupid things in e-mails,” Stillman said.
“Why did they send them?” Stillman asked. “They’re still human beings. And they are entitled to a fair opportunity to somehow explain what was really meant by those emails.”
Elkan Abramowitz, Davis’ attorney, said in an interview that “taking snippets from an email is not really saying there’s evidence of criminal and fraudulent conduct.”
“People are loose in their language in emails, and they’re ambiguous,” he said.
Abramowitz, a partner at Morvillo Abramowitz Grand Iason & Anello, said he would demonstrate “there are different ways to interpret the accounting procedures” adding, “noncriminal ways.”
SEC Enforcement Director Andrew Ceresney said at a press conference announcing the charges against the defendants that investors were led to believe they were purchasing bonds issued by a prestigious law firm poised for growth. Instead, he said, the firm’s senior finance personnel “used a grab bag of accounting gimmicks to create that illusion and top executives green-lighted the decision to sell $150 million in bonds to investors” on the basis of “blatantly falsified records.”
Benjamin Brafman, of Brafman & Associates, who is not representing any of the defendants named in the indictment, said, “this case could end up in a battle of experts, with accounting experts for both sides, either to defend or condemn the accounting practices that are alleged to have been used.”
Criminal defense attorneys also suggested that the SEC case will be stayed pending the resolution of the criminal case.
“It’s always a problem” when a client is named as a defendant in a criminal case and civil and regulatory case at the same time, said Frederick Hafetz, of Hafetz Necheles & Rocco, who is not involved in the matter. “You don’t want his deposition taken” because it will end up with prosecutors, he said.
Although the vast majority of criminal cases result in the defendant pleading guilty, often in exchange for a lesser sentence, many lawyers told the New York Law Journal that this case is likely to go to trial.
“I’m expecting a trial. There’s a lot at stake here,” said Gerald Shargel, a Winston & Strawn partner who is not involved in the case.
The top count against Davis, DiCarmine and Sanders—grand larceny in the first degree—carries mandatory prison time upon conviction, Brafman said.
“There is no discretion for the court to give a non-jail sentence in a case in which a person is convicted of grand larceny in the first degree. If you’re in that position, it’s very difficult to negotiate a favorable plea and sometimes people go to trial where the likelihood of winning is minimal but there’s no reasonable alternative,” he said. “It would appear that the people charged will seek to vigorously defend themselves.“
Abramowitz, Davis’ attorney, said “there is definitely going to be a trial.” Generally, he said, “when you’re dealing with lawyers, pleading guilty would be the end of their career.”
Stillman said it’s possible that some of codefendants could cooperate with prosecutors against the others before trial.
Among the other challenges facing the defense, the experts said, are jurors’ attitudes toward white-collar crime and toward lawyers.
“Jurors today are angrier than I have ever seen them in cases that allege white-collar crime and significant theft. Jurors who have gone through economic hardship … are generally biased in some respects when they come into courtrooms” where defendants allegedly profited greatly from criminal conduct, Brafman said.
“Lawyers are held to a higher standard, and to the extent these men are lawyers, the people who are representing them have their work cut out for them,” Brafman said.
A disadvantage, Stillman noted, is “the fact that you’re in a profession that people love to hate.”
But this case also has its advantages, the attorneys said.
“The charges are ominous,” Shargel said. “It’s one thing to bring charges, but it’s another thing to prove. Certainly, there are sweeping claims of criminal conduct, but these lawyers, like any other criminal defendants, are presumed to be innocent.”
If the defenses are not adverse to one another, Hafetz said having other codefendants could help.
“It could be a benefit if you have multi-defendants, good lawyers. You’re really working on a cooperative basis. You have the shared benefit of their thinking and strategizing,” he said.
State court proceedings offer more substantive pretrial motion practice, allowing defense attorneys to learn more about evidence before trial, Brafman said.
For example, he said the defense attorneys may ask the judge to review grand jury proceedings to determine if the charges are based on legally sufficient evidence and whether the jury was properly instructed.
Brafman said he anticipates one or more of the defendants may move to sever their case, especially if one is deemed to be less culpable than the others.
“One defense could be appropriate for one defendant and helpful to one defendant but potentially antagonistic to the best interests of another,” he said.
Prosecutors are withholding case information about the seven firm employees who have already pleaded guilty to crimes related to their roles in the scheme. But Stillman said this information will likely need to come out at some point.
“There is a likelihood that some or all of those people who have pleaded guilty are witness at a trial,” he said.
As for challenges for the prosecution, Stillman said it’s presumption of innocence and finding a motive.
“Why would these men who were trying to build a law firm destroy their lives, why would they throw everything away? They understand what the rules are of the law,” he said.
Stillman said it’s likely they will argue they were only intending to save their law practice.
The charges in this case are relatively complex, Brafman said, and “it’s up to the prosecution to make them understandable.”
Stillman, like several others who spoke with the Law Journal, were taken aback by the news.
“How sad it is,” he said, “lawyers who are at the pinnacle of their professional lives are now standing, if you will, on the wrong side of the caption.”