Peregrine Trial – Week 25
Comments by Bob Grimes and Dana Grimes
March 11, 2008 – 9:00 a.m. to 3:20 p.m.
After nineteen days of testimony, closing arguments began today. One juror was excused due to illness, and an alternate was seated in her place. The replacement juror was the only one taking notes throughout argument today. The juror who was excused and the replacement juror are both women, so the jury still consists of nine women and three men. AUSA Beste presented the Government’s theory of this complicated case in an organized and clear argument. He told the jury he would summarize the evidence to show how it proves Towle and Stulac’s guilt beyond a reasonable doubt. He argued that Towle and Stulac each played different, yet key roles in the scheme at Peregrine. The simplified Government theory is that Towle “cooked the books” by inflating Peregrine’s numbers, and Stulac “buried the evidence” by allowing Peregrine improperly to write off millions of dollars.
AUSA Beste displayed numerous PowerPoint slides, including the press releases in which Peregrine purported to have met its numbers quarter after quarter. He explained that people who put their hard-earned money into Peregrine stock were defrauded by the press releases, even though they did not know it at the time. Because the two defendants are being prosecuted for different types of conduct, AUSA Beste first argued his interpretation of the evidence as it related to Towle, and then as it related to Stulac. He displayed Towle’s resume (which he has been doing throughout the trial) to show Towle’s responsibilities as senior manager for world-wide revenue. He then displayed the British Telecom, IBM Global Services and FMI contracts, arguing that the white-out was applied to help backdate the contracts. AUSA Beste said Towle would receive a contract a few days into a new quarter, and backdate it into a prior quarter. He displayed contracts, recovered from Towle’s office, where the hard dates were within the last few days of one quarter, and the fax dates were in the beginning of the next quarter. He then displayed revenue lists sent by Towle to Arthur Andersen in which those contracts were booked in the quarter indicated by the hard dates.
AUSA Beste argued that Towle let his friend, Mr. Garcia, believe they were keeping quarters open legitimately because of a paperwork problem. Beste argued that Mr. Garcia told the FBI in 2004 that Towle “knew it was wrong.” In this trial, Mr. Garcia testified that Towle’s statement to the FBI meant Towle knew keeping quarters open was against internal company policy. AUSA Beste implied Mr. Garcia’s testimony was untrue.
AUSA Beste reminded the jurors that Lynn Morimoto testified that Towle told her to white out the dates on fax headers. If believed, this is the single most damaging piece of testimony against Towle. AUSA Beste argued that the only reason Towle went to the trouble of walking to Ms. Morimoto’s building to hand her a contract to white out was because he was trying to deceive. Beste used a defense exhibit to show that the auditors had questioned whether all dates preceded the date of revenue recognition on an IBM Global Services contract. The ‘yes’ box was checked, and Beste argued that was because the contract had white-out applied to the original fax header date.
AUSA Beste then explained how channel-stuffing was used at Peregrine to manipulate financial statements. He contended that Towle knew certain channel partners were not paying, and knew collection on new contracts with those partners was improbable. Beste reminded the jurors of the testimony of Felicia Alpren, who he argued “figured it out” despite her lack of an accounting background, and was upset those bogus sales remained on the books. AUSA Beste used the KPMG channel-stuffing example to argue that when Towle continually recognized revenue from the KPMG deals despite non-payment on earlier deals, he either did so with knowledge that it was wrong or with reckless indifference.
AUSA Beste turned to the Government’s view of Stulac’s role in the conspiracy, arguing that Stulac participated in the cover-up, and in so doing lied to his own audit team, his partners, and the public. Beste argued that after booking bad revenue, Peregrine needed to get it off the books, but in a way that would not draw attention to the fraud. Beste reminded the jury of expert witness Weinstein’s testimony, that the public needs auditors who are objective and independent. AUSA Beste displayed job reviews of Stulac, which stated that he possessed good technical skills and was becoming an expert in certain technology auditing. Beste argued that, because of Stulac’s abilities, he was able to deceive his own partners at Arthur Andersen.
