Mistrial Is Declared in Dewey & LeBoeuf Case

It was the rare trial that had captured the attention of lawyers across the country: a criminal case against some of their own, the top leaders of a once large and prominent law firm.

But the monthslong case against three former executives of Dewey & LeBoeuf resulted in a mistrial on Monday as a Manhattan jury deadlocked on dozens of charges after 21 days of deliberations.

The jury of seven women and five men had previously acquitted the defendants on dozens of charges. But they told the trial judge on Monday that they remained “hopelessly deadlocked” on the remaining 93 charges, including some of the most serious offenses such as grand larceny and scheme to defraud.

The three were accused of plotting to manipulate financial records in an attempt to defraud bank lenders and insurance companies during the financial crisis.

The trial in New York Supreme Court in Manhattan was closely watched. Dewey’s bankruptcy in 2012 was one of the biggest collapses of a law firm in the nation’s history. The firm itself was emblematic of both the old — Thomas E. Dewey, the former New York governor and Republican presidential candidate, had been a partner in a predecessor firm — and the new: Dewey’s last incarnation put a premium on growth, through mergers and the hiring of star lawyers with huge pay packages.

Photo

The trial’s mixed conclusion left the defendants, Steven H. Davis, Stephen DiCarmine and Joel Sanders, in limbo; they could be tried again on the deadlocked charges.

The messy end is a blow to Cyrus R. Vance Jr., the Manhattan district attorney, and comes on the heels of legal defeats in two other prominent white-collar cases: a case against a former Goldman Sachs programmer and another against officials with a community bank in Chinatown.

It was not immediately clear what Mr. Vance will do, given that several jurors interviewed right after Justice Robert M. Stolz declared a mistrial said the jury was divided about the culpability of the defendants and some were confused by the more than 151 charges.

Mr. Vance’s office issued a statement that said the hung jury may “necessitate a retrial pending a thorough review of the case,” although the statement added that prosecutors believed the defendants had broken the law.

Lawyers for the defendants were quick to urge Mr. Vance to drop the case.

The long deliberations and mistrial will raise questions about whether the case was too complex.

Alafair S. Burke, a criminal law professor at Hofstra University School of Law and a crime novelist, said that it was all too easy to second-guess how a case is argued, but noted that a major challenge with a trial that involves “a flood” of business documents “is to translate financial information into a narrative that jurors can understand.”

A jury must come away feeling “at a gut level that a crime was committed, not just a shady business practice,” she said.

Others lawyers suggested the case was presented to the jury with so many charges because of a quirk in New York criminal law that does not allow prosecutors to group together offenses into a single charge or two, as can be done in federal court with white-collar crimes.

 The only acquittals in the case came on a series of charges of falsifying business records.

One juror, Skylar Schur, a high school English teacher, said while she did not feel overwhelmed, some members of the panel seemed “uncertain as to what our role as jurors was.” She said some jurors were “looking for a smoking gun” to convict the defendants, even though the prosecutors had cautioned jurors at the beginning of the proceedings not look at the evidence that way.

Edith Hines, another juror, said she was not persuaded of the guilt of the defendants, in particular Mr. Davis and Mr. DiCarmine. Ms. Hines briefly hugged Mr. Davis in the hallway outside the courtroom at 100 Centre Street.

The jurors indicated the panel remained divided on the most serious charges. In a vote on Monday on one of the grand larceny charges, Ms. Hines, a retired state worker, said the panel had voted 8 to 4 to acquit all three defendants.

Early in the deliberations, Ms. Schur said there had been some heated arguments between jurors. In recent days, she said, the jury had requested a set of markers to prepare a timeline of events to help with the deliberations.

The jury’s two partial verdicts delivered more than a week ago had suggested the panel had more questions about Mr. Sanders’s culpability than that of Mr. Davis and Mr. DiCarmine, who were known simply as “the Steves” within Dewey. The jury before the deadlock had acquitted Mr. Davis on 23 charges and Mr. DiCarmine on 21 charges but voted to acquit Mr. Sanders on only 14 charges.

To some degree that is not surprising, since no witness during the trial ever testified that either Mr. Davis or Mr. DiCarmine had given specific instructions to do anything wrong. The testimony was a bit more ambiguous about Mr. Sanders’s role, however.

Mr. Davis, the law firm’s former chairman, was an architect of the 2007 merger of two law firms that created Dewey & LeBoeuf, and he led the firm until April 2012, a few weeks before it filed for bankruptcy. Mr. DiCarmine, the firm’s former executive director, and Mr. Sanders, the firm’s former chief financial officer, were other major figures in Dewey’s management team. All three men were trained as lawyers.

Elkan Abramowitz, the lawyer for Mr. Davis, said the prosecution reflected an attempt by prosecutors to “overcriminalize” conduct best handled in civil court.

 Mr. Abramowitz and the lawyers for Mr. DiCarmine and Mr. Sanders are expected to renew their motions to Justice Stolz to dismiss the charges the jury did not come to an agreement on.

 The heart of the prosecution’s case focused on year-end revenue adjustments that authorities said had been made to make the law firm’s finances appear healthier. The authorities said the adjustments were done to meet covenants in the firm’s bank loans and to persuade insurance firms to invest in a $150 million bond offering in 2010.

The trial featured more than 40 prosecution witnesses and the introduction of numerous internal emails, law firm business records and accounting ledgers. But in a daring move, the lawyers for the defendants chose not to call a single witness.

The Dewey trial lacked much of the drama and salacious details that were part of a famous accounting fraud and grand larceny case that a former Manhattan district attorney, Robert M. Morgenthau, brought against L. Dennis Kozlowski, the former chief executive of Tyco International, more than a decade ago.

Prosecutors charged Mr. Kozlowski with looting hundreds of millions from Tyco to support his lavish lifestyle, including art purchases, and to buy homes. Although the first trial ended in a mistrial, the case ended with Mr. Kozlowski’s being convicted in 2005 and spending six and a half years in prison.

The Dewey trial coincided with two defeats for Mr. Vance in other white-collar cases.

In July, another state judge in Manhattan overturned the conviction of Sergey Aleynikov, a former Goldman Sachs programmer who was convicted by a jury on a single charge that he stole confidential computer code from the Wall Street bank in 2009. The judge threw out the conviction after the jury in that case reached a split decision: convicting Mr. Aleynikov on one count, acquitting him on another and deadlocking on a third.

Mr. Vance’s office has said it will appeal the judge’s ruling.

The district attorney also incurred a big defeat in another complex, four-month trial involving the two senior officers of Abacus Federal Savings Bank, a small community bank that largely serves the Chinese community in New York. In that case, a jury voted to acquit Yiu Wah Wong and Raymond Tam, and the bank itself, on 240 counts of grand larceny and other criminal charges.

Mr. Vance had charged that the bank and its executives had lied for years to Fannie Mae about the qualifications of its mortgage applicants. The founder of Abacus, Thomas Sung, said after the verdict that Mr. Vance’s office had pursued a misguided prosecution.

There are some similarities between the course of the prosecution of the Dewey defendants and the Abacus case.

In the Dewey case, the prosecutors went to court having secured guilty pleas and reaching cooperating agreements with seven former employees of the firm who said they had made improper and illegal adjustments to the law firm’s financial records. All seven of those cooperators testified at the trial.

Likewise in the Abacus case, 10 former employees of the bank pleaded guilty by the time Mr. Wong and Mr. Tam went to trial. Some of those who pleaded guilty testified at their trial.