Second Circuit Chaos

Circuit Upsets Fraud Conviction of Ex-Mayer Brown Partner
The New York Law Journal by Mark Hamblett  -  January 10, 2012

The conviction of former Mayer Brown partner Joseph P. Collins for helping Refco Inc. executives defraud investors of more than $2 billion was overturned on Jan. 9 by a federal appeals court.  The failure of the trial judge, Southern District Judge Robert P. Patterson, to disclose to the parties the contents of a jury note suggesting that one juror was attempting to barter his vote, and the judge's subsequent ex parte conference with that juror, deprived Mr. Collins of the right to be present at his own trial, the U.S. Court of Appeals for the Second Circuit ruled.  The note, crafted by the jury foreman, was delivered to Judge Patterson on the sixth day of deliberations in Mr. Collins' trial that ended in July 2009 with his conviction for conspiracy and two counts each of wire fraud and securities fraud (NYLJ, July 13, 2009).  The jury failed to agree on a verdict on nine other counts after contentious deliberations during which Juror #4 claimed that Juror #9 twice threatened to cut off his finger. "There's been some concern amongst some of the juror's [sic] regarding odd behavior on the part of Juror #4," the foreman wrote. "During deliberations on 7/2, [Juror 4] changed his vote on a charge, bringing a unanimous decision. However, [Juror 4] then attempted to make his vote contingent upon the room agreeing blindly on a charge to be voted on later. He wanted to barter."  The jury foreman's note was one of a stream sent to the judge but was the only one whose contents were not disclosed to counsel. Instead, over the objection of defense counsel William J. Schwartz of Cooley, Judge Patterson spoke privately with Juror #4, who denied he had engaged in bartering and said he had been "insulted and threatened" by others on the panel, including Juror #9, who vowed to have her "husband take care of me."

This ex parte discussion and the failure to disclose the contents of the note were enough for Second Circuit Judges Guido Calabresi, Denny Chin and Susan L. Carney to upset the conviction in United States v. Collins, 10-1048-cr, which also vacates the seven-year prison sentence Judge Patterson ordered Mr. Collins to serve in 2010. Mr. Collins, who resigned from Mayer Brown following his conviction, has remained free pending appeal.  A spokesperson for U.S. Attorney Preet Bharara said the office was not commenting on plans to retry Mr. Collins. Mr. Schwartz issued a brief statement expressing gratitude for the decision "after this long fight."  In a prosecution led by Assistant U.S. Attorney Christopher Garcia, the government charged that Mr. Collins drafted legal documents and gave legal advice to Refco principals to hide the financial service company's true financial condition and make themselves rich.  The documents, Mr. Garcia contended, were used to confuse auditors and defraud Thomas H. Lee Partners when it purchased a majority stake in Refco in 2004 and mislead investors who purchased shares in an initial public offering of Refco in 2005 just before its fraud was discovered and the company collapsed.  Mr. Collins testified in his own defense during the two-month trial, insisting that former Refco CEO Robert Bennett and other executives lied to him about loan transactions that masked huge debt at the company. Mr. Collins said he would have resigned from representing Refco had he known the truth.  At sentencing, Judge Patterson agreed with Mr. Schwartz that Mr. Collins did not profit from the fraud and was not motivated by "greed or money because he would have been paid through his firm anyway."  "I think this is a case of excessive loyalty to his client," the judge said. (NYLJ Jan. 15, 2010).

Unintended Consequences

On Jan. 9, Judge Chin wrote for the Second Circuit that, "In general, the trial court should not respond to a jury note in an ex parte manner."  "Specifically, ex parte communication between the judge and a member of the jury may unintentionally 'drift' into a supplemental instruction," he said, citing the U.S. Supreme Court in United States v. United States Gypsum Co., 438 U.S. 422 (1978) and subsequent cases, as "a defendant has a well established right" to be present for supplemental instructions.  And, he said, as the Court noted in Gypsum, "Unexpected questions or comments can generate unintended and misleading impressions of the judge's subjective personal views."  The circuit went on to find that the initial failure to disclose the contents of the note and the ex parte conference deprived Mr. Collins of his right to be present at trial.  "To be sure, hindsight is 20/20," Judge Chin said. "The difficulty of the circumstances the district court faced is not lost upon us," for the judge "was trying in good faith to ease serious tensions in the jury room and deal with accusations of misconduct."  Nevertheless, he said, both decisions were in error and the error was not harmless.  "We cannot say with 'fair assurance,' that the district court's errors in this case did not substantially affect the verdict," he said. "The court singled out a dissenting juror, and emphasized to him the importance of reaching a verdict."  "We cannot ignore the possibility that Juror 4 walked out of the ex parte conference with the impression that he should not stand in the way of a prompt resolution of the case," he said.  Had Judge Patterson shared the note from the outset and asked for counsel's input before responding, Judge Chin said, "any mistaken impressions might have been avoided."  Mark Hamblett can be contacted at mhamblett@alm.com.