AUSA Beste argued that the unpaid channel receivables were bad debts that were supposed to go in the SG&A line, as Witness Austrian testified was proper, but that Stulac improperly buried the bad debt in the acquisitions line. AUSA Beste argued that Stulac “admitted” to Arthur Andersen’s attorney, Mr. Vick, that he knew the channel partners were not paying and was told that Peregrine was going to write off their debt. Beste argued that after days of questioning by Mr. Vick, Stulac “confessed” that he had told Gless that the write-offs go in the SG&A line, but that Gless said he would only include them in the acquisitions line or not at all. Beste stated Stulac told Mr. Vick, “I allowed Gless to do it,” in order to “avoid World War III.” The Government’s theory is that the intent to defraud can be inferred from Stulac’s statement that he felt “sick to his stomach,” because he felt sick about agreeing to let CFO Gless deceive the public. Beste argued Stulac further confessed that he “did no substantive testing” of those numbers because Stulac did not want to know what that testing would yield. AUSA Beste then explained the difference it would have made if the bad debt were written off in the SG&A line, and argued that the public thought Peregrine’s earnings were $37 million in the fourth quarter of 2001, when the earnings were actually $11 million.
AUSA Beste argued that Philip Turowski, the German Arthur Andersen auditor, was silenced by Stulac, and that Stulac took steps to make sure that the revenue – which Mr. Turowski had refused to recognize – stayed on the books. Beste argued that Stulac intentionally misled his Arthur Andersen partners at a Peregrine risk review meeting. AUSA Beste said that Stulac prepared the binders for the meeting by intentionally taking out pages that referred to the German revenue recognition problem.
The Government places great emphasis on Stulac’s statements to attorney Scott Vick. AUSA Beste argued that Stulac eventually admitted to Mr. Vick that he did not believe in the “channel conflict theory” justification of the write-off of accounts receivable into the acquisitions expense line. AUSA Beste contended that Nevanna Sacks stated that Stulac was looking down when he said this. Beste reminded the jury that it was Sacks’ testimony that Stulac said Gless told him (Stulac) that there was bad channel conflict at Peregrine that needed to be written off.
One of the biggest obstacles in the Government’s case against both defendants is the issue of motive. The Government believes Stulac was motivated by a desire to be CFO at Peregrine. AUSA Beste displayed an e-mail to the jury in which Gless recommended Stulac as a successor to Farley. AUSA Beste argued that Towle was motivated financially, by the desire to appear successful, and by a fear of losing his job.
AUSA Beste argued that the scheme at Peregrine involved more than the salespeople and senior management. Beste said the scheme required people in accounting to disregard their duty and required outside auditors to give it the aura of legitimacy.
AUSA Beste then went over the elements of the charges against these defendants. They are both charged with one count of conspiracy, one count of securities fraud, and one count of wire fraud. AUSA Beste highlighted aspects of conspiracy law, such as the fact that all participants are just as responsible as major players in a conspiracy, and it does not matter how minor their role is. Under the concept of co-conspirator liability, if two people conspire and only one person commits an overt act, both people are liable for the crime.
Attorney Kate Thickstun began her closing argument in the last hour of court today. She explained that the presumption of innocence is the most important tenet of our justice system. She argued that this case is about choices, but not the kind the Government thinks. She stated that Towle did not choose to be a part of any fraud. She said he did choose to plead not guilty, because that is what he is. She agreed with what AUSA Narus said in his opening statement: that this is a case about lies, cheating, and deception. She contends that this case was indeed about those things for a small group of people, but that group did not include Towle.
Attorney Thickstun returned to the “agreement” element of conspiracy, which AUSA Beste had brought up in his closing argument. Attorney Thickstun asked the jury, “Where is that agreement?” She argued that none of the conspirators named Towle, and stated there was no evidence that he had intent to defraud in any of the 900,000 e-mails in the Peregrine database. Attorney Thickstun argued that Towle recognized revenue properly based on the facts he knew at the time, and cautioned the jury against judging Towle’s knowledge at the time based on hindsight.
With respect to motive, Attorney Thickstun displayed Towle’s salary, which increased from $68,000 to $73,000 during his time at Peregrine. She argued that he never exercised stock options, and earned one modest bonus of $5,000. She presented the jury with a chart listing Peregrine employees who she argued were “rewarded” for their roles in the conspiracy. Attorney Thickstun asked the jury to follow the money. She argued that Gardner made over $20 million, Powanda $30 million, Gless $5 million and Towle $5,000. She also argued that BJ Rassam and Lynn Morimoto were deemed too valuable to lose, and given many bonuses. Attorney Kate Thickstun displayed a pay increase sheet for Ms. Morimoto which noted she “consistently receives praise from sales.”
