Thursday, November 9, 2006

Playing Both Sides in High Profile Cases

The U.S. Attorney's Office for the Southern District of New York announced the arrest of Michael Lair for allegedly defrauding lawyers in two civil cases by telling them that he had information for sale about their opponents.  After taking the money, he then contacted counsel for the other side and offered to provide information that the opposing lawyers hired him to engage in illegal or unethical acts, including "pretexting" made famous by Hewlett-Packard's internal investigation.  Lair appears to have presented himself as an investigator with access to the information.  A press release (here) issued by the USAO describes the alleged scheme:

According to the Complaint, LAIR approached lawyers or parties involved in at least two highly publicized civil cases and claimed to have information regarding another party to the litigation. LAIR requested payment of funds prior to turning over the purported evidence. Over time, as LAIR failed to deliver on his promises, the party targeted by LAIR ended its relationship with him. According to the Complaint, one of these lawyers, who represents the former CEO of a large insurance company, was defrauded out of $75,000 by LAIR. 

Once LAIR had defrauded one party involved in the litigation, as described in the Complaint, LAIR then approached opposing counsel with the claim that counsel for the first party had hired LAIR and asked LAIR to take illegal or unethical investigative steps. According to the Complaint, LAIR asserted that the illegal or unethical investigative techniques employed by these attorneys included illegally hacking into computers, fraudulently obtaining financial records of potential witnesses, and “pretexting” to obtain individuals’ telephone records. In one instance, LAIR stated that he would not release evidence of these requests by opposing counsel unless he was paid $50,000. LAIR provided a forged email – which purported to be from opposing counsel asking LAIR to engage in illegal investigative techniques – to support his claims in the hopes of receiving the $50,000 payment.

A New York Law Journal article (here) identifies the former insurance company CEO as Maurice Greenberg, who is involved in litigation with AIG over his removal from the company.  The second case involves securities fraud claims between Biovail Corp. and a hedge fund accused of improperly trading its shares. 

An interesting question is whether the $75,000 payment made by Greenberg's attorneys, led by Robert Morvillo, for information about AIG may have been unethical, in addition to being naive in buying a "pig in a poke."  Depending on what information Lair purportedly told Morvillo and other counsel he had that was worth that much money, the court could look askance at one party buying information outside the usual discovery process. (ph -- thanks to Pat Clawson for passing along information about Lair not being a licensed private investigator) 

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/11/pi_charged_for_.html

Fraud, Investigations | Permalink

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