WASHINGTON - The U.S. Department of Justice filed a brief attacking the arguments of convicted bid-riggers Peter Ghavami, Michael Welty, and Gary Heinz, who are urging a federal appeals court to overturn their convictions on the basis of an expired statute of limitations, improper testimony, and other alleged errors in their earlier trial.
The trio of UBS AG executives was convicted in a U.S. District Court in Manhattan in August 2012 as part of a wide-ranging DOJ investigation into the rigging of bids for guaranteed investment contracts and other muni products that occurred between 2001 and 2006. The three are the last major group of bid-riggers arrested in that probe continuing to battle the government in court. General Electric bankers Dominick Carollo, Steven Goldberg, and Peter Grimm, also convicted for GIC bid-rigging, won their appeals in the same appellate court in December 2013 after the court found that their convictions should have been prevented by an expired statute of limitations.
Ghavami, Welty, and Heinz each filed separate briefs with the U.S. Court of Appeals for the Second Circuit in New York, because each man's attorneys are taking slightly different tracks in an effort to get either a new trial or a reversal of their convictions, though they have joined in each other's arguments. In May the district court in denied Welty's initial request for a new trial on the basis that the government suppressed an email that would have damaged the prosecution's case. Welty appealed that decision along with his conviction, and both matters have been consolidated in the appeals court.
Ghavami's appeal attacks the decision of the lower court to apply a ten-year statute of limitations to fraud affecting a financial institution, rather than the five-year statute that applied to the Carollo defendants and which ultimately allowed them to go free. In addition to Welty's new trial appeal, the Ghavami's lawyers also argued that the lower court should not have allowed other alleged wrongdoers to testify about telephone calls they did not participate in and should not have allowed evidence that Ghavami participated in similar conduct prior to working at UBS. Heinz's appeal takes a similar track, further alleging that Heinz's right to due process was violated because other men who pled guilty to the same conduct as Heinz were not alleged to have affected a financial institution and therefore incurred a ten-year statute of limitations.
The government's response, filed late Wednesday, argues that the convicted men conceded that their crimes affected UBS in order to prevent the government from presenting evidence to that effect at trial. That should preclude them from claiming that only a five-year statute should apply, the DOJ attorneys wrote. The government lawyers also rejected claims that the jury received improper instructions and that it was improper to allow jurors to view evidence of Ghavami's and Heinz's conduct while the two were previously employed at JPMorgan.
The DOJ brief also addresses the suppressed email. The U.S. Supreme Court has ruled that the prosecution must disclose evidence favorable to a criminal defendant.
The email was sent with regard to an escrow transaction that CDR had brokered for the Idaho Health Facilities Authority in 2005. CDR sent bid specifications to individuals at five firms, including Welty at UBS. Welty sent CDR an email stating that UBS was "out" and that its "indication" was "not an offer." But UBS' Mark Zaino had testified for the prosecution that Welty and others meant "bid" when they used the word "indication" in conversations audiotaped and played for the jury. Welty's legal team told the appeals court that the withheld evidence clearly undermined the government case, but the DOJ disagreed.
"The email concerned a transaction not alleged to be part of the charged conspiracies, and its cursory use of that term is consistent with the trial evidence," DOJ lawyers wrote. "Thus, the email does not undermine the government's theory of the conspiracy and is not favorable to the defendants."
The appeals court could overturn the convictions, send the case back for a new trial or other proceedings, or could reject the appeals. Only the Supreme Court could overturn the appeals court's decision.
