March 11, 2014

The Perils of Documenting Your Intent to Defraud

Manhattan District Attorney Cyrus Vance recently announced that three senior members of the now-bankrupt law firm Dewey & LeBoeuf LLP had been indicted on a series of charges alleging, in essence, that they defrauded and stole from the firm's lenders, investors, and others. It also appears that they thought it was prudent and wise to write each other confirmatory emails as their scheme progressed.

The three are Steven Davis, Stephen DiCarmine, and Joel Sanders, who were the Chairman, Executive Director, and CFO at Dewey. Also named is Zachary Warren, who was a firm Client Relations Manager. The indictment charges that the three senior lawyers committed Grand Larceny in the First Degree, Scheme to Defraud in the First Degree, Martin Act Securities Fraud, Falsifying Business Records in the First Degree, and Conspiracy in the Fifth Degree. Warren is charged in some, but not all, of the above counts.

While the charged conduct is interesting, and the downfall of Dewey makes an engrossing tale, I was most struck by revelations in the New York Times about how these lawyers thought it a good idea to memorialize their schemes.

According to the Times today,
Four men, who were charged by New York prosecutors on Thursday with orchestrating a nearly four-year scheme to manipulate the firm’s books to keep it afloat during the financial crisis, talked openly in emails about “fake income,” “accounting tricks” and their ability to fool the firm’s “clueless auditor,” the prosecutors said.
One of the men even used the phrase “cooking the books” to describe what they were doing to mislead the firm’s lenders and creditors in setting the stage for a $150 million debt offering that was supposed to solve the firm’s financial woes, according to the messages.
Even agents with the Federal Bureau of Investigation, which worked with Mr. Vance’s office, were surprised by the brazenness with which Mr. Davis and his team discussed their plan in emails, a person briefed on the investigation said.
You don't have to be Clarence Darrow to know that writing down that you intend to commit some crimes is a bad idea, and that detailing precisely how you are committing these crimes while you are committing them is even worse. Using emails (which never really go away, even when you think they are deleted) is incomprehensibly thickheaded, and betrays the apparent arrogance of the defendants.

This is not any different than those stories of dimwitted thieves who get caught when they brag on Facebook about their crimes, or carry around stolen phones or laptops until the cops finish tracking the GPS signals. Except that here, the alleged bad guys are the very people who lecture their clients not to memorialize their criminal intentions. File this under ironic, and repeat after me: do not email your co-conspirators to confirm your conspiracies.

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