The trial starting this week against Evan Greebel, a former Kaye Scholer and Katten Muchin Rosenman partner and onetime adviser to Martin Shkreli, will not only dive into federal conspiracy charges, but also explore at what point federal prosecutors claim ethical violations by a lawyer can become a crime.
In battling letters on the eve of trial to U.S. District Judge Kiyo Matsumoto in Manhattan, Greebel’s defense lawyers assert that the government is apparently contending that violations of attorney ethics rules relate to its criminal prosecution.
“To set a precedent allowing the government to wield ethical guidelines as swords of criminal liability would be extremely damaging to the entire bar,” stated the Oct. 13 letter from Gibson, Dunn & Crutcher partner Reed Brodsky. “This is frightening for the legal profession and for every corporate lawyer in the United States simply doing their job representing clients.”
Greebel is charged with agreeing to engage in a scheme to defraud and “one way of the ways in which he agreed to do that was by agreeing to, and then in fact, failing to, disclose material facts that he had a duty to disclose,” said prosecutors in a response filed Oct. 14. “It would be particularly inappropriate to preclude evidence or argument about a duty derived from the attorney-client relationship in this case.”
In a case where legal ethicists could take the stand, jury selection began Monday and opening arguments are scheduled for Wednesday. The government, which plans to call about 25 witnesses, anticipates its case will take about three weeks, according to court documents.
While Greebel is one of many lawyers from large law firms in the last decade to stand trial for criminal charges, his case stands out because he was arrested in late 2015 alongside his client’s CEO, Shkreli, who led biopharmaceutical company Retrophin Inc.
Greebel was Retrophin’s outside counsel and a Katten Muchin partner at the time of the conduct at issue in his case. (Kaye Scholer hired Greebel from Katten Muchin in mid-2015.)
Prosecutors claim that Shkreli and Greebel engaged in a scheme to defraud Retrophin by misappropriating Retrophin’s assets in an effort to pay off Shkreli’s debts, including obligations he owed to investors in two of his former hedge funds. The government argues the two used a series of settlement and sham consulting agreements that hurt Retrophin and its investors.
Greebel and Shkreli were charged together in two counts: Conspiracy to commit wire fraud related to Retrophin and conspiracy to commit securities fraud related to Retrophin stock. Greebel resigned from Kaye Scholer’s partnership shortly after his arrest in December 2015.
On Aug. 4, a New York jury convicted Shkreli, Greebel’s onetime co-defendant, on three counts and acquitted him of five counts, including count seven, a key wire fraud conspiracy charge that Greebel also faces.
Since the verdict, Greebel’s defense lawyers have argued that count seven should be dismissed because of Shkreli’s acquittal on the count and because the government has introduced no evidence showing that Greebel conspired with anyone else other than Shkreli.
Matsumoto, in a decision issued late Friday, said the government can proceed to try Greebel on count seven given its stated intention to present evidence that may differ from that presented at Shkreli’s trial. Even if the government proceeds on the theory that Shkreli was Greebel’s only co-conspirator, a different result would not be required, Matsumoto said.
“The government,” the judge said, “is not bound to repeat the same case it proffered against Shkreli; it may present additional or different evidence and may argue that additional individuals conspired with Mr. Greebel.”
Greebel’s defense lawyers are contending that the government appears to be making an argument that “a lawyer’s duty to disclose certain information to his client’s board of directors rises to the level of a criminal violation.”
In response, the government said in its Oct. 14 letter that it has “never argued and does not intend to argue that the [Greebel] should be found guilty merely because he violated state bar rules.”
Prosecutors noted that one element of wire fraud is that there was a scheme to defraud or to obtain money under false pretenses, which may be demonstrated through evidence of misstatements or omissions so long as the defendant had a duty to disclose the omitted information. There is no basis for attorneys to receive special treatment while all others who also have fiduciary duties—such as accountants and corporate officers—are held to a different standard, according to prosecutors.
What Greebel is arguing for, prosecutors say, is “an extraordinary carve-out from criminal law when the defendant charged with a crime is a lawyer,” said assistant U.S. attorneys Alixandra Smith, David Pitluck and David Kessler.
Greebel has said his potential witnesses include two authorities on New York state legal ethics, Stephen Gillers, a professor at the New York University School of Law, and Ronald Minkoff, a partner at New York’s Frankfurt Kurnit Klein & Selz.
Such potential expert witnesses could end up guiding a jury through a lesson on legal ethics, especially after jurors read animated emails expected to be shown by prosecutors.
“[I’ve repeatedly] done all you ask,” Greebel said in one email to Shkreli from 2013, “and very rarely chase you for money.”