January 30, 2012

Finally breaking ground on the redevelopment of Union Station's south side.  Ever since buying our space in LoDo overlooking the train station, we have anxiously anticipated the metamorphosis from dreary parking lot to vibrant city center.  We cannot wait for the end product, which will include public spaces with trees, fountains, benches and two new wing buildings with retail, restaurants and small markets.  Click here for more information about the project and artist renderings of what the plaza will look like when complete.

Here are a couple more pictures of what the construction looks like this morning.

 http://www.bizjournals.com/denver/print-edition/2011/12/30/agents-to-nfl-stars-mired-in-legal.html

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

Rajaratnam Conviction Signals Government’s New Strategy for Old Tool

            If Colorado federal prosecutors were building a case against former Qwest CEO Joe Nacchio today, it’s quite possible that their toolbox would include old fashioned bugging devices similar to those planted in mobster Paul Castellano’s kitchen table lamp back in the early 1980’s.  Apparently everything old is new again, because federal prosecutors just landed a stunning conviction against billionaire hedge fund manager, Raj Rajaratnam, in one of the government’s biggest insider trading cases in U.S. History, using the modern-day equivalent of “Big Paul’s” kitchen table lamp. 

Rajaratnam, the founder of Galleon Group, a New York hedge fund with assets of up to $7 billion, was convicted last month on fourteen counts of securities fraud and conspiracy.  The federal government estimated Rajaratnam’s illegal profits and avoided losses from inside trades to be more than $63 million.  The sheer scope of the case, which led to insider trading charges against 25 defendants, is enough to put Rajaratnam in league with such “Hall of Shamers” as Ivan Boesky and Michael Milken.  But what really sets this case apart is the fact that it was the first insider trading prosecution to use wiretapped recordings to win the conviction.  Over the course of the twelve-day trial, the government played 66 separate taped conversations for the jury, while Rajaratnam sat quietly in the courtroom listening to his own recorded accounts of receiving confidential inside tips from contacts at Wall Street’s most powerful  institutions, including Goldman Sachs, IBM, Bear Sterns, and Intel.  Jurors reported that the wiretaps of Mr. Rajaratnam were the deciding factor in rendering their decision.

            Of course, wiretaps are familiar trappings for prosecutors and screenwriters alike when going after Mafiosi and drug kingpins.  Tony Soprano made regular trips down to his basement to quietly discuss “business” with his crew, even though every word was being monitored by the FBI until Tony’s daughter, Meadow, took Tony’s table lamp (sound familiar?) to decorate her college dorm room. Wiretaps were the FBI’s secret weapon against the Soprano’s real-life counterparts such as Messrs. Castellano, Gambino, and Gotti.  Indeed, the first U.S. Supreme Court wiretapping case, Olmstead v. United States (1928), involved the taped conversations of a prohibition-era bootlegger.  But the Rajaratnam case was the first time wiretapped conversations were used in securities fraud prosecutions.  Until now, most fraudulent trading cases have been fairly strategic in scope, built upon a small number of suspicious trades—think Martha Stewart.  This is because broad-based wiretaps are very costly and time consuming propositions.  The Federal Wiretap Act, generally referred to as “Title III,”[1] requires a lengthy application process and a court order issued by a judge who must determine the presence of probable cause for the belief that a crime has been, or is about to be committed.  While judges seldom deny government requests for wiretap orders, the real work begins afterwards.  Wiretaps must be monitored in real time to “minimize the interception of communications” that are unrelated to the crime.  Agents must literally stop and start the recordings based on the content of the contemporaneous conversations. Minimizing unrelated interceptions is more problematic in white collar cases because suspects are more likely to converse with co-workers, friends, and spouses as part of their daily activities, unlike organized crime figures who tend to segregate their illegal activity from their family routine.  Moreover, judicial officers must regularly monitor progress and renew court approval based on periodic reports.  For these reasons, electronic eavesdropping is costly and controversial.

