Stephen DiCarmine, left, and Joel Sanders outside the courtroom during their 2015 trial (NYLJ/Rick Kopstein)
Two former Dewey & LeBoeuf executives facing retrial are urging a Manhattan judge for permission to cross-examine the lead witness for the prosecution about a new cooperation agreement, calling the deal “extraordinary circumstances” that directly bear on the defendants’ rights.
Defense counsel for former Dewey chief financial officer Joel Sanders and former executive director Stephen DiCarmine said they want a ruling before jury selection of retrial, slated Jan. 23, of whether they can cross-examine cooperating witness Francis Canellas about an amended plea agreement.
Any testimony about the amended plea agreement will be a leading defense tactic to deeply undermine the credibility of Canellas during retrial.
Canellas, Dewey’s former finance director, originally admitted to second-degree grand larceny.
After a jury acquitted Sanders and DiCarmine on lower charges and deadlocked on others in 2015, Manhattan Supreme Court Justice Robert Stolz in February 2016 dismissed the top charges against the Dewey executives, grand larceny in the first degree.
At that point, the prosecutors’ main witness—Canellas—faced a higher charge than the defendants themselves.
The remaining charges against Sanders and DiCarmine are scheme to defraud, securities fraud and conspiracy. They have been accused of misrepresenting Dewey’s financial health to lenders before the firm’s 2012 collapse.
The Manhattan District Attorneys’ Office quietly negotiated a lower plea for Canellas last year before a retrial of Sanders and DiCarmine, allowing Canellas to withdraw the grand larceny plea and plead to scheme to defraud in the first degree.
Under the new agreement, prosecutors will recommend a sentence of one to three years in prison—up to half of what the recommendation under the initial agreement called for.
The amended cooperation agreement provides that, although the judge’s dismissal of the larceny charges against Sanders and DiCarmine is not binding in the case against Canellas, “the district attorney has concluded that … fairness requires that [Canellas] be permitted to withdraw his guilty plea and plead” to scheme to defraud.
But the defense counsel, in a letter to the judge on Thursday, said the amended cooperation agreement is misleading because, unlike the two Dewey executives, Canellas pleaded guilty to larceny and a judge accepted his guilty plea, “establishing that the sufficiency of the evidence of his larceny is incontrovertible”
“In the collective decades of trial experience of defense counsel,” the defense said, “we are unaware of any situation similar to the extraordinary circumstances of Mr. Canellas’ withdrawn and renegotiated cooperation agreement between a trial, acquittals of trial defendants on the crime to which the cooperator pled, and a retrial.”
“If … fairness to Canellas were truly the district attorney’s overriding concern, as opposed to tactical advantage over Mr. Sanders and Mr. DiCarmine, the district attorney could have eschewed an amendment altogether and recommended a lesser sentence at his sentencing,” they said. “Instead, the district attorney re-charged Mr. Canellas so that his pleaded crime harmonized with the remaining charges.”
The defense added that the renegotiated agreement’s “fact and timing suggest that it is a gambit intended to mollify a disenchanted cooperator and camouflage the dissonance between the larceny to which Mr. Canellas admitted (or was coerced to admit), and of which Mr. Sanders and Mr. DiCarmine were thereafter absolved.”
Stolz last year ruled that the parties are not to refer to the fact of a previous trial during the retrial. The defense said the prosecution’s decision to allow Canellas to withdraw and renegotiate his agreement to secure his continuing cooperation “has now opened the door to the fact of the first trial and the acquittals.”
The defense letter is signed by Andrew Frisch, Sanders’ attorney and head of his own firm, and Rita Glavin, DiCarmine’s attorney and a Seward & Kissel partner.
Former Dewey junior manager Zachary Warren and ex-chairman Steven Davis will avoid retrial, having signed deferred prosecution agreements.
A spokeswoman for the Manhattan DA’s office declined to comment.
Canellas’ attorney, Brian Maas, did not immediately return messages seeking comment.
Meanwhile, the DA’s office could confront another obstacle before retrial.
Alan Jacobs, the liquidating trustee overseeing the Dewey & LeBoeuf bankruptcy, is asking a judge to abandon and destroy firm property and records, which will prompt objections from the DA’s office and the Securities and Exchange Commission, according to court documents.
In a late December request to Bankruptcy Judge Martin Glenn, Jacobs is seeking an order to close the Chapter 11 case and authorize the destruction of remaining estate records.
The trustee said the court has already authorized him to decommission and abandon a data center and destroy hard-copy records. The trustee said he may still retain residual records.
But in a court letter, SEC attorney Howard Fischer said the trustee’s request would permit the trustee to destroy remaining estate records including materials preserved and loaded onto hard drives at the request of the DA’s office. Fischer said these hard drives include email and user drives of the Dewey defendants and potential witnesses as well as underlying data of Dewey’s accounting system.
The SEC and the DA’s offices expect to object, Fischer said, in a status report to Southern District Judge Valerie Caproni, who is overseeing the SEC civil case against Dewey leaders, which has been put on hold.
Responses to the trustee’s request are due Jan. 11, and a hearing is planned Jan. 18 in bankruptcy court.