SEC known Kelly jury hears closing arguments
2003-10-10 15:16 ET - Street Wire
by Mort Lucoff in Miami and Lee M. Webb
James T. Kelly, on trial for securities fraud in Miami, is either a crook "driven by greed" or an innocent victim "set up" by his one-time partners and friends, according to diametrically opposed closing arguments delivered by prosecution and defence lawyers. Mr. Kelly faces a possible 25 years in prison, if convicted on all seven counts relating to wire, mail and securities fraud.
Mr. Kelly, the former president of Pennsylvania-based Shamrock Partners Ltd., a brokerage firm with a checkered history known to the U.S. Securities and Exchange Commission (SEC), is accused of conspiring with former co-defendants and business associates Joseph Huard and Bruce Cowen in a kickback and stock manipulation scheme involving shares of Lighthouse Fast Ferry Inc.
All three were arrested last year on charges arising from Operation Bermuda Short, a two-year joint FBI-RCMP undercover sting that led to indictments against 58 penny stock players from the U.S. and Canada.
Mr. Huard and Mr. Cowen negotiated separate plea bargains in the case, flipping to become key prosecution witnesses against Mr. Kelly.
(As previously reported by Stockwatch, the Lighthouse Fast Ferry shares at the centre of the alleged kickback and stock manipulation scheme were owned by the Lancer Group, a purported $1-billion hedge fund operation run by former star Wall Street analyst Michael Lauer. (All amounts are in U.S. dollars.). In a separate civil action, the SEC shut Lancer down on July 10, levelling allegations of massive fraud against the hedge fund operation and Mr. Lauer.)
Mr. Kelly's Bermuda Short trial in the U.S. District Court for the Southern District of Florida in Miami opened with jury selection on Sept. 23. Because of Mr. Kelly's documented health problems, including diabetes, Judge Cecilia Altonaga instituted abbreviated trial sessions running from 11:30 a.m. to 5 p.m.
U.S. prosecutors Thomas McCann and Thomas Hanusik laid out the government's case against Mr. Kelly over eight half-day court sessions, calling their final witness on Oct. 7. Mr. Kelly's Miami defence lawyer Norman Moscowitz called the defence witnesses and wrapped up the testimony in less than three hours on Oct. 8.
On Thursday, the jury heard final arguments from the prosecution and defence, with U.S. prosecutor Mr. McCann leading off for the government. Mr. McCann addressed the jury for approximately 90 minutes.
ABOUT GREED
"Greed is what this case is all about," was the opening remark from Mr. McCann to the jury.
"What drove them?" Mr. McCann asked rhetorically. "They did it for money. This defendant was fully involved, directly and indirectly."
Mr. McCann noted that two former co-defendants, Mr. Huard and Mr. Cowen, had pled guilty in the kickback and stock manipulation scheme and had testified for the prosecution against Mr. Kelly. Mr. McCann told the jurors that "all of them had had a lot to gain" in the scheme. "And all of them knew their conduct was wrong," the prosecutor said.
Mr. McCann laid out for the jurors in detail Mr. Kelly's part in the conspiracy involving kickbacks and stock manipulation involving shares of Lighthouse Fast Ferry Inc. between April and December of 2001.
"Jim Kelly was actively engaged in the schemes," Mr. McCann told the jury. "Mr. Kelly knew what was going on. The purpose was to control the stock of Lighthouse Ferry through fraudulent means. No doubt about it."
Anticipating that Mr. Moscowitz would attack the credibility of the testimony of Mr. Huard and Mr. Cowen because of their plea deals, Mr. McCann said that they had a lot to lose if they did not tell the truth.
"Their co-operation agreements would be torn up," he said. "All they can do is tell the truth and let the chips fall where they may."
Mr. McCann ended his argument by telling the jurors that Mr. Kelly knew what was going on.
"He was solidly involved throughout," Mr. McCann said. "Use your common sense. We have shown his direct involvement in these crimes."
AN AILING VICTIM
Not so, said Mr. Moscowitz in his closing argument to the jury on Thursday.
"Jim Kelly did not do this deal," Mr. Moscowitz said. "It was done by Joseph Huard and Bruce Cowen. They set up the transactions, did the documents, the transactions, the E-mails. Jim Kelly had no involvement."
The defence attorney made much out of what he said were the few statements of Mr. Kelly caught on tape recordings in the undercover FBI investigation of the stock manipulation and kickback scheme.
"They're making a judgment on his silence," Mr. Moscowitz told the jurors.
The defence lawyer went on to challenge the credibility of Mr. Cowen and Mr. Huard. The prosecution was asking the jurors to "rely on two friends whom he (Mr. Kelly) had trusted," Mr. Moscowtiz said.
"What they testified to at the trial was to benefit themselves," the defence lawyer told the jury. "They cannot be believed."
Mr. Moscowitz then turned to the prosecution's claims regarding the month-end manipulation of Lighthouse Fast Ferry's share price. Mr. McCann had shown the jury charts tracking the end of the month pumping up of Lighthouse Fast Ferry stock and the slump in its prices during the rest of the month.
Mr. Moscowitz countered that these same charts showed that the stock was down seven months and up only in five months.
"If you look at the whole year, the price began at $2.18 a share and ended the year at $1.90," Mr. Moscowitz told the jurors. "If it's down, what's the point of manipulation?"
Mr. Moscowitz told the jury that Lancer, which owned the Lighthouse Fast Ferry shares, was a hedge fund and hedge funds are far less regulated than mutual funds. The defence lawyer said that the law governing hedge funds is vague and ambiguous.
"If the law isn't clear, it isn't a crime," Mr. Moscowitz argued.
Mr. Moscowtiz characterized Mr. Kelly as man with two passions.
"He is a trader," the defence lawyer said. "His other passion is fishing."
Mr. Moscowitz said Mr. Kelly suffered from "very severe medical and mental problems" during the period that the government says he was a key participant in the stock manipulation and kickback scheme.
"His health was getting worse," Mr. Moscowitz said, going on to tell the jury that Mr. Kelly was "letting things go."
"He had real problems," the defence lawyer said. "He was relying on his partners and they took advantage of him."
Concluding his closing argument, Mr. Moscowitz turned to the jury. "All I ask you for is justice," Mr. Moscowitz said.
ON HIS GAME
Following Mr. Moscowitz's closing argument, which also lasted about 90 minutes, co-prosecutor Mr. Hanusik rose to conclude the government's case with an hour-long rebuttal of the defence argument.
Mr. Hanusik scoffed at the claim that Mr. Kelly's physical and mental problems put him out of the picture. The prosecutor wondered at the timing of these problems, occurring during the months of the alleged kickback and stock manipulation scheme.
Mr. Hanusik pointed out that Dr. Richard Eisner, the neurologist Mr. Kelly had seen in March of 2001, wrote in his medical record that "his prognosis was benign."
"There is no evidence that his health deteriorates, gets worse," Mr. Hanusik said. "All the medical evidence is quite irrelevant. Look to the tapes. Hear Mr. Kelly on the big tape. He's involved in complex securities transactions. He's lucid, alert, on his game."
With the closing arguments wrapped up on Thursday, Judge Altonaga delivered her instructions and handed the case over to the jury on Friday morning.
Because of a juror scheduling conflict, deliberations broke off at 1 p.m. on Friday. U.S. courts will be closed on Monday for the Columbus Day holiday, so the jury will not resume deliberations until Tuesday, Oct. 14.
(More information regarding Mr. Kelly's trial is available in Stockwatch articles published on Sept. 25, 26 and 29; and Oct. 1, 2, 3, 7, 8 and 9, 2003.) |