Nonetheless, Colorado’s white collar practitioners should expect to see prosecutors using wiretaps on a more regular basis after their dramatic success in the Rajaratnam case.  There is little doubt that the case was made using the stunning admissions captured through electronic surveillance.  Key evidence included a taped conversation showing Rajaratnam received inside information about an expected quarterly loss at Goldman Sachs from Goldman board member, Rajat Gupta.  The wiretap caught Rajaratnam telling his contact, “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share. The Street has them making $2.50.”  In another tape, Rajaratnam advised a fellow hedge fund manager to buy a million shares of a tech stock based on an inside tip, but then immediately sell half the shares to provide a plausible cover against federal regulators.  These are only two examples of the 66 incriminating conversations played for the jury.

            Rajaratnam will most certainly appeal.  His lead counsel, John Dowd, even left the courthouse declaring, “See you in the Second Circuit.”  Among the issues preserved for appeal are whether the government’s wiretap application failed to establish probable cause, whether wiretaps were even necessary in light of conventional investigative procedures, and whether the government adequately minimized the interception of communications.  The appellate court also will be asked to address whether the government is even entitled to use wiretaps to investigate insider trading cases when Title III is silent on the issue.  In his Order denying the suppression of the wiretap evidence, Judge Richard J. Howell found that since Title III authorizes the government use of wiretaps to investigate wire fraud, “the government was authorized to use wiretaps to investigate a fraudulent insider trading scheme using interstate wires even though Title III does not specifically authorize wiretaps to investigate insider trading alone.”[2]  Judge Howell did have concerns about the adequacy and completeness of the government’s wiretap application, but not enough concern to suppress the evidence.  According to the trial court, the government’s application omitted and misstated important information regarding the credibility of a key government informant and the overall scope of the SEC’s investigation.  “Given that the issuing court relies on the government candidly to disclose the full nature and scope if its investigation in order to determine whether a wiretap is necessary, the omissions here are troubling to say the least.”[3]  Nonetheless, Howell allowed the evidence to be heard because the other portions of the application demonstrated ample reason to find probable cause.      

            Until the appeal issues are resolved, it is unclear just how useful wiretaps will be as an investigative tool in building securities fraud cases.  In the meantime, the government will be including Title III applications in its white collar arsenal, and Colorado practitioners would be well advised to consider the following compliance issues:

• ·         Whether prosecutors followed the strict application process and established a sufficient probable cause for the required warrants;
• ·         Whether other normal investigative procedures were tried and proved unsuccessful, such that wiretaps were necessary over other information-gathering techniques;
• ·         Whether the surveillance was conducted in compliance with the minimization requirements of the Act, which obligate agents to screen calls and turn off recording devices whenever the conversation appears to be irrelevant or unrelated to the alleged activity;
• ·        

Judges will be listening.  To be sure, the next wiretap application in a white collar case will be closely scrutinized, and any misstep in the process may result in the exclusion of key evidence against some overly ambitious Whartonite looking to be the next god of Greenwich, Connecticut.      

[1] The Wire and Electronic Communications Interception and Interception of Oral Communications Act (formally known as the “Title III” Wiretap Act, 18 U.S.C. §§ 2510-2520).

[2] United States v. Rajaratnam, et al., No. 09 Cr. 1184 (RJH), 2010 WL 4867402, at *1 (S.D.N.Y. Nov. 24, 2010).

[3] Id.

Mitchell has broad practice experience in complex commercial litigation, business torts, internal investigations and employment matters. Prior to joining Sander Ingebretsen & Wake, he was a partner at Hogan & Hartson, LLP, where he practiced for 10 years.

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

Wake specializes in civil business litigation and has extensive experience representing clients in issues of securities, corporate governance, employment litigation and commercial disputes.

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

Rohner specializes in business litigation and has extensive experience representing large and medium-sized businesses, business owners, and financial institutions in commercial disputes. He lives in Jefferson County with his wife and two daughters. Through his participation in Leadership Jefferson County, Rohner intends to use his legal expertise to effectively strengthen his community. The 10-month program includes a retreat and monthly forums that highlight issues involving the Denver area while also connecting the participants to engaged community leaders.

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

Buckley Ranch Loan Pool was formed to loan money for the Buckley Ranch development project. Through a loan pool participation arrangement, funds were secured for the project. Gibraltar Companies sent a letter to investors within the loan pool, outlining the terms of the project and the loan pool arrangement.

