U.S. Drops Case Against N.Y. Financier After Judge Slams FBI
U.S. Abandons Case Against Financier Wey After Judge Slams FBI
(Bloomberg) -- The U.S. dropped fraud charges against Benjamin Wey, the founder of the private equity firm New York Global Group, after a judge threw out thousands of pages of documents she said were illegally seized by the FBI in 2012.
The dismissal by prosecutors in Manhattan comes less than three weeks after the government surrendered in another high-profile white-collar case. The U.S. last month dropped charges against two former JPMorgan Chase & Co. traders accused of hiding more than $6.2 billion in trading losses on wrong-way derivative bets, after determining they couldn’t rely on the testimony of star witness Bruno Iksil, the Frenchman at the center of the case who was dubbed the “London Whale.”
Wey, who made a career of bringing Chinese companies onto U.S. exchanges, was charged with fraud in connection with three reverse mergers. He was accused of using family members to help him secretly amass ownership of large blocks of stock in companies he took public through reverse mergers and then manipulating the price of their shares. The scheme, which generated tens of millions of dollars, ran from 2007 to 2011, prosecutors said.
Reverse mergers involve using a closely held firm to buy a shell company already public on an exchange, allowing it to list shares without the scrutiny of a public offering.
"I was wrongly charged in the first place,” Wey said in a statement. “This ordeal devastated our employees and our families, has done irreparable harm to our lives and closed our prospering businesses. We are thankful that this judgment will help clear my name.”
Prosecutors said in a filing Tuesday that the case was “based in significant part” on the evidence seized in overly broad searches of Wey’s home and office. U.S. District Judge Alison Nathan ruled in June that the government’s conduct reflected “at least, grossly negligent or reckless disregard” of Wey’s constitutional rights.
During a January 2012 search of Wey’s Wall Street office and apartment, agents seized at least 14 terabytes of computer information and items that included family x-rays, medical prescriptions, documents tied to Wey’s divorce and even his child’s PSAT college test scores. The government kept the property for at least three years.
‘Powerful Reminder’
“This case should serve as a powerful reminder for years to come that the government must adhere to fundamental safeguards of our privacy and liberty when conducting searches,” Wey’s lawyer, David Siegal, said in a statement.
Charges are still pending against Seref Dogan Erbek, a broker in Switzerland who was accused of helping Wey.
Dawn Dearden, a spokeswoman for Acting U.S. Attorney Joon Kim, declined to comment on the decision to drop the case.
Wey, accompanied by Siegal and another lawyer, Charles Glover, appeared in federal court Wednesday to have a court-ordered monitor removed from his ankle. Afterward, dressed in a blue business suit with an American flag lapel pin, a smiling Wey showed off his newly returned U.S. passport.
"As an American citizen I feel very proud and honored to be exonerated and vindicated," he said.
In the London Whale case, prosecutors had spent years trying unsuccessfully to get Javier Martin-Artajo and Julien Grout to face charges in the U.S. A Spanish court in 2015 shot down U.S. efforts to extradite Martin-Artajo from that country. And Grout, who was living in his native France, wasn’t subject to extradition. In court papers, prosecutors also pointed to statements and writings by Iksil, which include a 400-page manuscript on the case, claiming “the government no longer believes that it can rely on the testimony of Iksil in prosecuting this case, even if the defendants appeared.”
Wey was indicted in September 2015, two months after a New York jury awarded $18 million to Hanna Bouveng, a Swedish intern at Wey’s firm who claimed in an unrelated case that he coerced her into sex, then fired her and trashed her online as a prostitute and drug addict. A judge later reduced that amount to $5.6 million.
Wey’s company has injected itself into a proposed takeover of the Chicago Stock Exchange by a group of investors led by Chongqing Casin Enterprise Group Co., a conglomerate based in China. The acquisition has been under review by U.S. regulators.
New York Global Group paid Sconset Strategies LLC $150,000 in the third quarter of 2016, in part to lobby members of Congress about “issues related to the purchase of the Chicago Stock Exchange,” according to a report filed with Congress. It’s impossible to tell from the filing whether the lobbying was aimed at supporting or opposing the deal. The exchange has said it has nothing to do with Wey.
The case is U.S. v. Wey, 15-cr-00611, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Annie Massa
To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net.
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider