Lawyer Accused in Scandal Over MasterCard Deal Speaks Out
Lawyer Accused in Scandal Over MasterCard Deal Speaks Out
The crash of a New York attorney named Keila Ravelo has captivated Big Law. Now Ravelo is starting to talk about it.
Until last fall, she worked as a partner at Willkie Farr & Gallagher, a top-tier Manhattan corporate law firm. She led a Willkie team defending MasterCard in antitrust litigation brought by thousands of merchants. In December, federal agents arrested Ravelo and her husband, Melvin Feliz, for allegedly defrauding MasterCard and Willkie by means of a phony litigation-services vendor Feliz ran.
That was surprising enough. Then an internal investigation by Willkie revealed a further shocker: Ravelo had received thousands of e-mails containing confidential legal information from plaintiffs’ attorney Gary Friedman.
The Friedman-Ravelo correspondence across enemy lines exploded. Citing the previously secret communication, a federal judge on Aug. 4 rejected a $79 million settlement between merchants and American Express. Now the back-channel chatter threatens to blow up a $5.7 billion settlement between an overlapping group of retailers and MasterCard and Visa.
Ravelo’s husband, Feliz, has already pleaded guilty to the litigation-services fraud scheme, as well as separate drug trafficking charges. Ravelo has resigned from Willkie while denying wrongdoing. Willkie has suffered a serious black eye. And the credit-card litigation could now persist indefinitely. (Willkie does legal work for Bloomberg L.P., owner of Bloomberg Business.)
In her first interview since the scandal broke, Ravelo, 49, told me “people don’t know the whole story.” What follows is by no means a complete or objective account. It’s a series of fragments and factoids from Ravelo's perspective. There doubtless will be more to come from all parties to the controversy.
The MasterCard/Visa settlement with retailers, initially reached in 2012, sought to resolve merchants' allegations of rate-fixing and other collusive conduct by the card companies—accusations the defendants denied. Even before the Friedman-Ravelo communications came to light, various large retailers had objected to the pact as inadequate. In trying to salvage the deal in the wake of Ravelo's departure, Willkie and MasterCard’s other lead law firm, Paul, Weiss, Rifkind, Wharton & Garrison, have minimized Ravelo’s role. The law firms have said in court filings that while Ravelo led the Willkie team, Paul Weiss attorneys set overall strategy and argued key motions in court.
“That is ridiculous," Ravelo said. "I was in every meeting, I was on every conference call, and I sat at counsel table in court.”
Ravelo told me that while helping craft MasterCard’s strategy, she relied on Friedman’s revelations of confidential plaintiffs’ information. “When advising MasterCard and communicating with co-counsel … including regarding the negotiation and finalization of the settlement and in connection with mediation sessions, I drew upon all the information in my possession that affected MasterCard’s interests, including the information I was provided by Gary Friedman,” Ravelo said in a sworn declaration dated Sept. 1.
In other words, she says she used confidences revealed to her by Friedman to try to get a better deal for MasterCard. That conduct isn't the subject of the criminal charges, but if her account is true, the $5.7 billion settlement seems doomed. Why? Because the plaintiff-retailers’ interests were revealed to—and used against them by—their longtime antagonist.
The two Willkie partners who worked most closely with Ravelo—Wesley Powell and Matthew Freimuth—didn’t respond to e-mails and phone calls seeking comment about Ravelo. They haven't been accused of wrongdoing. A Willkie spokeswoman likewise didn't respond to e-mail and voice messages. A person designated to speak for the defense team called Ravelo's assertions false. The negotiations and settlement were proper in all respects but for the behavior of Ravelo and Friedman, this person said.
Friedman issued a statement on Sept. 29 in which he characterized his communications with Ravelo as routine back-and-forth with an opposing lawyer, all of it intended to improve the fortunes of his clients. "I acted as I did based upon a verifiably accurate assessment that our communications would benefit the merchant class," Friedman said in his statement. "My internal compass is guided entirely by class member interests. ... This work entailed no shortage of sidebars, and it required relationships of trust between individual lawyers in opposing camps."
Represented by a separate set of attorneys, Costco, Home Depot, and other major merchants trying to block the settlement as inadequate dismiss Friedman’s justification as laughable. “Gary Friedman indisputably betrayed his ethical duties,” the objecting retailers said in a separate brief.
Did Ravelo violate her ethical obligations in her communications with Friedman? She says no, because she was exclusively on the receiving end of plaintiffs' confidences. Federal prosecutors allege that she betrayed her client in a more basic way: by ripping off the card company to the tune of millions of dollars via the phony litigation-services vendor.
Ravelo told me that if the full story of the MasterCard/Visa settlement negotiations were told, it would strike many observers as unsavory. She said, for example, that she and other defense lawyers and a court-appointed mediator employed what they called a “cram down” strategy, playing certain larger retailers against smaller rivals, all with the collaboration of plaintiffs’ lawyers. A cram-down, as Ravelo describes it, might raise new questions about the fairness of the $5.7 billion settlement—although high-stakes litigation is not for the faint of heart, and class-action defendants routinely try to divide and conquer groups of plaintiffs.
The person familiar with the defense team confirmed that something approximating a cram-down strategy came into play but that no retailers were exploited. The mediators and federal judge supervising the process were well aware of how the negotiations unfolded, this person added.
On another issue, Ravelo said she’s prepared to provide evidence that MasterCard and Visa allegedly used private joint defense-strategy sessions to engage in fresh collusion on rates charged to retailers. She said some plaintiffs’ lawyers became aware of this alleged collusive activity, but defense lawyers talked them out of publicizing it in the interest of reaching a large settlement.
Of the fresh collusion allegations, the person designated to speak for the defense team said that the joint defense group worked together, as one would expect, and that this arrangement was approved by two court-appointed mediators and the judge in the case.
Ravelo and her attorney, Steve Sadow, declined to discuss their motivation for speaking to me. So I’ll speculate: They want to convey that if her former white-shoe colleagues assist federal prosecutors in trying to put Ravelo in prison, she intends to fight back—and, in the process, reveal compromising information about elite lawyers and how they operate behind the scenes.
If Ravelo really does have a bomb to drop on the world of high-stakes litigation, the collateral damage appears to be of little concern to her as she seeks to avoid a future behind bars.