By Joseph Ax
NEW YORK, Oct 10 (Reuters) - An attorney for former Mayer
Brown partner Joseph Collins said at the start of his client's
retrial on Wednesday that Collins was misled by top executives
at commodities broker Refco and now has to "answer for their
Collins, formerly an outside lawyer for Refco, is charged
with helping the firm's executives conceal a $2.4 billion fraud
that caused the broker's 2005 implosion. He is on trial in U.S.
District Court in Manhattan a second time, after his 2009
conviction and seven-year prison term were tossed out by an
appeals court earlier this year.
The case marks a rare instance in which a corporate lawyer
has been charged for legal work done in connection with a
client's fraud. Last year, a federal judge in Maryland threw out
charges against a GlaxoSmithKline lawyer who was accused of
obstructing a probe into the company's marketing practices.
Collins has maintained that his actions were part of a
good-faith legal representation of his client, not a conspiracy
to commit fraud.
In opening statements, defense attorney Jonathan Bach said
Collins was never informed of the Refco fraud and had no way of
knowing that the company's executives were hiding illegal
"This man was lied to and used by his clients, and now he
has to sit here and answer for their crimes," Bach said.
Earlier, Assistant U.S. Attorney Harry Chernoff told the
jury that Collins performed legal work that allowed the scheme
to continue undetected, even after Refco agreed to sell itself
to private equity firm Thomas H. Lee and went through an initial
"The defendant, Joseph Collins, used his law license to earn
millions of dollars in fees for legal work to help his client
Refco commit one of the biggest frauds Wall Street has ever
seen," Chernoff said.
Prosecutors have accused Collins of failing to disclose to
T.H. Lee the existence of a deal with Austrian bank Bawag that
gave the bank a significant stake in Refco during T.H. Lee's
negotiations to buy the company.
But Bach argued to jurors that Collins simply exercised his
legal judgment regarding his obligation to disclose information,
a decision that did not rise to the level of a crime.
The trial is before U.S. District Judge Loretta Preska.
In January, the 2nd U.S. Circuit Court of Appeals found that
the judge at the earlier trial, Robert Patterson, should have
called defense lawyers in before advising a recalcitrant juror
to continue deliberating.
The Refco fraud, which was revealed soon after the company's
August 2005 IPO, led to the prosecution of several Refco
executives. Former chief executive officer Phillip Bennett is
serving a 16-year prison sentence and former president Tone
Grant is serving 10 years.
Former chief financial officer Robert Trosten and Santo
Maggio, who ran a unit of Refco, also pleaded guilty and agreed
to testify in other trials, including that of Collins.
Bach urged the jury to carefully consider the credibility of
those prosecution witnesses.
"There is no other way to put it, ladies and gentlemen:
these men are sociopathic liars," he said.
Maggio died earlier this year, Chernoff said in court. His
testimony from the first trial will be entered into evidence.
Collins faces 10 counts, including wire fraud, bank fraud
and conspiracy charges. The fraud charges carry a maximum of 20
years in prison.
The case is USA v. Collins, U.S. District Court for the
Southern District of New York, No. 07-cr-1170.
For the U.S.: Assistant U.S. attorneys Harry Chernoff,
Edward Imperatore and Michael Levy.
For Collins: Jonathan Bach and William Schwartz of Cooley.
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