Joel Sanders, former CFO of Dewey & LeBoeuf, speaks to an unidentified woman outside the courtroom after he was found guilty Monday. (David Handschuh/NYLJ)
The criminal case arising out of Dewey & LeBoeuf’s dramatic spiral into bankruptcy five years ago led to a somewhat less dramatic verdict on Monday, when a Manhattan jury found the firm’s former chief financial officer guilty of fraud and conspiracy, while acquitting its former executive director on all counts.
The retrial conviction of former Dewey & LeBoeuf CFO Joel Sanders stands in contrast to a much more ambitious start to the case in 2014, when the office of Manhattan District Attorney Cyrus Vance Jr. sought to put four people on trial for hundreds of charges.
“It’s always problematic when prosecutors take a high-profile business failure and try to fit it within the framework of the criminal law,” Roger Stavis, head of Gallet Dreyer & Berkey’s white-collar defense practice and a former state prosecutor, said of the Dewey & LeBoeuf case.
Sanders’ conviction came the same day as former Dewey & LeBoeuf executive director Stephen DiCarmine was acquitted on the same charges. And the verdict followed years of investigation and prosecution, including two lengthy trials and nearly a full month’s worth of deliberations for the juries combined.
Looking back on the twisting path that led to Tuesday’s verdict, some white-collar lawyers said the DA’s office played it much smarter in the case’s second act—while others continued to question the prosecutors’ approach.
After a hung jury ended the first trial against Sanders, DiCarmine and former Dewey & LeBoeuf chairman Steven Davis, prosecutors substantially winnowed the case. They reached a deferred prosecution agreement with Davis that freed him from another trial and agreed to dismiss charges against Zachary Warren, a former Dewey & LeBoeuf junior manager who is now a young lawyer at Williams & Connolly.
In the retrial, Vance’s office alleged just three charges against Sanders and DiCarmine—down from the more than 100 counts against all defendants in the first trial—while still accusing the former executives of misleading the firm’s financial backers for years before Dewey & LeBoeuf’s 2012 bankruptcy.
“It certainly appears that streamlining the case may have made the difference here. In complex fraud cases, prosecutors sometimes can’t resist the temptation to over-try the case, for fear of leaving something out,” said Justin Shur of MoloLamken. “That can be a tactical mistake, because it’s not the quantity of evidence, it’s the quality.”
Several observers also said that even the retrial, which lasted three months and included testimony from more than 30 witnesses, was too long and complicated. Vance’s office, they said, should have pursued a narrower case—or no case at all—from the start. “I think Cy and his office had a good faith belief that something bad happened here and they needed to bring these criminal charges. They did, and they were dogged in pursuing them,” said Charles Stillman of Ballard Spahr.
But even if the prosecution wasn’t misguided, Stillman added, the procedural background—two lengthy trials, a hung jury and dropped charges—supports the view that the case was too broad. He also said a case of this magnitude puts a strain on everyone involved.
“What the history of the case reveals is that they should have narrowed it before it got started,” said Stillman. “These long trials are just not fair; they’re just not fair to the defendant; they’re not fair to the jury; they’re not fair to the system. You need to find a way to circumscribe the evidence.”
Not surprisingly Rita Glavin, a partner at Seward & Kissel who led DiCarmine’s defense in the retrial, had a similar take.
“I just think this case from the beginning was flawed. I don’t think there should have been a case—not a criminal case—here,” she said. “They certainly bit off more than they could chew. It makes it much harder to defend, because it was almost schizophrenic.”
Despite criticism in hindsight from some observers, Vance on Tuesday trumpeted Sanders’ conviction as a successful case of holding a top executive accountable for misusing a position of power.
“Joel Sanders used his position as chief financial officer to mask the failing financial health of Dewey & LeBoeuf, leading insurers and lenders to believe the firm was still above water,” Vance said in a statement. “This office is committed to prosecuting financial criminals at all levels of an organization, whether it is a small business, a major corporation, or a prestigious law firm.”
Vance’s office could still face a sustained legal battle from Sanders and his team. Sanders’ lead defense lawyer, Andrew Frisch, has already said that he’ll challenge the conviction.
Observers said the case’s long procedural history may work to Sanders’ advantage in future proceedings, although that history could be more relevant to Sanders’ sentencing than to any appeal.
“I don’t know that the fact that there were multiple trials or that there were lengthy trials and that the judge dropped certain charges, as a general matter, impacts whether you have, as a defense lawyer, a good appellate issue,” said MoloLamken’s Shur. He added that there was a possibility the judge could take some of those factors into account when it comes time to hand down a sentence, however.
“It’s the same judge that sat for both trials. He has a good understanding of the facts and the evidence,” Shur said. “He’s going to be able to focus in on what matters to him, in terms of sentencing.”
Stavis of Gallet Dreyer & Berkey notes that some judges may consider a case’s entire history—including the impact it has had on a defendant—when issuing a sentence.
“The enormous costs, both emotionally and financially, borne by a defendant in a case like this can have a definite impact on a sentence imposed by a judge,” he said.
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