Attorney Thickstun argued that Towle never told Ms. Morimoto to white out documents. She noted that in spring 2002, when attorneys interviewed Ms. Morimoto, she said nothing about white-out. Then, throughout the ongoing investigation, Lynn Morimoto kept the documents with her in a special box under her chair. Attorney Thickstun argued that the SEC subpoenaed the documents, and even then Ms. Morimoto did not turn them over. When Morimoto finally turned the documents over, she stated that Matt Gless had told her to apply the white-out. Attorney Thickstun argued that she only added that Towle told her to white out the documents when prompted to say so during later FBI interviews. Ms. Thickstun noted that Ms. Morimoto works with Gless now at her new job, despite the fact that he is an admitted co-conspirator.
Attorney Thickstun argued that the black-out list of Peregrine executives who were prohibited from buying and selling stock during certain periods is a list of the insiders. She stated that those people, such as Gless, Gardner, and sales executives, knew the revenue targets and attended sales forecast meetings. She said that Towle, on the other hand, did not know what numbers the sales people had to meet.
Attorney Thickstun reminded the jury of the testimony of Ms. Okamura, who stated during cross-examination by the Government that she had overheard Towle explaining to people they could not backdate contracts, and that the contracts needed to be signed. Attorney Thickstun presented e-mails in which Towle had instructed Ms. Morimoto not to book a contract in a quarter, as well as e-mails between other employees stating that Towle would not let them book the revenue in a given quarter because of some problem with the contract language. Attorney Thickstun argued that this is simply inconsistent with the theory that Towle was also trying to back-date fax headers. She then made the point that if the contracts the Government found in Towle’s office were really smoking guns, he would not have kept them in his office. She argued that, for six months after the conspirators fled the building, Towle helped the lawyers track down documents. She stated that Mr. Ortzman had access to Towle’s office every night after Towle went home, and argued that this is evidence of Towle’s lack of a guilty conscience.
Attorney Thickstun will resume her closing argument tomorrow at 9:00 a.m. Attorney Mike Attanasio’s closing argument will follow, and then the Government will present its rebuttal argument.
March 12, 2008 – 9:00 a.m. to 4:00 p.m.
Patrick Towle’s defense attorney, Kate Thickstun, finished her closing argument today by emphasizing the information Towle had available to him in “real time” at Peregrine, and urging the jury not to judge him based on hindsight. She argued that Towle did not assess deal “collectability,” and that he was entitled to assume that the Schedule A’s which appeared to have been signed with the appropriate quarter were legitimate. Attorney Thickstun presented an e-mail introduced by the Government, in which Felicia Alpren listed accounts she believed were problematic in 2002. Attorney Thickstun then juxtaposed that e-mail with an e-mail written to Towle in 2000 by Ms. Morimoto, in which one of the same deals appeared. Attorney Thickstun argued that because Towle saw the e-mail from Ms. Morimoto, which indicated that the deal was going through the legal department, the information he had available made the deal appear legitimate at the time he booked the revenue.
Attorney Thickstun argued that it is only with hindsight that the KPMG deals seem bogus on their face. She displayed KPMG’s history of payment on the projector, and explained that at first KPMG did pay their bills, then they started slowing payment, but even then Towle did not have a reason to believe that this Fortune 100 Company was entering into fraudulent deals. She emphasized that the fraud at Peregrine was a sales fraud, not an accounting fraud, and said that was the reason side letters were hidden from the accounting department.
Attorney Thickstun then reminded the jury of testimony that one of the two most important numbers to Wall Street is the revenue number. She asked the jury if Peregrine, a multi-billion dollar corporation, would rely on one young accountant, Patrick Towle, to provide this important number. She then displayed documents comparing the number Towle provided in his quarterly revenue reports to the numbers Peregrine actually reported as their license revenue number in press releases; the press releases reflected higher earnings than Towle had reported by millions of dollars. Attorney Thickstun, referring to the press releases, argued, “These are not Patrick’s numbers!” She contended that the high-dollar contracts were approved for revenue recognition by Rassam and Gless, not Towle.
The Government has alleged that Towle participated in channel stuffing. Attorney Thickstun argued that out of the $40 million in unpaid channel revenue, 60% was revenue that had been recognized outside of North America. Attorney Thickstun then referred to the prosecutor’s practice of displaying Towle’s CV as “Prosecution by Resume.” She noted that Towle did not indicate that he was solely responsible for accounting and ensuring compliance with revenue policy. She stated that his resume is not evidence of guilt, and it is not evidence of knowledge of fraud.
