A Turf Battle Over Handling Of Fraud Case - The New York Times 6/2/09 10:29 AM

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A Turf Battle Over Handling Of Fraud Case
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By GRETCHEN MORGENSON
[email protected]
Published: Wednesday, May 26, 1999
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In the middle sits Victor Wang, the former chairman of Duke &
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But on Monday, apparently with no notice to Mr. Morgenthau, Federal marshals spirited
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Federal prosecutors are not barred from securing a guilty plea following a state
prosecution, but the Petit Rule says that they should generally not prosecute where a

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A Turf Battle Over Handling Of Fraud Case - The New York Times 6/2/09 10:29 AM

prosecution, but the Petit Rule says that they should generally not prosecute where a
state prosecution already exists. To do so, a Federal prosecutor usually must get
approval from the Department of Justice. The United States Attorney declined to
comment on that matter yesterday.

Mr. Wang's exit from Riker's Island -- under a writ requested by Mr. Carter's office --
may signal that the former broker is trying to reach a plea agreement with Federal
prosecutors that would trump Mr. Morgenthau's indictment. In their writ, the Federal
prosecutors did not state whether they sought Mr. Wang as a witness in a case or as a David Pogue channels
defendant.
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Yesterday, Mr. Wang's lawyer, Lawrence V. Carra of Mineola, N.Y., said, ''It is not in my
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If a plea is being discussed, it indicates that cooperation between the United States
Attorney's and the District Attorney's staffs, which have previously worked together, is
near a low. The maneuvering for control of high-profile cases is usually conducted by
prosecutors behind the scenes, not in the spotlight.

Jack S. Hoffinger, a criminal defense lawyer at Hoffinger, Friedland, Dobrish & Stern,
called the apparent squabble unfortunate. ''It's irregular to writ out a state prisoner
without notifying the district attorney who put him away. Especially when the D.A. is RELATED ADS What are Related Ads?

Bob Morgenthau, whose competence and integrity are models for the rest of the
» Criminal History
country,'' he said. ''Is this a grab for publicity?''
» Criminal History Online

Since Mr. Morgenthau began investigating Duke & Company almost two years ago, four » Find Criminal History

former employees of the firm have pleaded guilty to securities violations. Earlier this » My Criminal History
month, a grand jury returned indictments against the firm and 18 individuals for » Criminal History Lookup
enterprise corruption, grand larceny, antitrust violations and evidence tampering.

Prosecutors contend that Duke employees colluded with at least two other brokerage
firms to maintain artificially high prices of six stocks underwritten by Duke between
1995 and 1998. About 34,000 clients invested $171 million with Duke, according to Mr.
Morgenthau. The firm was the subject of 26 regulatory actions before it closed in March
1998.

Because Duke had offices in Manhattan and on Long Island, the case could fall within
the domain of either Mr. Morgenthau or Mr. Carter. But Mr. Carter's intervention in a
case under a state grand jury's review for more than 18 months is unusual.

This is not the first time a Federal prosecutor has interfered with a case brought by Mr.
Morgenthau. In late 1997, he brought securities fraud charges against Marisa Baridis, a
former compliance officer in the legal department at Morgan Stanley Dean Witter who
had fed confidential information about companies to acquaintances. About a month
later, Mary Jo White, the United States Attorney in Manhattan, took control of the case,
arguing that serious Federal securities crime was her territory, not the state's. Mr.
Morgenthau's office had to dismiss its case against Ms. Baridis, but prosecuted 10 others
in the matter.

Ms. Baridis pleaded guilty to Federal conspiracy and securities fraud charges; she has
yet to be sentenced.

Defendants caught in a turf battle between state and Federal prosecutors can benefit by
essentially choosing to be prosecuted by the office providing the best deal. Federal
prisons are generally considered more appealing than state jails. In Mr. Wang's case, the
dispute may also result in a lesser sentence even if he admits to having swindled
investors.

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A Turf Battle Over Handling Of Fraud Case - The New York Times 6/2/09 10:29 AM

Securities lawyers say that as more investors jump into stocks, opportunities rise for
securities swindlers. Prosecutors well understand the publicity that accrues from success
in fraud cases, and the battle to mount them is hotter than ever.

Federal prosecutors often say that they are better equipped than their state counterparts
to prosecute complex securities cases and that prosecuting such crimes under state law
diminishes their seriousness.

But Mr. Morgenthau's office has pursued white-collar crime and securities fraud cases in
recent years. In the last 18 months alone, his office has brought 8 securities fraud cases
against 61 individuals. The Duke case is one of the largest, but others include the case
against A. R. Baron, a brokerage firm, now defunct, whose employees, prosecutors said,
swindled investors out of $75 million.

Mr. Carter's office is also investigating Stratton Oakmont, a brokerage firm that attracted
several regulatory actions before being shut in 1996. Stratton's principals, Jordan Belfort
and Daniel Porush, were indicted on Federal securities fraud and money-laundering
charges in September. Before starting Duke & Company, Mr. Wang was an executive at
Stratton Oakmont.

A version of this article appeared in print on Wednesday, May 26, More Articles in Business >
1999, on section C page 1 of the New York edition.

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