Stephen DiCarmine, left, and Joel Sanders outside the courtroom during their 2015 trial (NYLJ/Rick Kopstein)
As a key government witness wrapped up his testimony Monday in the criminal case over Dewey & LeBoeuf’s collapse, defense lawyers urged a New York judge to throw out indictments against two former firm executives, arguing that prosecutors had hamstrung their efforts to defend their clients in court.
After a 2015 mistrial, prosecutors are once again trying to persuade a Manhattan jury that former Dewey executive director Stephen DiCarmine and former firm CFO Joel Sanders fraudulently misled investors and lenders about Dewey’s finances before it was forced into bankruptcy five years ago.
Former Dewey finance director Francis Canellas—a cooperating witness in the case—has been a central figure in both trials. During redirect examination on Monday, Manhattan assistant district attorney Peirce Moser again showed jurors emails related to accounting adjustments between 2008 and 2012 that Canellas previously said were inappropriate. Those adjustments were intended to help the firm avoid defaulting on revolving loans worth about $100 million, according to Canellas.
Canellas earlier told jurors he had discussed those improper adjustments with Sanders and that the firm failed to disclose them to its potential investors and financial auditors. On Monday, Moser asked Canellas whether he knew those accounting adjustments were wrong at the time they were made.
“They were the wrong accounting treatment,” said Canellas. “I knew that then.”
Moser also referred back to Canellas’ testimony under cross-examination by DiCarmine’s lawyer, Rita Glavin of Seward & Kissel, during which he said he had never explicitly discussed accounting adjustments with DiCarmine. On Monday, Moser asked Canellas to explain why he never had those specific discussions with DiCarmine.
“Because I thought he knew,” Canellas responded.
Also on Monday, Glavin, joined by Sanders’ lead defense lawyer Andrew Frisch, filed a motion with Acting Manhattan Supreme Court Justice Robert Stolz to dismiss all charges against the defendants. They argued that prosecutors in the case had refrained from taking notes in more than 100 meetings with witnesses since 2014, including cooperators such as Canellas.
“The prosecution’s practice of ‘no notes’ in witness meetings since 2014 and its refusal—or perhaps more accurately, its inability—to provide the defense any information about these undocumented meetings runs roughshod over the defendants’ federal and state constitutional rights to due process, fundamental fairness and confrontation,” the brief stated.
The defense lawyers argued that even if Stolz doesn’t dismiss the indictments, he should at least require the prosecution to provide a list of meetings with witnesses and some basic information about them, such as who attended and how long they were. They also asked Stolz to issue an instruction to the jury indicating that, if prosecutors had taken notes and provided them to the defense, “it likely would have contained information favorable to the defense.”
Glavin had previously raised the issue of the prosecution’s purported “pens down, no notes” policy during Canellas’ March 16 testimony. On Monday, Stolz said he would reserve his decision on the motion, and Moser told the judge he hadn’t yet decided whether his office would respond in writing.
The initial trial in the case ended with a deadlocked jury. Since then, prosecutors have narrowed the case and agreed to a deferred prosecution agreement with former Dewey managing partner Steven Davis, who was a defendant along with Sanders and DiCarmine in the first trial. The remaining defendants face charges of scheme to defraud, securities fraud and conspiracy.