Today, Attorney Thickstun was more forceful in her discrediting of Lynn Morimoto. She argued that Ms. Morimoto, who was trained by Gless, was lying when she testified that Towle had instructed her to white-out fax headers. She suggested to the jury that Ms. Morimoto’s testimony was not believable when she indicated that Towle walked all the way from his office to Ms. Morimoto’s office (in a different building) simply to ask her to white-out a fax header. Attorney Thickstun asked the jury, rhetorically, “Did Patrick not have white-out in his office?” She also reminded the jury that Gless was the one who taught Ms. Morimoto to white-out fax headers, that Ms. Morimoto now works with Gless at Quest Software, and stated, “She knows what side her bread is buttered on.”
In essence, Attorney Thickstun did a thorough and persuasive job of arguing Towle’s good faith defense that he had no knowledge, no motive, and no intent to defraud.
Attorney Mike Attanasio began by thanking the jury for their service, looking them in the eye and telling them, “You are the United States.” He then pointed to the prosecutors and said they may refer to themselves as the United States when they call witnesses, but these gentlemen are lawyers. He told the jury that they are the wall between innocent men and a government that sometimes overreaches. At various times throughout his argument he pointed at the Government, and he occasionally raised his voice to make an important point. He was practically yelling when he said, with great indignation, “You didn’t even hear from the conspirators until I subpoenaed them!”
Attorney Attanasio contended that the Government had presented a “postage stamp” view of the case, asking the jury to draw the worst conclusions from ambiguous statements and innocent acts. He argued that the Government had failed to meet its burden by not presenting any evidence or witnesses directly linking Stulac to the conspiracy. He stated that, after the defense called the real conspirators, the evidence showed that Stulac was not in on their conspiracy, because he and his audit team were constantly lied to and deceived. Displaying an e-mail from Gless to Gardner which warned of potential exposure to the auditors, Attorney Attanasio argued that the defense attorneys were the only ones who had proven a conspiracy, and challenged the Government to show him one “smoking gun” e-mail with Dan Stulac’s name on it. He detailed the specific ways in which he argued Peregrine concealed the collusive fraud from Stulac, including use of side agreements, backdating, bogus confirmation letters from customers, and deceptive collection tactics.
With respect to Gardner’s testimony, Attanasio reminded the jury that Gardner indicated that the limit on keeping the quarter open was when the audit team came to the Peregrine campus. He argued that common sense dictates that if Stulac were in on the fraud, Gless or a co-conspirator would have asked him not to send confirmation letters to customers regarding bogus deals. Attorney Attanasio argued that instead of that thirty-second phone call to Stulac, the evidence shows that the Peregrine “den of thieves” hurried to all corners of the globe to secure the lies of third parties to deceive Arthur Andersen.
He revisited the testimony of Felicia Alpren, who testified that when the KPMG auditors came she “let the cat out of the bag,” despite her instructions not to show them anything except how the software worked. Ms. Alpren testified that she had followed those instructions to keep the uncollectible accounts hidden when she met with the Arthur Andersen auditors. Attorney Attanasio argued this is evidence that Arthur Andersen auditors were unaware of the fraud.
Attorney Attanasio argued that Gardner and his co-conspirators fooled Stulac, Arthur Andersen securities analysts such as Mr. Austrian, and the whole world, because everyone saw their excellent products and Fortune 500 customers. He reminded jurors of the videos of Gardner speaking at Peregrine during its rise, stating, “That guy could sell ice to Eskimos!” The jurors chuckled. He asked them to consider if Stulac, with his alcohol problems and his workload, really stood a chance against Gless and Gardner.
Attorney Attanasio urged the jury not to “judge the papers” of Leslie Sadoff, Stulac, and the audit team. He stated that the Government’s misunderstanding that an auditor is a “corporate cop” (which the Government indicated in opening) is perhaps the reason for the trial. He argued that Stulac was run over by the sophisticated, smart den of thieves at Peregrine, and that even if he could have done better, it is not a crime for a fish entering a shark tank to get eaten. He drew attention to the evidence indicating that Stulac was not the only one fooled at Arthur Andersen, arguing that the senior partner, Bigelow, was duped first, and the engagement partner who followed Stulac, Baldwin, was duped after. He argued that nothing was hidden from Baldwin, who wrote a memo in 2002 reaching the same conclusion that Stulac reached, justifying the write-off of accounts receivable. He also reminded the jury that Ms. Sacks testified that at the end of the day she was comfortable with the decision to recognize the revenue on the German contracts.
