Judge Declares Mistrial in GAF Case but Orders New Trial for Thursday

A federal judge declared a mistrial Tuesday in the GAF Corp. stock manipulation case because a prosecutor had delayed turning over to defense lawyers a report showing that a crucial piece of evidence had been tampered with.

Defense lawyers Stephen E. Kaufman and Arthur L. Liman immediately said they would ask the U.S. 2nd Circuit Court of Appeals to permanently dismiss the case. They claimed that a retrial would subject their clients to “double jeopardy,” which is banned by the Constitution.

But U.S. District Judge Mary Johnson Lowe, who granted the defense request for a mistrial, ordered the lawyers to begin picking a new jury no later than Thursday. The judge said the appeal was likely to fail because there wasn’t any evidence that the prosecutor, Assistant U.S. Atty. Carl H. Loewenson Jr., had intentionally delayed turning over to the defense the report by a documents expert.

Closely Observed Trial

The trial had been under way since Dec. 12. It ended after a week of testimony by Boyd L. Jefferies, the government’s main witness, who had stated in court that he had made an illegal agreement with GAF Vice Chairman James T. Sherwin to bid up the price of Union Carbide stock in 1986, when GAF was preparing to sell a very large block of Carbide shares. Both GAF Corp. and Sherwin are defendants in the case.

The case has been closely followed by the press and by defense attorneys in other securities fraud cases, in part because it is the first of the many cases set off by the investigation of former Wall Street stock speculator Ivan F. Boesky to come to trial.

Sherwin seemed elated by the judge’s decision. He smiled broadly and hugged two of his daughters, who had been present throughout the trial.

But Liman, who represents GAF, said: “Nobody is happy to have a mistrial.” He said a mistrial was necessary because the prosecutor’s mistake prejudiced the jury’s view of the case. “But we (the defense lawyers) agreed that the trial was progressing very well for us,” Liman said, adding that “we’re tired.”

In a statement issued on behalf of GAF and Sherwin, a spokesman said: “We are disappointed, with the case going so well for the defense, that the government’s conduct necessitated a mistrial.”

Sees Little Chance

The spokesman said the defendants would pursue an appeal to get the case dismissed permanently on the grounds of the “double jeopardy” provision in the Constitution. That protects individuals in some circumstances from being tried twice for the same crime.

However, Richard Uviller, a professor of criminal law at Columbia University, said in an interview that he thought GAF’s lawyers had little chance of persuading the appeals court to throw out the case.

The issue for which the mistrial was granted centered on what Loewenson had described as the most crucial piece of evidence in the case. It was an invoice from the Los Angeles-based brokerage firm Jefferies & Co. for $40,000 for “investment banking” services. Boyd Jefferies testified that the invoice was fraudulent, drawn up as cover for a $40,000 payment that Jefferies & Co. expected from GAF to cover its losses in the illicit Union Carbide trading.

When the government submitted into evidence a copy of the invoice found in GAF’s files, Liman at the same time introduced a slightly different copy found in Jefferies’ files. Liman then suggested in court that Jefferies might have altered the one in his own files to back up his story. But the report by Pennsylvania documents expert Gus R. Lesnivich refuted Liman’s theory. Lesnivich’s report stated that the invoice in Jefferies’ files hadn’t been altered, but that the one taken from GAF’s files may have been, with “white-out” fluid.

Prejudice to Defendants

In conferences in the judge’s robing room late last week and on Monday, Liman argued that he would never have raised questions about the document in Jefferies’ files if he had known about the report, which was turned over to him after he had made his statements in court.

Federal rules of procedure in criminal trials require prosecutors to turn over to defense lawyers a broad range of material that might be deemed useful to the defense. Kaufman and Liman argued that the new facts brought out in the report would irrevocably prejudice the jury against the defendants.

In her ruling Tuesday, the judge agreed.

“Because I find that the failure to produce the expert’s report resulted in incurable prejudice to the defendants, I grant the defendant’s motion for a mistrial,” she said.

Judge Lowe, however, said she believed Loewenson’s assertions that the delay in turning over the report had been an “oversight” and that he hadn’t expected Liman to raise the issue that invoices might have been tampered with.

Explaining Terms

Manhattan U.S. Atty. Rudolph W. Giuliani, who announced his long-expected resignation Tuesday during a press conference, defended Loewenson’s actions. “The judge made it very clear that he had done nothing wrong,” Giuliani said.

Much of the trial had been taken up by Jefferies and other Wall Street experts attempting to explain the complex world of securities trading on a level that the jury, made up mainly of blue-collar and clerical workers, could understand.

After the judge apologized to the jurors for the mistrial and allowed them to leave, one juror, William Patten, said in an interview that the jurors hadn’t discussed the case among themselves. He said he hadn’t yet developed an opinion of whether the defendants were guilty or innocent. Patten said he and other the jurors were able to follow most of the Wall Street terminology but that at times some of the testimony “was pretty hard to understand.”