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Judge declares mistrial in criminal trial of ex-Dewey & LeBoeuf executives

(Reuters) – The judge overseeing the criminal case against three former executives of defunct U.S. law firm Dewey & LeBoeuf declared a mistrial on Monday following over three weeks of jury deliberations.

The jury sent a note to the court saying for the third time it was deadlocked on the major counts against former Dewey Chairman Steven Davis, Executive Director Stephen DiCarmine and Chief Financial Officer Joel Sanders, including grand larceny, scheme to defraud and violating New York’s securities law, the Martin Act.

The three defendants were accused of using illegal accounting adjustments to mask the firm’s teetering finances between 2008 and 2012 and convince lenders and investors, including Bank of America Corp and HSBC Holdings Plc that the law firm was still healthy. [nL1N11G2UF]

The case was one of the most significant white-collar prosecutions brought by Manhattan District Attorney Cyrus Vance since he took office in 2010. Vance now faces a difficult decision about whether to retry the case.

After the jury indicated on Monday afternoon it was “hopelessly” deadlocked, Acting Supreme Court Justice Robert Stolz asked if further instruction on the law would help. He declared a mistrial after the jury said no.

“You have played your part in one of the central institutions of democracy,” the judge said to the jury as he dismissed them. “This is no small thing.”

Jurors issued partial verdicts in the case last week and the week before that, acquitting all three defendants on several lesser counts of falsifying business records.

Testimony carried on for four months, while the 22 days of jury deliberations are believed to be the longest in New York history, according to court spokesman David Bookstaver, though he noted there were no official records.

In a statement issued on Monday afternoon, Vance’s office said it was reviewing the case, including the possibility of a retrial. “We continue to believe in the strength of the evidence and that the defendants’ actions broke State law,” the statement said.

According to two jurors who spoke to reporters, the jury was divided in different ways on the counts and the three defendants, and there were no isolated holdouts.

Juror Edith Hines, a retired state worker, said most of the jury favored acquittal on a bulk of the counts. She said she and some other jurors had been in favor of acquittal from the beginning, but that they “couldn’t budge” the others. Hines hugged Davis on her way out of the courtroom.

The defendants smiled wearily after the mistrial was announced. This was an “absolutely inappropriate criminal case,” Davis’ lawyer, Elkan Abramowitz, said. The defendants are moving to dismiss the case, with a hearing set for Nov. 16.

Another juror, Skylar Schur, who declined to say which side she favored, said there was “absolute confusion” among the jurors. She said that on one day there was a heated argument, though she did not go into details. “Some were looking for that smoking gun,” she said.

Dewey & LeBoeuf once had as many as 1,400 lawyers, before going bankrupt in May 2012. Its collapse is the largest of a law firm in U.S. history.

The prosecution’s case hinged on internal emails and the testimony of seven cooperating witnesses, including former firm Finance Director Frank Canellas, who told jurors he provided Davis and Sanders with a list of accounting tricks to help conceal the firm’s financial woes.

But the defense poked holes in Canellas’ credibility, depicting him as a workplace bully who frequently lied.

Even if the accounting practices were illegal, the defense argued, the prosecution failed to show the three executives had criminal intent. They also said the firm’s accounting was not the reason for its ultimate collapse, citing the departure of certain key partners as the true cause.

Davis, DiCarmine and Sanders still face related civil charges brought by the U.S. Securities and Exchange Commission. They will likely have a harder time defending their case against the SEC, which faces a lower burden of proof.

Criminal charges against Zachary Warren, a 30-year-old former client-relations manager implicated in the scheme, remain pending in a separate case.

The case is People v. Davis et al, Manhattan Supreme Court No. 773/2014.

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