July 8, 2005

Elliot Spitzer: Sore Loser, Legal Tyrant

At the second item in this post a few weeks ago, BizzyBlog asked “Do you see now why Elliot Spitzer prefers press-release intimidation over real trials?”

The question arose because of the acquittal of former Bank of America broker Theodore Sihpol on 29 of 33 counts (the jury hung on the other 4 counts–more on that in a moment). Mr. Sihpol forgot to read the part of The Spitzer Survival Guide that demands that anyone he targets roll over, pay a lot of money, not admit to guilt about anything, but allow Elliot to display a scalp and claim credit for “cleaning up corrupt business practices.” Instead, Sihpol and the legal team he had to force his former employer to pay for whipped Spitzer’s butt in court.

Poor Elliot is not happy, and Sihpol, the first (and I believe only) person in the two-year investigation to face trial on criminal charges relating to the mutual fund trading scandal, is feeling his wrath:

Former Bank of America Corp. broker Theodore Sihpol, whom a jury last month had acquitted of helping a hedge fund trade mutual funds illegally, will be retried on four counts on which the jury deadlocked, lawyers told a New York state court Thursday.

The jury had on June 9 deadlocked on one count each of fraud and scheming to defraud, and two counts of falsifying business records, leading New York Supreme Court Justice James Yates to declare a partial mistrial.

It acquitted Sihpol of seven counts of grand larceny, the top charge, and 22 other counts. Sihpol had faced up to 30 years in prison. The vote on the other four counts was 11-1 to acquit.

So, Sihpol was one vote away from acquittal on the four remaining counts — and Spitzer is going through with a new trial?

Any other prosecutor would cut his losses, let it go, and allow Sihpol to get on with his not-guilty life. Instead, we have an abuse of prosecutorial discretion, a disgraceful waste of New York State taxpayer dollars, and an inevitable diversion of legal resources away from other more meaningful cases.

Sihpol’s retrial is purely a personal political vendetta. Elliot Spitzer wants to go into his New York gubernatorial run with a spotless record, and Sihpol, this nuisance, this ingrate who doesn’t appreciate the wonderful things Spitzer is doing for the world, stands in the way.

Spitzer should have resigned his post when he declared his candidacy back in December. Sihpol’s lawyers should insist that a retrial be denied until he does.
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UPDATE: The pass that Spitzer gets from the business press is breathtaking. The sub-headline at the link about the new trial says:

Sihpol gets new trial for charges related to late trading of mutual funds after jury deadlocks

A reader unfamiliar with the case up to this point and who didn’t read on would think that Sihpol asked for the new trial. Zheesh.
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UPDATE 2: Don Luskin at poorandstupid.com takes note.
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UPDATE 3: Proud Outside The Beltway Traffic Jam participant.
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UPDATE 4: The Wall Street Journal editorial page chimes in (link requires paid subscription):

… Mr. Sihpol’s defense was that he was merely executing trades ordered by others that he thought were perfectly legal — and the jury agreed. It’s hard to see what important legal principle is worth the time and expense of another Sihpol trial.

All of which suggests that the vindication that Mr. Spitzer is seeking here is probably his own. Mr. Sihpol’s real “offense” is that he refused to roll over and cop a plea the way most of Mr. Spitzer’s business targets have. And his acquittal has proved to be a major embarrassment for the attorney general who wants to be seen as the peerless prosecutor as he runs for governor in 2006.

Mr. Spitzer also has other late-trading prosecutions on his calendar — against individuals from Security Trust Corp. and Canadian Imperial Holdings — and the conclusion of the Sihpol jury that late trading isn’t even a genuine crime is not a good precedent for that case. On the other hand, as former New York AG Dennis Vacco noted last week in a statement assailing the Sihpol retrial, “Prosecutors know that on retrials the evidence doesn’t get better. . . ”

Mr. Spitzer has built a reputation as a tough-guy prosecutor willing to take on the rich and powerful. In retrying the non-powerful Mr. Sihpol, he merely seems vindictive and petty.

SEEMS?

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2 Comments

  1. I noticed your comment with interest. I am the editor of a mutual fund industry publication and assigned a reporter to cover the Sihpol trial gavel to gavel. I also personally sat in on the trial during the closing arguments and at other times.

    First, Mr. Sihpol is not the only person to face trial regarding late trading and improper fund trading. There are three more individuals whose trial is set to begin in September. In addition, one mutual fund executive pled guilty and served a jail term. A second broker-dealer executive pled guilty yesterday to late trading charges and another pled guilty nearly two years ago.

    In addition, William Galvin’s office in Massachusetts is considering bringing criminal charges against three Prudential brokers in Boston.

    So Sihpol is not alone.

    Yet, outragously, Paul Schectman (Sihpol’s lead lawyer) asked the jury during his closing argument why those at Security Trust (another late trading firm) had not faced trial as part of his effort to undermine the prosecution’s case. What he left out was that two Security Trust executives are among those who will be tried in September. No one else had faced trial simply because someone has to be first.

    That said, the scheme perpetrated by Canary Capital and Edward Stern to my mind, was clearly fraudalent. However, Eliot Spitzer backed himself into a corner when he cut a deal with Stern and then found that he had few other targets to go after. Rather than being a small fish leading to bigger fish, Stern appears to have been a whale himself and that whale has swum free.

    That miscalculation left Sihpol as one of the only fish in the net that could be tried.

    Should Sihpol be tried again? Imagine someone being allowed to buy a stock at 5 pm at the closing price. What seller would agree to that trade? Then imagine that the broker told the seller the sale order had gone through at 4 pm, not 5 pm. Is this a fraud? Was something of worth taken through deception? It seems so to me. That is what the Sihpol case is about.

    In as far as he participated in a scheme that enabled Stern & Co to steal from hundreds of thousands of investors, I believe it would be a good thing for all of us for him to be convicted. For that to happen, though, the prosecutors will have to do a much better job than they did the first time.

    The problem in the first trial was that Harold Wilson, the prosecutor, utterly failed in his presentation of the case. He literally put the jury to sleep. One juror told me after the case that even Judge Yates appeared asleep at one point.

    Yates also was unsure of how the Sihpol/Canary plot worked and said so in a sidebar.

    Wilson also never underlined the harm caused by Sihpol’s actions.

    So, perhaps Spitzer should change his team, but we should think carefully before asking him to not pursue justice.

    Comment by S. Hanna — July 8, 2005 @ 3:32 pm

  2. Geez, I thought I made a commment and it got lost.

    I’m glad you brought up what you did.

    I believe what Sihpol did was very unethical and very immoral. In a society and business environment where people were constrained by commonly-held Judeo-Christian beliefs, Sihpol and the others would not have done what they did.

    That said, a jury of Sihpol’s peers essentially found that the laws Spitzer wanted to apply to this situation didn’t apply. If the laws aren’t up to the task, we’ll just have to go through the messy process of passing new laws. Spitzer’s methods are a lazy way of getting around all those messy details and hard work.

    Maybe the prosecutor was dumb, bungled the case, and put the judge to sleep, but, in spite of the fact that I have personally been harmed by the crazy jury system, I prefer it to the trial-by-press-release methods of Spitzer. I think a lot of people who would never be convicted by a jury are being intimidated by Spitzer into saying “no mas.” That is not justice.

    I don’t think Spitzer believed that Sihpol would resist. Sihpol had to sue just to get BofA to pay his legal fees. Even after that, I think Spitzer was trying to get a guilty verdict on Sihpol to use as a hammer to force the others to settle. Now, in my opinion, he’s desperate.

    Comment by TBlumer — July 8, 2005 @ 5:37 pm

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