The fraud conviction of Joseph Collins, Refco Inc.’s former outside lawyer, was reversed by an appeals court that found the trial judge improperly instructed a juror outside the presence of Collins’s lawyers.
Collins, found guilty in 2009 of helping Refco’s former chief executive officer Phillip Bennett and other executives defraud investors of $2.4 billion, is entitled to a new trial, a three-judge panel of the New York-based federal appeals court said in a ruling today. Collins, who is free on bail, was sentenced to seven years in prison.
Collins, 61, was convicted of five of the 14 criminal counts against him, including two counts of wire fraud, two counts of securities fraud and one count of conspiracy. Jurors were unable to reach a verdict on the other nine charges. During deliberations in the case, jurors told the judge of sharp disagreements in the jury room, with one juror threatening to cut off the finger of another one.
“We cannot say with fair assurance that the judgment was not substantially swayed by the district court’s errors in this case,” U.S. Circuit Judge Denny Chin wrote in an opinion today.
“After this long fight, we are very gratified by the Court of Appeals’ decision,” William Schwartz, a lawyer for Collins, said in an e-mailed statement. Ellen Davis, a spokeswoman for the U.S. Attorney in Manhattan, declined to comment on the ruling.
Collins, a former corporate lawyer with the Chicago firm Mayer Brown LLP, was accused of helping Refco’s management conceal transactions that hid losses incurred by the New York-based firm.
On the fifth day of deliberations in Collins’s trial, jurors told U.S. District Judge Robert Patterson in a note that they were having difficulty reaching a verdict. Later that day, one of the jurors told a court security officer that another juror had physically threatened him.
The next morning, Patterson received two notes from the jury, including one from Juror 4, a man, who said that Juror 9, a woman, had threatened to cut off his finger and had said “I will have my husband take care of you.”
Later, jurors sent two more notes, including one claiming that Juror 4 had tried to barter his vote. Over the objections of Collins’s attorneys, Patterson met privately with Juror 4, encouraging him to work with the other jurors toward a verdict.
The appeals court held that Patterson’s meeting alone with Juror 4 deprived Collins of his right to be present at all stages of the trial.
“This was a situation in which an able and experienced trial judge was trying in good faith to ease serious tensions in the jury room and deal with accusations of misconduct,” Chin wrote in the opinion. “Nonetheless, we conclude that the district court erred in not disclosing the contents of the note to Collins and counsel before taking action and in engaging in an ex parte communication with Juror 4.”
Once the biggest independent U.S. futures trader, Refco collapsed in 2005, two months after raising $670 million in an initial public offering. Refco filed for bankruptcy after disclosing that it had transferred more than $1 billion in losses to a firm owned by Bennett.
For almost a decade, Refco concealed trading losses by secretly transferring them to the Bennett-owned holding company. Prosecutors said Collins knew of the scheme and drafted legal documents that allowed Bennett to deceive investors, including Boston-based Thomas H. Lee Partners, which paid $507 million for a 57 percent stake in Refco in 2004.
Bennett was sentenced to 16 years in prison in 2008.
The case is U.S. v. Collins, 07-cr-1170, U.S. District Court, Southern District of New York (Manhattan).