Former Executives' Convictions Upset Over AG's Failure to Turn Over Documents to Defense
Ruling is the latest of several setbacks for the state in the case
Noeleen G. Walder, New York Law Journal, July 09, 2010
A New York state judge has tossed out the felony convictions of two former Marsh & McLennan Cos. executives after finding that the state attorney general's office had failed to turn over to the defense potentially exculpatory evidence, including some 700,000 documents obtained during a related civil proceeding.
Observing that "the courts are charged with safeguarding the integrity of the adjudicative process and the public's confidence that verdicts are rationally based and achieved by means fair not foul," Manhattan Supreme Court Justice James A. Yates wrote in People v. Gilman, 4800-09, that the prosecutors' failure to exercise due diligence in searching out the material had "undermin[ed]" his "confidence in the verdict" that he had reached after a 10-month bench trial.
The ruling is the latest of several setbacks for the state in the case. In a statement, Richard Bamberger, a spokesman for Attorney General Andrew Cuomo, said, "We are reviewing the decision and intend to appeal." The office declined further comment citing sealing orders in the case.
The former Marsh executives, William Gilman, an executive marketing director, and Edward J. McNenney, global placement director, were charged in 2005 with 37 counts during a high-profile probe of anti-competitive practices in the insurance industry launched by then-Attorney General Eliot Spitzer. The case continued under Cuomo.
In 2008, Yates convicted each of a single count of restraining trade under the Donnelly Act, the state's antitrust statute. Other charges were dismissed or resulted in an acquittal.
Last year, the defendants moved to vacate the guilty verdict under CPL 440, arguing that evidence not made available to them had in several instances contradicted prosecutors' theory that the defendants helped to solicit fake bids from complicit insurance companies. In a partially redacted 25-page ruling, Yates granted their motion.
The prosecutors had claimed that Gilman and McNenney, along with six other Marsh brokers, participated in a multimillion-dollar price-fixing scheme in which Marsh employees told customers that they had solicited competitive bids for excess casualty insurance.
However, prosecutors said that in reality the defendants secured losing bids or "fake quotes" from accomplice insurers and then steered their customers to a predetermined winner.
In 2005, Marsh agreed to pay customers $850 million to settle a civil case brought by Spitzer in connection with the price-fixing scheme. However, the attorney general's office has had less luck with its criminal cases from the probe.
According to Bloomberg, Yates last October acquitted three other former Marsh officials after an 11-month bench trial. In November, he dismissed charges against three additional defendants at the request of Cuomo.
DEMANDS FOR DOCUMENTS
More than 20 million pages of documents were exchanged in the case against Gilman and McNenney.
According to Yates' ruling, the defense in 2006 formally requested that the attorney general's office produce "all exculpatory evidence, leads, and evidence favorable to all defendants" and "all exculpatory evidentiary material, including testimony before the grand jury," of cooperating witnesses and other named individuals.
The defense also made a formal demand for all documents from Liberty Mutual Insurance Co. "related to transactions specified as part of the prosecution," the decision says.
Four months before the trial began, lawyers in the attorney general's office told the court that they "would like to give [the defendants] everything, whether we are calling the witnesses or not."
"We don't want to be accused of hiding anything," prosecutors said, according to the ruling.
But the defendants accused the government of failing to turn over more than 700,000 pages of discovery that Liberty Mutual handed over in 2007 to the investment protection bureau during a civil trial against Liberty Mutual. The documents were disclosed during the criminal trial of the three Marsh executives acquitted by Yates.
The defense claimed the documents directly contradicted the testimony of two key prosecution witnesses and maintained that the Liberty Mutual files supported their theory that clients knew about the bidding process used by Marsh, which they said was standard industry practice.
Prosecutors insisted they did not review the files and stressed that the investor protection bureau was not working with the lawyers in the case against Gilman and McNenney.
However, Yates did not buy what he called the "theoretical argument" that "in the abstract," the two bureaus "are separate and distinct entities operating in disconnected spheres."
"[O]ne office, under the control of one prosecutor is authorized to prosecute Martin Act violations by civil and/or criminal prosecution. Nowhere in this statutory authority conferred upon the Attorney General in either the Executive Law or the General Business Law is there a division of authority," the judge wrote. "Most disturbing," he said, was the fact that he had been assured by prosecutors that they would hand over anything "of arguable relevance to the subject matter of the testimony," regardless of whether it was in the files of the civil or criminal division.
Thus, the judge said, the attorney general's office "had free access to information from Marsh and the carriers, but controlled defense access to the same materials."
In addition to the 700,000 documents, the judge also said the office should have turned over other evidence, including deposition testimony of certain cooperating witness in a related proceeding.
"While each item of evidence taken individually may present a reasonable possibility that the verdict would have been different, taken as a whole, the evidence raises not only a possibility, but a probability that its disclosure would have produced a different result," Yates concluded.
Gilman and McNenney were sentenced to 16 weekends in jail and 250 hours of community service, but that has been stayed pending their separate appeals in the Appellate Division, 1st Department.
In a statement, Richard L. Spinogatti of Proskauer Rose, who represented Gilman, said, "We are very pleased with Justice Yates' analysis and his decision vacating the conviction."
Robert J. Cleary of Proskauer also represented Gilman.
A spokesman from Marsh said that it would be inappropriate to comment since the company was not involved in the ruling.
Scott D. Devereaux of Cooley Godward Kronish in Palo Alto, Calif., represented McNenney. "We are very pleased by the decision," he said in an e-mail.
Assistant Attorney General Hannah Stith Long handled the response to the CPL 440 motion for Cuomo's office.
Elizabeth Nochlin, the lead prosecutor at trial and the only one mentioned in Yates' opinion, left the attorney general's office in January 2008.
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