Monday, 2 March 2015
Last updated 11 min ago
Jan 31 2008 | 1:00am ET
The crime cost investors hundreds of millions of dollars, and two out of the three culprits of the now-defunct Bayou Group are doing the time for their involvements in the hedge fund scam with a third awaiting his fate. But a lawyer for co-founder James Marquez, who was sentenced to more than four years for his role in the fraud, says prosecutorial missteps might backfire in the long run.
According to Bradley Simon, a partner at law firm Simon & Partners, the case was a little unusual, as prosecutors gave a cooperation agreement to Daniel Marino, the former chief financial officer considered by the judge to be the “lynchpin” of the crime. Normally, prosecutors give deals to “lesser downs on the totem pole” and use their testimonies against higher ups, Simon said—people like his client.
“There was a subconscious effort on the government’s part to try to minimize the conduct of the cooperators and overstate the conduct of the non-cooperating individuals,” he said. “And that’s okay, if the non-cooperating individuals are the higher-ups. But the judge wasn’t buying this, which is bad for the government because a witness who they went to bat for got 20 years. This is going to be a problem for them in the future because if they can’t deliver on these agreements, clients are going to be less inclined to cooperate.”
Simon did not deny his client’s involvement in the scam, but said he would have preferred that his client didn’t have to serve time in the clink because of his lesser role in the scam. He said Marquez was involved at a very early stage but got out and has “made good on whatever loss there was.”
“Marquez had no idea what Marino and Israel were doing after he left the firm, and the government responded by producing documents purportedly signed by Marquez to show that he did know what was going on,” Simon said. “But guess what? It turned out that the document was a forgery by Marino.”
The forged documents in question by Simon include a letter to an investor, a funds transfer agreement and a trading authorization form.
Also, Simon said government lawyers’ rebuttal of the defense’s psychiatric report showing that Marquez suffers from bipolar disorder, which made him unable to challenge the wrongdoings of Israel and Marino, also backfired.
“The government tried to submit their own psychiatric report and their psychiatrists agreed with our psychiatrists. Once again, they fell on their faces and this whole thing could’ve been avoided if they didn’t use the primary culprits are cooperators. While the judge’s judgments were harsh all around, she clearly was not buying it.”
The judge wasn’t buying Marquez’s bipolar claims, either, saying she would “not excuse the defendant’s behavior as aberrant."
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…