Nov 11, 2019

DealBook: What a Judge’s Rare Reversal Means in the Platinum Partners Fraud Case

Peter J. Henning

Credit...Mike Segar/Reuters
Trial judges don’t typically overturn jury convictions.
A Federal District Court judge did just that last month and overturned the convictions of Mark Nordlicht and David Levy in the so-called Black Elk scheme involving the now-defunct hedge fund Platinum Partners.
Judge Brian M. Cogan found there was insufficient evidence of criminal intent to convict Mr. Levy, and granted Mr. Nordlicht a new trial. In July, a jury had found the men, both executives at Platinum Partners, guilty of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud.
The case revolved around an oil and gas company, Black Elk, which Platinum Partners controlled. A number of Black Elk’s bonds were held by Beechwood, an affiliate of Platinum Partners. At issue was whether Black Elk’s bondholders knew that Platinum Partners controlled Beechwood when they voted on changing the protections for bondholders, which provided a more favorable outcome for Platinum.
Judge Cogan found that the information about who controlled the bonds was material information for investors. He also ruled that there was enough evidence to establish Mr. Nordlicht’s criminal intent because he knew that bonds were held by Beechwood.
But according to the judge, allowing the verdict against Mr. Nordlicht to stand “would be a manifest injustice” because holding the bonds through Beechwood “suggests that, although Nordlicht knew about the affiliate rule, he and Beechwood went to great lengths to comply with” that rule. The judge found that the prosecutors had failed to introduce sufficient evidence to prove their case.
In overturning Mr. Levy’s conviction, Judge Cogan found that “the inference that Levy was so deeply affected by Nordlicht’s cursory criticism, and so concerned about Nordlicht’s opinion, that he would enter into a criminal conspiracy to redeem himself is too speculative to sustain a conviction.”
The Justice Department has asked the United States Court of Appeals for the Second Circuit in Manhattan to reject the acquittal of Mr. Levy and overturn the decision to grant a second trial for Mr. Nordlicht.
When a judge overturns a jury verdict, there is a question of whether the defendant can be tried a second time. Judge Cogan acquitted Mr. Levy only after the jury had returned its verdicts, so there is no violation of the double jeopardy clause of the Constitution. Prosecutors have asked the judge to delay setting a date for Mr. Nordlicht’s second trial so the appeal can be heard. If the appeals court reverses Judge Cogan’s decision, the jury’s guilty verdicts will be reinstated.
A second trial of Mr. Nordlicht would pose challenges for the government. Judge Cogan has made it clear that he has a low opinion of the evidence.
But if the jury convicted Mr. Nordlicht again, it would be much more difficult for Judge Cogan to throw out the verdict. Convincing two juries that a defendant acted with fraudulent intent is usually a signal that there is enough evidence to support the charges.
In any retrial, the defense also gains the benefit of its experience in the first trial. That can make it easier to exploit any weak spots in the government’s case and explain how the defendant did not have an intent to defraud.

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