The judge overseeing the municipal bond bid-rigging trial in New York on Monday rejected a defense motion for a mistrial.
John Siffert, the lead attorney for Steven Goldberg, one of three former executives of General Electric Co. subsidiaries accused of fixing bids for muni bond contracts, objected to U.S. Justice Department antitrust prosecutor Steven Tugander’s reference to inside information during direct questioning of Zevi “Stewart” Wolmark, a former executive with CDR Financial Products Inc.
“There is no 'inside information’ in this case,” said Siffert, a name partner at New York’s Lankler Siffert & Wohl LLP.
Tugander called the remark “completely inadvertent.”
Judge Harold Baer of the U.S. District Court for the Southern District of New York in Manhattan rejected Siffert’s motion, but warned Tugander: “In the future, let’s try to assure that we won’t hear that phrase.”
The government has charged Goldberg, Peter Grimm and Dominick Carollo with manipulating competitive bids for municipal bond investment contracts between 1999 and 2006.
Wolmark — who worked for Beverly Hills, Calif.-based CDR from 1986 through 2010 and held the titles of president, vice president, chief financial officer and managing director — interpreted taped recordings of phone conversations he had with Goldberg and Carollo, in which he gave them so-called last looks at bids from competitors.
In return, CDR would receive swap fees on the back end — sometimes hidden in the price of the mainstream broker’s fee — as a kickback.
The recordings have Wolmark saying to Goldberg, in reference to a North Central Texas Health Facilities Development Corp. deal in 2000 for the Dallas Jewish Community Foundation: “Listen, that foundation deal, you’d better do today. I’m going to give you a last look. … Don’t you like layups?”.
Goldberg replied: “Always, always.”
Asked by Tugander what he meant, Wolmark said: “It’s not a question of whether the ball will go into the basket.”
According to one veteran trial lawyer, conspiracy cases — and those heavily dependent upon audio tapes — pose challenges for both prosecutors and defense attorneys.
“In a conspiracy case, you have to show intent. It’s sometimes difficult to pin people down. That’s not an easy task. All it takes is one weak link in the chain,” said Anthony Sabino, a law professor at St. John’s University who has extensive experience in antitrust and white collar crime cases.
“Tapes can be tricky,” said Sabino. “There’s a heavy burden on the prosecution. The prosecution has to bear the burden to show the language is clear.”
Throughout the trial, which began last week on the 23d floor of the Daniel Patrick Moynihan Courthouse in Foley Square and is expected to last at least a month, the defense has accused the government of cherry-picking tapes.
The defense last week frequently played parts of the same conversations that the government did not play on direct questioning of former CDR executives.
“Thank goodness for the tapes,” Siffert said repeatedly during his opening statement.
The charges relate to events that stretch back as far as the late 1990s, which could bode well for the defense, according to Sabino.
“The human memory is the most faulty thing in the universe,” he said. “This is what trial lawyers like myself live for. The defense will shred witnesses’ memories — not because they’re bad people. Confusion is good for the defense.”
But, Sabino added, the defense must beat back a perception of Wall Street greed.
“One of the problems for the defense is the timing, the climate,” he said. “Most people are still in the throes of the Great Recession and there are negative attitudes about Wall Street. Here come your prototypical Wall Street people accused of mismanaging taxpayer money. A juror is inclined to say, 'Oh, I’m a taxpayer.’
“You can almost see that as an element of the prosecution,” he added. “They’ll say, 'This impacts your community, your schools.’ ”
Wolmark, 57, who lives in Los Angeles, pleaded guilty last winter along with CDR founder David Rubin and vice president Evan Andrew Zarefsky.
He told the court Monday that he faces a maximum sentence of 35 years, with no promises of leniency from Judge Victor Marrero in Manhattan.
Wolmark said he was unsure how much he would have to pay in fines, but added, “I know it’s pretty steep.”
He also must amend his tax returns from 2002 to 2010 and pay back taxes to the Internal Revenue Service.
Defense attorneys were scheduled to cross-examine Wolmark on Monday afternoon.
