Peregrine Trial – Week 16

Comments by Bob Grimes

July 23, 2007

Today the jury deliberated from 8:30 a.m. to 1:30 p.m. They sent Judge Whelan a note requesting further explanation of the numbering system of the exhibits. The volume of e-mails, contracts, and other documentary exhibits in this case is overwhelming, and the jury apparently is still trying to organize them. This request from the jury is not at all illuminating on the question of whether they may be inclined at this point in their deliberations to favor the Government, or some or all of the defendants. However, it is an indication that they are still hard at work.

Tomorrow they return to resume their deliberations at 8:30 a.m.

July 24, 2007

The jury of six men and six women continued to deliberate today, and will return tomorrow at 8:30 a.m. The Foreperson of the jury is Juror #11. She was seated in the front row, and was one of several jurors who took a lot of notes during the trial. Judge Whelan has sealed the list of the jurors’ names, to protect their privacy.

July 25, 2007

The jury deliberated today from 8:30 a.m. to 3:00 p.m. They asked that lunch be brought into the jury room, so that they can work through lunch. They had no notes and no questions today, and will return to continue their deliberations at 8:30 a.m. tomorrow.

July 26, 2007

Today the jury deliberated from 8:30 a.m. to 3:00 p.m., and once again they worked through the lunch hour. This was their tenth day of deliberation. There have been no communications from the jury upon which any inferences could be drawn about which way they are leaning, or if there is a significant disagreement among them. Tomorrow will be the conclusion of over two full weeks of deliberations, and it is also a Friday. On Fridays, trial lawyers worry that there may be a tendency to compromise, to reach a verdict and get the case over with. The lawyers do not want compromise. The lawyers want each of the jurors to reason with and listen to the others, but then render their own individual judgment as to each count for each defendant. This is what Judge Whelan instructed the jury to do, and throughout the three months of testimony in this case they have given every appearance of being a conscientious group of citizens.

Tomorrow the jury will resume deliberations at 8:30 a.m.

July 27, 2007

As this day of deliberations was winding to an end, the jury sent a note to Judge Whelan that they were unable to come to a unanimous decision on any of the four defendants, Joe Reichner, Gary Lenz, Patrick Towle, and Dan Stulac.

Judge Whelan called the jury into the courtroom, and asked if any of them thought that it would be productive for them to have any additional instructions of law or for them to engage in any further deliberations. No juror thought that any further deliberation would change the deadlock. Judge Whelan told them that it would be very hard to adequately express his gratitude, not just on behalf of the court and the parties but all of the citizens of this District. Judge Whelan remarked that he could tell how conscientious they had been during the three months of testimony and over two weeks of deliberations. A status date was scheduled for Monday, August 27, 2007, at 9:00 a.m.

The Government will have to decide if it is going to retry these defendants, and if there is going to be another trial; scheduling will be discussed on August 27. AUSA Bhandari suggested to the judge that these four defendants might be tried along with the remaining three defendants, Nelson, Crook and Deller. Attorney Gene Iredale announced that he was ready to pick another jury right now, but the judge thought it would be better to have a status hearing first.

After being released from their service on this case as well as from the admonition not to talk to anybody about the case, most of the jurors stayed in the hallway outside of Department 7 to answer questions from the lawyers from both sides. They revealed that a majority of the jurors favored a vote of not guilty as to all defendants on all counts. There was a slight variation among the defendants, ranging from 7-5 and 8-4 to 9 to 3, in favor of not guilty. The 9 to 3 was on the case of Joe Reichner.

The Government did not win this battle, but they won the war. A very capable team of assistant U.S. attorneys and FBI agents obtained the guilty pleas of the architects of the conspiracy, and its inner circle. Some of the defendants who have pled guilty could receive prison sentences in the range of 15 to 20 years. A number of other lesser defendants also pled guilty, and some of them could receive up to five years in prison. The guilty pleas were a major victory for the Government, on behalf of the Peregrine employees and investors who were victims of the fraud.

These defendants, Lenz, Reichner, Towle and Stulac, pled not guilty, and elected to be tried by a jury of 12 fellow citizens. After three months of trial and approximately 1,300 exhibits, the majority of the jurors voted not guilty as to all of these defendants.

The financial and emotional consequences of being a defendant in a criminal trial are tremendous. Now these defendants will wait and see if the Government chooses to try them again.


After listening to months of testimony the question on everyone’s mind is why couldn’t the jury make up their minds regarding the guilt or innocence of Dan Stulac, Patrick Towle, Joseph Reichner, and Gary Lenz? We listened to the testimony and carefully evaluated all the evidence and we can understand why the majority of the jury voted not guilty. The evidence against the four defendants was not strong.

The architect of the fraud at Peregrine was CEO Steve Gardner, along with CFO David Farley, and when Farley died, the new CFO Matt Gless. CEO Steve Gardner and CFO Matt Gless are extremely intelligent and were quite persuasive. Their inner circle included Doug Powanda and Andrew Cahill, but it never included any of the four defendants in this trial. Lenz and Reichner had important sounding titles. However, they were hired after the conspiracy was already underway, and fired by Gardner and Cahill before the conspiracy was over.

Daniel Stulac was the engagement partner for AA, and there was considerable evidence that Gless and Gardner made efforts to mislead AA (as well as the analysts and investors).

Towle was a mid-level person on the accounting side of Peregrine, with limited authority.

Most of the testimony against the defendants came from witnesses who had either pled guilty or admitted knowingly participating in the conspiracy. Most of these witnesses were generally fairly credible, and a lot of their testimony was more helpful than harmful to these four defendants. To the extent that they offered incriminating testimony against these four defendants, there was not much corroborating evidence, in the form of documents or other testimony. A jury likes to see some other form of evidence to back-up the testimony of cooperating defendants that have admitted that they have committed crimes, and are hoping for leniency in return for their testimony at trial.

The Government believed that they had corroboration in the form of documents, including e-mails. Many of the e-mails that the Government offered as proof of the defendant’s guilt were vague and could be interpreted as having more than one meaning. Many of the witnesses that testified against these four defendants admitted to wrongdoings much worse than the acts that the defendants on trial were accused of.

Attorney Thomas Bienert said that the Government cast too wide a net in this case, and most of the jury agreed with this characterization. Certain defendants, such as former CEO Stephen Gardner and former CFO Matthew Gless were so clearly guilty. Their bad acts stood out in sharp contrast to the wrongful acts that these four defendants were accused of.

We have no doubt that the Government acted in good faith in bringing this prosecution. They worked very hard, and obviously believed in their case. Sometimes it is hard to tell in advance how a case is going to play out in court. Also, it is extremely hard for any lawyer, including a prosecutor, to objectively evaluate both sides of every case, no matter how hard they try. That is why we have an adversary system with lawyers on each side. And that is why we have a jury of 12 citizens to sit in judgment.

We commend this jury for their hard work. The evidence presented during this trial was often tedious and complicated. This verdict is not a failure; it is an illustration of the greatness of our jury system.


The next hearing in the case of Defendants Nelson, Crook, and Deller, is a motion hearing and trial setting hearing currently set for January 28, 2008. The next hearing set for Defendants Lenz, Reichner, Towle, and Stulac is the status hearing on August 27, 2007. It is possible that other hearings could be scheduled.

Some of the Peregrine defendants who pled guilty will testify for the Government in any trial (or trials) that may still occur against the remaining above seven defendants. The sentencings of those who have pled guilty will presumably be continued until after any remaining trials.

We will continue to follow the proceedings, and post any significant updates on this blog as any new events occur.