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Companies News - Judge Stays Insurer's

Case Against Dewey Defendants


A federal court judge in Iowa has granted a stay in Aviva Life and Annuity Companys civil lawsuit against three
former Dewey & LeBoeuf executives for allegedly making false and misleading statements as part of a 2010 bond
offering.

The judge also allowed the defendantsformer chairman Steven Davis, former executive director Stephen
DiCarmine and former chief financial officer Joel Sandersto ask the U.S. Court of Appeals for the Eighth Circuit to
hear an interlocutory appeal of his May 19 decision denying their motion to dismiss the case on grounds that the
insurance company has no standing because it sold off the bonds and claims that are at the center of the case.

Aviva filed its civil suit against Davis, DiCarmine and Sanders in December 2012, seven months after the collapse of
Dewey. The insurer claimed it lost 45 percent of its $35 million investment in the firms 2010 bond offering as a
result of false and misleading statements by the three defendants, who are accused of violating Iowa state and
federal securities laws in obtaining loans for Dewey.

Last year, the former Dewey executives filed a motion to dismiss the suit, arguing that Aviva lacked standing to fi le
the claim because it sold the securities in question to Sea Port Group Securities for $19.2 million in the same
month that Dewey filed for bankruptcy. U.S. District Judge James Gritzner for the Southern District of Iowa denied
the motion on May 19 of this year.

Then, in June, the defendants asked Gritzner to stay the civil proceedings pending the outcome of a criminal case
filed in March by Manhattan District Attorney Cyrus Vance against Davis, DiCarmine and Sanders as well as a
fourth defendantformer Dewey client relations manager Zachary Warrenaccusing them of masterminding a
fraudulent scheme to cover up Deweys financial troubles.


Davis, DiCarmine and Sanders argued to Gritzner that by proceeding with the civil case in Iowa while the criminal
case is underway, the men would have to choose between preserving their Fifth Amendment right to avoid self-
incrimination and participating in their defense of the criminal trial that is scheduled to go to trial in January 2015
because both cases use some of the same evidence.

Vances office joined in requesting a stay in the Aviva case in June. (The office also had filed and received a stay in
April from federal court in Manhattan in civil proceedings by the U.S. Securities and Exchange Commission against
Davis, DiCarmine and Sanders as well as finance director Frank Canellas and controller Tom Mullikin, in which the
SEC accuses the men of accounting fraud.)

Aviva, represented by Kilpatrick, Townsend & Stockton partner Helen Michael, asked Gritzner to deny the stay
request, arguing that the insurers civil case had been delayed long enough and that 18 months had already passed
without having entered discovery. The insurer was concerned that further delay could harm its case because of
statutes of limitation, among other reasons.

On Tuesday, Gritzner agreed to put Avivas civil suit on hold until the criminal case is resolved, writing in his ruling
that the court agrees with the defendants and [the district attorney of New York County] that the criminal case
should yield a great deal of evidence that can be utilized in this proceeding once a stay is lifted.

He added: This court is greatly concerned about the ability of witnesses to cooperate due to cooperating
agreements they may have with [the district attorney of New York County] as well as the logistical difficulties likely
to arise during the six-month criminal trial next winter and spring. The task of managing discovery herein against
the competing demands in New York offers the potential for substantial conflict.

The criminal case is slated to move forward in August with the district attorneys response to the defendants
omnibus motions. The next court date is scheduled for Sept. 15.

In his order Tuesday, Gritzner refused to reconsider his motion to dismiss Avivas suit. Instead he allowed the
defendants to file an interlocutory appeal with the Eighth Circuit, noting in his order that there is no assurance that
the Eighth Circuit would accept the appeal.

The case is one of the exceptional circumstances where a certification for interlocutory appeal is justified,
Gritzner wrote, adding, An immediate appeal may materially advance the ultimate termination of the litigation.

Kevin Van Wart, Davis attorney and a senior litigation partner at Kirkland & Ellis, told The Am Law Daily: We are
pleased with the ruling and believe it was a sensible resolution.

Michael did not respond to requests for comment.