Securities Fraud Conviction in New York

Sometimes even a great cross-examination of a fraudster-snitch can't save your client.

James Margulies was convicted yesterday in a $100 million securities fraud case. Manhattan DA Cy Vance promptly showed up with a statement (will it help rehabilitate sagging image?) [More...]:

The defendant’s pump-and-dump scheme artificially inflated stock prices before he sold off the shares, leaving honest investors holding worthless stock,” Cyrus R. Vance Jr., the Manhattan district attorney, said in a statement after a jury convicted Mr. Margulies on 30 criminal counts. Mr. Vance noted that the victims included a teachers’ pension fund in Ohio and a Methodist church.

As for the cooperator, John D. Mazzuto, his deal is now in jeopardy because he picked up a DUI which violates his agreement. When he pleaded guilty in January, the fraud was only $60 million. How did it get to $100 million?

Vance's office agreed to a 1 to 3 year sentence for Mazzuto. Margulies is now facing 25 years. Freedom is a commodity far more precious than money. The incentive to lie -- and tell the truth as the Government sees it -- is enormous.

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    I take it Mazzuto's 1-3 year sentence (none / 0) (#1)
    by NYShooter on Thu Jul 21, 2011 at 06:22:19 PM EST
    was before the DUI charge. What is customary in a case like this, and what do you think he's facing now?


    I doubt it will be much different (none / 0) (#2)
    by Jeralyn on Thu Jul 21, 2011 at 06:23:55 PM EST
    now that he's gotten them a conviction. Had Margulies been acquitted, I wonder what they would have done.

    Am confused, please explain (none / 0) (#3)
    by BTAL on Thu Jul 21, 2011 at 06:28:45 PM EST
    First, I understand you are a defense attorney and I respect that profession.

    However, where is the balance in defending an individual described who is:

    • One of the "evil" Wall Streeters.
    • Whose actions probably resulted in many seniors and many others to lose significant savings/investments for their retirement.


    Ooh, ooh, let me (5.00 / 2) (#4)
    by NYShooter on Thu Jul 21, 2011 at 06:34:46 PM EST
    Jeralyn isn't so much defending the bad guy. She's merely forcing the prosecutor to prove his case.

    Big difference.


    Fair enough and a gold star for you (none / 0) (#5)
    by BTAL on Thu Jul 21, 2011 at 06:42:53 PM EST
    The questions still stand for the rest of the group here.

    Thank you, thank you (none / 0) (#6)
    by NYShooter on Thu Jul 21, 2011 at 06:49:58 PM EST
    I didn't mean to be rude.

    Speaking for Jeralyn....I think my forefingers are gonna fall off.


    to add to NYShooter (5.00 / 1) (#7)
    by Jeralyn on Thu Jul 21, 2011 at 07:00:12 PM EST
    My complaint is with how the prosecution proves its case when it offers close to a get out of jail free card to a person heavily involved in the criminal activity in exchange for testifying against the defendant on trial. Cooperator testimony is fraught with danger because the incentive to lie is so great.

    The government will say it is rewarding the cooperator who has admitted his guilt and agreed to testify with a lenient sentence only so long as the cooperator tells the truth.  But it is the Government's version of the truth they must tell. If the cooperator's truthful statement was that the defendant on trial wasn't guilty, they wouldn't call him as a witness or give him a deal. So they only offer deals to those who support their case against someone else. When you are looking at 25 years and the only way out short of trial is to agree to tell a jury that someone else is guilty, it's a powerful incentive to lie.

    Charges are not evidence. I don't know if Margulies is an evil Wall Streeter or intentionally defrauded anyone. And given that the DA's evidence was in large part based upon Mazzuto, who if you read the prior article,

    Mazzuto, who prosecutors said illegally obtained $15 million from Pittsburgh-based IEAM and used it to fund a lavish lifestyle, including homes in Southampton, New York, and Palm Beach Gardens, Florida, testified that he couldn't make bail after he was arrested in May 2010. A judge had set bond at $2 million. He spent seven months behind bars.

    During his testimony, Mazzuto said he had a "difficult time dealing with jail," found God and approached prosecutors in December about a plea deal to reduce his potential sentence.

    Mazzuto faced as long as 25 years for the most serious charges against him. If he cooperated and fully complied with his plea agreement, prosecutors agreed to recommend a sentence of one year to three years in prison  

    This is paid testimony, only it is paid with promises of freedom instead of money. It's a practice that makes our system morally bankrupt.


    To your point.... (5.00 / 1) (#8)
    by NYShooter on Thu Jul 21, 2011 at 07:41:48 PM EST
    The case that was broadcast recently (and, I believe you blogged about it) where four completely innocent suspects each confessed to a heinous murder and rape. Not bad enough that just by observation any lay person could see they all were cognitively challenged, yet all told the same story of the brutal, tortuous interrogations they endured before "breaking," and confessing to crimes they didn't commit.

    The part I found truly incredulous was how the interrogator kept demanding the suspects name other involved "conspirators," and like trained, beaten puppies, they started tossing out the names of virtually everyone they ever knew. And, sure enough, the cops arrested many of them on just this rancid accusation, and simply expanded the "plot" to include almost everyone in the state.

    If that case doesn't scare the bejesus out of all freedom loving people then we are a lost cause as a society.


    findings of fact? (none / 0) (#9)
    by diogenes on Thu Jul 21, 2011 at 07:55:44 PM EST
    "Prosecutors said that Mr. Margulies and Mr. Mazzuto issued 43 million shares of stock in a company in which they had executive roles, even though they were authorized to issue just 15 million shares. Most of the shares they issued were to close friends and relatives, who sold them off and invested some of the money back into the company, Industrial Enterprises of America. Those investments made the company seem as if it were in better financial health than it actually was, prosecutors said, and allowed them to artificially inflate the value..."

    So Mr. Margulies was not an executive of the company and the company did not issue forty-three million shares though authorized to issue only fifteen million?  A good defense lawyer should pretty easily be able to show that these "facts" are just not so, whatever a snitch might claim.  There is a paper trail, after all.  

    Rosa Parks' Estate Looted by Lawyers (none / 0) (#10)
    by Mr Natural on Fri Jul 22, 2011 at 06:02:23 AM EST
    "Her estate, with a cash value of $372,000 at the time of her death, is mostly gone -- eaten up by lawyer's fees...  

    After the money was gone, the filing charges, the lawyers persuaded [Wayne County Probate Judge Freddie] Burton to award them Parks' vast memorabilia collection and the rights to license her name [valued at $10 Million], which Parks had given to her Rosa and Raymond Parks Institute for Self Development long before she died."

    Heckuva profession, Burton.

    - Lawyer: Rosa Parks' estate was drained, David Ashenfelter, Detroit Free Press, July 21, 2011, http://www.freep.com/article/20110721/NEWS06/107210550/Lawyer-Rosa-Parks-estate-drained?odyssey=obin site

    Sorry, I was aiming for the open thread. (none / 0) (#11)
    by Mr Natural on Fri Jul 22, 2011 at 06:26:20 AM EST