With respect to the write-off of accounts receivable, Attorney Attanasio presented the jury with direct quotes from testimony. He asked the jurors to consider the circumstances such as “monkey brain,” a concept Mr. Vick testified means someone is trying to communicate, but they are jumping from one thought to another. He reminded the jurors that Stulac was taking new anti-anxiety and anti-depressant medication, and that he arrived at the 9:00 a.m. meeting disheveled and smelling of alcohol. Attanasio revisited the testimony of Ms. Sacks, who stated she felt the meeting was a “set-up.” He displayed the transcript of Mr. Vick in which Vick was asked if he knew Stulac thought the justification for the accounts receivable was “ridiculous.” Mr. Vick testified that he did not know if Stulac thought it was ridiculous in April 2001. As to Stulac’s alleged statement that he was “unconvinced” by channel conflict theory, Attorney Attanasio showed the jury that Mr. Vick said he did not know if Stulac remained unconvinced later, and that it is common for auditors to be unconvinced at first, then persuaded by management’s explanation.
One phrase the Government repeats and considers an admission of guilt is that Vick testified Stulac felt “sick to his stomach.” Attorney Attanasio told the jury that Mr. Vick himself did not know what Stulac meant when he said that. He reminded the jurors that Vick testified Stulac had told him that he did not consider the $30 million write-off to be material, since there were write-offs of a billion dollars for that fiscal year, due primarily to the Harbinger acquisition. Attorney Attanasio then reminded the jury that he had asked Mr. Vick if he would rely on something Stulac told him during that meeting given the condition Stulac was in, if it were important to Mr. Vick and his family to rely on it. Mr. Vick said he would not rely on it. Attorney Attanasio argued to the jury that this is reasonable doubt.
Attanasio seemed affronted by the Government’s suggestion that Stulac did not consult with anyone at Arthur Andersen about writing off the accounts receivable. Referring to the meeting Gardner testified to in which Stulac allegedly told Gless that Arthur Andersen would allow the write-off just one time, Attorney Attanasio declared to the jury, “Bigelow was there!” Attanasio said that he would have subpoenaed Steve Gardner from the moon to present him to the jury to testify that in that meeting with Gless, where it was Gardner’s impression that Gless had either persuaded or misled the auditors, Stulac’s senior partner Dick Bigelow was present.
Attorney Attanasio argued that Stulac had an informal forty-five minute interview regarding his potential for being the CFO of Peregrine, but learned he was not a viable candidate. He emphasized that in the interest of full disclosure, Stulac told Bigelow about his interest in that job anyway, and that this goes to his lack of a guilty conscience.
Essentially, Attanasio argued that the Government has presented a financial fraud case without evidence of a financial motive, and a conspiracy case in which they did not call the conspirators. The last words Attanasio spoke to the jury were laden with emotion. The courtroom was completely quiet as he said, “Dan Stulac, this man, and his family, have been in my hands for a long time. And now they’re in yours.”
The Government is allowed to have the last word to the jury at trial, because they carry the burden of proof. AUSA Beste presented the Government rebuttal. He conceded numerous times that the defense attorneys were very good, but he argued that they were trying to distract the jurors from the real evidence. He accused Attorney Attanasio of beating up on the Government because he did not have facts or law to argue to the jury. At one point, AUSA Beste referred to, “The defense attorney for Mr. Attanasio.” Attorney Attanasio jumped up and said, “Your honor, I’m not on trial!” The jury laughed. AUSA Beste indicated that he was frustrated because when a prosecutor doesn’t call a co-conspirator he gets chastised for it. He argued that if he had called the co-conspirators, the defense attorneys would have impeached them with their plea agreements. (Considering what happened in the first trial, he is probably right.) He argued that during the meeting with Mr. Vick regarding the write-off of accounts receivable, Stulac confessed, and that co-conspirator testimony was therefore unnecessary to prove his guilt.
In response to Ms. Thickstun’s closing argument, AUSA Beste argued that the blackout list was irrelevant because Ilsa Cappel was not on the list, and she was aware of the fraud. He reiterated that contracts with white-out covering their dates were found in Towle’s office. He read testimony to the jury from Mr. Ortzman, who stated that when Towle was asked for explanations during the internal investigation he was not timely in responding and that he generally did not give good answers. It is the Government’s position that when Towle stayed at Peregrine after the resignation of the executives, he did not do so in a true effort to help the internal investigation.
AUSA Beste will finish his rebuttal closing argument tomorrow morning. Presumably, Judge Whelan will then instruct the jurors. The last day of this retrial resumes at 8:45 a.m. tomorrow morning.
March 13, 2008 – 8:45 a.m. to 9:10 a.m.