A single statement in the letter, that principals of Gibraltar Companies would personally guarantee repayment of the loan, was at issue in the case. When Buckley Ranch Loan Pool was not able to collect on those personal guarantees, it filed a claim against Gibraltar Companies for violating the Colorado Uniform Securities Act, seeking damages in excess of $1.7 million, plus interest, attorney’s fees and costs. Buckley Ranch Loan Pool claimed that the statement by Gibraltar Companies regarding the personal guarantees was deceptive.

On behalf of Gibraltar Companies, Rohner filed a motion for summary judgment to dismiss the claims. The court agreed that the securities fraud claim was unsubstantiated and dismissed Gibraltar Companies from the case.

“We are pleased that the Court agreed that the statements made by Gibraltar Companies were not deceptive or fraudulent in any way,” Rohner said

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

DENVER–A Pennsylvania-based telecom company on June 10 won a $12.5 million judgment in Denver District Court in a complex debt case involving a Colorado banking cooperative. Judge R. Michael Mullins presided the case.

Pa.-based South Canaan Cellular Equity and South Canaan Cellular Investments borrowed $7.5 million for infrastructure from Colorado-based banking cooperative CoBank, but later defaulted on that loan. Another telecom company, Rowland, Pa.-based Lackawaxen Telecommunications Services, purchased the loan from CoBank and as the new lender filed suit against the South Canaan entities.

At the same time, the South Canaan entities filed for bankruptcy in Pennsylvania. At issue was a counter claim filed by the South Canaan entities, who argued Lackawaxen breached fiduciary duties to defendants and improperly purchased the loan.

Lackawaxen was represented by Charles T. Mitchell of Sander Ingebretsen & Wake and attorneys from Pennsylvania firms Reger Rizzo & Darnall and Vuono & Gray. Representing the defendants was Charles Hecht of Hamil/Hecht, who is deceased. His partner Larry Hamil took over the case into the settlement. The case is settled and defendants won’t appeal.

http://www.lawweekonline.com/2011/07/pa-telecom-company-secures-12-5m-judgment-in-denver/

South Canaan Cellular Equity and South Canaan Cellular Investments borrowed $7.5 million from Colorado-based banking cooperative CoBank, ACB, to expand and upgrade their rural telecommunications services but quickly defaulted on the loan. Lackawaxen Telecom purchased the loan, which was secured by the voting rights in South Canaan Cellular Communications Company that were held by the borrowers and South Canaan Telephone Company.

In January 2009, Lackawaxen Telecom filed a suit to enforce its rights under the loan agreements. The borrowers filed for bankruptcy protection but South Canaan Telephone Company filed counterclaims, asserting that Lackawaxen had breached various duties owed to defendants and interfered with contractual and prospective business relationships by its improper purchase of the CoBank loan.  The case played out in state and federal court in Colorado and Pennsylvania, but it was the Colorado ruling that resolved the litigation and provided Lackawaxen with a $12.5 million award.

“This was a decisive and total win for our client. Not only did we prevail on all defendant counterclaims, but we were able to secure full repayment of the loan, including interest and attorneys’ fees,” Mitchell said.

After more than two years of litigation in multiple state courts and federal bankruptcy court, Mr. Mitchell, with co-counsel from Pennsylvania-based Reger Rizzo & Darnall, LLP, and Vuono & Gray, LLC, secured the global victory. All counterclaims were dismissed, and the Court ruled that Lackawaxen Telecom was entitled to all benefits and voting rights under the loan agreements.

About SIW

Sander Ingebretsen & Wake is a business litigation law firm in downtown Denver that provides companies and individuals with superior legal counsel. They combine extensive trial experience, legal knowledge, and client commitment with effective staffing and technology to achieve excellent results for clients. They specialize in business litigation, class actions, commercial arbitration, corporate governance, employment litigation, financial institutions, franchise and authorized dealer disputes, intellectual property and information technology, real estate and construction litigation, and securities litigation.

Read a recap of our Changing Expectations discussion from Law Week Colorado.