Tuesday, October 20, 2015
The five-month criminal trial of three leaders of the defunct law firm of Dewey & LeBoeuf ended in a deadlocked jury on most major charges (and many acquittals of falsifying business records charges). Most jurors were reportedly in favor of total acquittals of Steven H. Davis, the law firm's chairman, and Steven DeCarmine, its executive director. The jurors were reportedly evenly split on Joel Sanders, its chief financial officer. Cyrus Vance, the New York County District Attorney whose office prosecuted the case, gave an equivocal statement as to whether his office will prosecute a new trial. (My guess is that it will.) The defense lawyers said they would renew their motions for dismissal.
The non-verdict against Davis and DeCarmine (whose lead lawyers respectively are my friends Elkan Abramowitz and Austin Campriello, both excellent and highly-experienced white-collar criminal lawyers who actually try cases) did not surprise me at all. There was no direct evidence that either defendant had directed or was aware of the accounting manipulations about which seven cooperating accomplice witnesses who had pleaded guilty testified. The non-verdict against Sanders, however, did to an extent surprise me since there was some, although not very much, direct evidence against him.
The prosecution case was based on what it demonstrated were accounting adjustments made to make the firm's finances look rosier than they were to lending banks and potential investors. The non-verdict against Sanders at least leads me to believe that some jurors did not find these adjustments to be criminal. (I cannot help but wonder what those witnesses who pled guilty and their lawyers are thinking now.). End-of-year accounting adjustments by businesses to make them appear more attractive to investors and lenders are not uncommon, particularly among struggling entities. Prosecutors, however, almost invariably view them as criminal. Jurors apparently are not all of the same mindset.
I am hesitant to critique the decisions or tactics of trial lawyers in a case with which I am not intimately familiar since there are wise decisions that may not appear so to those unaware of certain facts or circumstances. I was, however, somewhat surprised by the District Attorney's failure to call an accounting expert to clarify the case for the jury and to explain how the accounting adjustments created a distorted picture of the firm's finances. Of course, I do not know that such an expert was available (but it is a rare case in which an "expert" cannot be found to say almost anything).
What the case does demonstrate, I believe, is that it is not so easy to convict the heads of businesses or financial institutions as some journalists and some politicians of both stripes seem to think. Often, these business leaders are so insulated that there is only a single person who discusses the alleged criminal actvity with them. (Here, presumably that person, if there were any, would have been Sanders). And often, those leaders are just so involved in other things that they are not aware of any criminality in their institution, however widespread it might be.
Vance has recently brought two major cases in which he accused leaders of institutions with criminal responsibilty for apparently criminal acts done by their employees. The first, barely reported until recently (except in the Chinese language press), the prosecution of a Chinatown-based bank (Abacus Federal Savings Bank) and its chief officers (Yiu Wah Wong and Raymond Tam) resulted in an acquittal several months ago (also after a number of employees had pleaded guilty and testified against their bosses). The other is the Dewey & LeBoeuf case.
Whether cases like Abacus or Dewey should be brought against institutional leaders where there is considerable seeming illegality by employees but only tenuous connections to its leaders is a question worthy of serious consideration. Vance's once-removed predecessor, Manhattan District Attorney Frank Hogan, under whom I served almost 50 years ago, believed a prosecution should be brought only when the prosecutor was convinced both that the defendant is guilty and will be found guilty after trial, a belief apparently consistent with that of the Department of Justice in business organization leader situations. Vance apparently believes otherwise. He appears to believe a prosecutor should not necessarily decline to prosecute a case in which he is convinced of the defendant's guilt but is not convinced he can secure a conviction. That is not to say that such consideration was made in this case.