Continuing his rebuttal argument, AUSA Beste talked about the meeting which Gardner testified to in which Stulac allegedly told Gardner that Arthur Andersen would allow the write off of accounts receivable as acquisitions costs just this one time. AUSA Beste argued that the important part of that meeting occurred behind closed doors between Dan Stulac and Matt Gless, before anyone else joined the meeting. Beste argued that this was when Dan Stulac entered into a “secret side agreement” with Matt Gless to conceal Peregrine’s bad debts from the shareholders. Beste also contended that Stulac lied to his own engagement team about these bad debts, and concealed the whole story of the write-offs from his partners at Arthur Andersen. AUSA Beste emphasized that there was testimony indicating that Stulac admitted he did not consult with his AA partners on this issue of the write-offs.
AUSA Beste stated that it was wrong for Dan Stulac to ignore the advice of the German audit team of Arthur Andersen. Beste argued that Stulac misled the public when he allowed the revenue to stay on the books, and Beste said that Dan Stulac’s actions showed “reckless indifference”.
AUSA Beste conceded that Kate Thickstun’s power point presentation used during her final argument on behalf of Patrick Towle was well done. However, Beste pointed out that the evidence exhibited in the presentation ended with a document dated in December 2000. Beste asked the jury to look at an email in evidence, dated June 2001. Beste said that this June 2001 email shows that Towle put another KPMG contract for $1.6 million on the Peregrine books after the pattern became clear that KPMG was not paying their obligations to Peregrine.
The government contended that Patrick Towle kept the Peregrine books open after the quarter had ended, and booked contracts after the end of the quarter. Beste argued that Towle booked revenue he knew had not actually been paid. AUSA Beste argued that Patrick Towle told Lynn Morimoto to white–out fax headers, and Beste noted that whited-out documents were found in Towle’s office.
In conclusion, AUSA Beste said when Towle and Stulac worked at Peregrine (or with Peregrine) they “signed off” on things that they should not have signed off on, and therefore they furthered the conspiracy to defraud the public, and are guilty of the charges against them.
Judge Whelan instructed the jury on the law, and they have begun their deliberations. They will resume their deliberations tomorrow.
March 14, 2008 – 9:00 a.m. to 1:00 p.m.
The jury deliberated today from 9:00 a.m. to 1:00 p.m., maintaining the same schedule they had during the course of the trial. They will resume their deliberations at 9:00 a.m. Tuesday.
This retrial involved many fewer witnesses and exhibits than the first trial. Whereas the first trial lasted thirteen weeks, this retrial lasted only six weeks.
The FBI did a very thorough investigation in this case; there were over one million documents collected by the FBI, including approximately 900,000 e-mails from the Peregrine database alone. During the first trial, the jury probably felt that they were being shown every one of these documents, sometimes first by one side and then again by the other side. In this retrial, the prosecutors and defense attorneys were much more selective in their presentation of documents. One of the reasons that the attorneys were able to limit the number of exhibits in this retrial is that defendants Towle and Stulac were both involved in accounting, so there was no need for the attorneys to go into great detail regarding the side-letters and other improper practices of certain employees in sales.
Although Stulac and Towle were both accountants, the evidence against each of them is quite different. For this reason, it is almost as though the jury heard two cases in one trial.
The most dramatic part of this trial was when Stulac’s attorney, Mike Attanasio, subpoenaed former top sales executive Doug Powanda and former super-star CEO Steve Gardner as defense witnesses. Until that point in the trial, the jury had been presented with the Government’s allegations of wrongdoing on the part of Stulac and Towle, but they did not yet see the big picture of the Peregrine fraud.
Attorney Attanasio has a very good understanding of the accounting principles that are at issue in the case, and he has been assisted throughout both of these trials by Aaron Arnzen, who is a CPA as well as an attorney. During his cross-examination of expert witnesses called by the prosecution regarding accounting principles, Attanasio was able to elicit testimony favorable to Stulac regarding the limitations on the role of an outside auditor. By calling and questioning the top insiders of the conspiracy as defense witnesses, Attorney Attanasio and Attorney Thickstun were able to elicit testimony that neither Stulac nor Towle conspired with these insiders.
AUSA Eric Beste argued that the law does not require the Government to show that Towle and Stulac conspired with the architects of the fraud at Peregrine. This is a correct statement of the law. However, the illegal conduct of Gardner and Powanda (and others that they testified about, including Gless and Farley) was clear-cut and on a vast scale. It is possible that, for some jurors, the overwhelming guilt of the insiders might have overshadowed the allegations against Towle and Stulac.