Canellas under Fire in Dewey & LeBoeuf Trial

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Summary: Francis Canellas, a key witness for the prosecution, has been testifying for over a week in the criminal trial of former Dewey & LeBoeuf executives.

On Tuesday, prosecutors worked hard to boost the credibility of their star witness, Francis Canellas, in the Dewey & LeBoeuf criminal trial, the American Lawyer reports. For the previous two days, defense lawyers challenged testimony by Canellas that allegedly linked their clients to improper accounting adjustments at Dewey & LeBoeuf. The New York Times adds that the firm allegedly found ways to overcome a shortfall in excess of $50 million.

  

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Canellas was the finance director at the firm before it crumbled in 2012. He has been testifying for over a week in the trial against former chairman Steven Davis, former executive director Stephen DiCarmine, and former chief financial officer Joel Sanders. His testimony may be essential to landing convictions for the three defendants, who are accused of misleading lenders and investors about the finances of the firm. According to the Wall Street Journal, the three have denied any wrongdoing. During cross-examination, however, Canellas admitted that he had not explicitly informed his bosses that improper accounting tricks were being used at the firm.

The trial has the world’s attention.

On redirect examination, Peirce Moser, an assistant district attorney, asked Canellas why he never told DiCarmine that adjustments he was making were “false.” Canellas responded, “Because I believed it was known.”

After asking Canellas to review an email from November 2009 from Sanders to the other defendants which referred to “fake income” in the amount of $25 million, Moser asked Canellas if he thought it was “necessary” to describe accounting entries as illegitimate or false. Canellas said, “No, sir.”

Next, Moser asked Canellas if it was appropriate to go to Davis and DiCarmine and tell them that these improper adjustments were being made to the books. Canellas said, “No.”

Canellas revealed the firm’s “master plan” in previous testimony.

Canellas did admit that he lie to auditors, and that, to his knowledge, others at the firm lied to auditors, too.

The defense has attempted to convince the jury that Canellas was a lying bully while at the firm. They added that he agreed to cooperate with the case in exchange for prosecutors recommending a lighter sentence. Canellas has pleaded guilty to second-degree grand larceny, which is a felony.

Canellas noted on Tuesday that sometimes it was in his best interests to be “less than truthful” while he worked at Dewey, and that the truth was not always in the best interests of the firm.

Moser asked, “How did that work for you?”

“Bad,” Canellas responded.

When asked what was in his best interests now, Canellas responded, “To just tell the truth…to be able to look myself in the mirror every day for the rest of my life.”

Becoming emotional, Canellas added, “I have a little boy that I want to show…he did a mistake, he lived up to it and owned it.”

Canellas then asked for a five minute recess, drank a glass of water and walked out of the courtroom.

Canellas’ testimony also got personal while he was being questioned by Andrew Frisch, Sanders’ lawyer.

Canellas is engaged to Lourdes Rodriguez, a former member of the accounting department, and a cooperator herself. He said that the did not know what prosecutors will say at his sentencing, and that he just did not want to be separated from his little boy.

Frisch quipped, “Mr. Canellas, were you also thinking about your son when you were dating Miss Rodriguez and cheating on his mother?”

Responding that this was “not even close to the truth,” Canellas said that he started dating Rodriguez after he and his wife had separated.

Earlier that day, Canellas was cross-examined by Austin Campriello of Bryan Cave, DiCarmine’s lawyer. Campriello attempted to demonstrate that DiCarmine did not mention financial details to possible investors in a $150 million bond offering that Dewey floated in 2010. Canellas commented that DiCarmine’s role during that time was to sell “the vision” of the firm’s plans to improve. Canellas was actually in charge of the financial numbers that were given to the potential investors.

Canellas added that though he was the director of finance, which was below the ranking of “chief” at Dewey, he still attended many meetings that were meant for chiefs. He was also one of the highest paid non-lawyers, bringing in $665,000 in 2012.

The former employees have tried to redirect blame during the trial.

Campriello also tried to show that DiCarmine made necessary, proper adjustments to the firm’s finances, such as cost cutting after a 2007 merger. While being cross-examined, Canellas confirmed that Dewey did cut its expenses in 2009, such as by eliminating redundant positions and offices, and that DiCarmine headed many of these moves.

Last week, Canellas testified that the only way to cut expenses was through accounting adjustments, but under questioning by Campriello, he admitted that there were other ways.

Campriello also introduced an email from July 2011 that was prepared by Canellas and was to be sent to Dewey partners from DiCarmine. That email noted that the period of March through June of that year was the “strongest four-month period” since 2008.

Canellas noted that he felt the email was accurate, and that, less than a year before the firm declared bankruptcy, its financial condition appeared to be improving.

Source: American Lawyer

Photo credit: American Lawyer, New York Law Journal (Frisch), BryanCave.com (Campriello), bendbulletin.com (Moser)