BREAKINGVIEWS-Bankers can't always hide behind bad legal advice
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Reynolds Holding
NEW YORK, June 8 (Reuters Breakingviews) - Bankers can’t always hide behind bad legal advice. A former Deutsche Bank (DBKGn.DE) broker convicted in a tax-shelter scheme won’t get a new trial because of blunders by his counsel. And yet ex-Bank of America (BAC.N) Chief Executive Ken Lewis is blaming lawyers for seemingly insufficient disclosure before shareholders voted on the 2008 merger with Merrill Lynch. It’s enough to give attorneys whiplash.
The Deutsche case is a lawyer’s worst nightmare. A quick Google search by defense counsel discovered that a juror at David Parse’s trial may not have been the housewife she professed to be. But the attorneys refused to believe she had lied during jury selection. Only after the verdict did they ascertain for sure that she was a suspended lawyer deeply prejudiced against their client.
But rather than grant Parse a new trial, the judge excoriated his attorneys for hiding their suspicions until after his conviction. The court ruled that Parse had waived the constitutional right to an impartial jury and would therefore take the fall for the mistakes of his lawyers.
The concept seems alien to BofA’s Lewis. In court papers filed this week, he says the bank’s chief financial officer and lawyers, allegedly including Wachtell, Lipton, Rosen & Katz, assured him that disclosing Merrill’s mounting losses was unnecessary, and so he isn’t liable for misleading investors about the $50 billion acquisition. In legal terms, so the argument goes, he lacked the necessary intent to break the law, because he relied on expert advice, however mistaken.
Something doesn’t add up. There’s no evidence that Parse, who pleaded not guilty, knew anything about the juror’s lies, but he still faces substantial prison time after an unfair trial because his lawyers erred. Meanwhile, Lewis, no stranger to the demands of financial disclosure, agreed with a decision not to publicly reveal information that very well might have quashed his big deal. And yet he seeks protection by making counsel the scapegoats.
There is at least a reasonable chance that Parse’s conviction will be overturned on appeal. And despite years of scrutiny, regulators and prosecutors have yet to pin fault on Lewis for the Merrill misadventure. Disgruntled shareholders may eventually fare better. Passing the buck is a Wall Street pastime, but can also be a risky game to play in court.
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- U.S. District Judge William Pauley in New York on June 4 upheld the conviction of former Deutsche Bank broker David Parse on tax evasion charges, despite finding that a juror’s lies had tainted the verdict. The judge ruled that Parse waived his right to a new trial because his lawyers knew, but failed to tell the court, that the juror had given false answers during jury selection. Pauley granted three of Parse’s co-defendants new trials because of the juror’s misconduct.
- Meanwhile, former Bank of America Chief Executive Kenneth Lewis asked a judge on June 3 to dismiss a class-action lawsuit alleging that he misled shareholders by failing to disclose mounting losses at Merrill Lynch before BofA acquired the investment bank in 2008. Lewis argued that BofA’s lawyers and chief financial officer had told him that disclosure wasn’t necessary.
- Court ruling: link.reuters.com/zyh68s
Judge orders new trial for ex-Jenkens lawyers: link.reuters.com/tes68s
BofA masked Merrill loss before 2008 vote-filings [ID:nL1E8H4ET9]
- For previous columns by the author, Reuters customers can click on [HOLDING/]
(Editing by Jeffrey Goldfarb and Martin Langfield)
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