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May 15, 2008 3:50 PM

Live From Hackensack: Parmalat-Citigroup Trial

Posted by Andrew Longstreth

On May 15, The Am Law Daily is blogging live from the Bergen County Justice Center on Main Street in Hackensack, N.J., covering the Parmalat-Citigroup trial.


Opening Arguments: Ted Wells for Citigroup--Posted 3:50 p.m.

Paul Weiss litigator Ted Wells opened for Citigroup with a question: When Parmalat filed for bankruptcy in 2003, who was the biggest creditor? Who lost the most money?

He quickly followed up with an answer: Citigroup. "We were the biggest dupe. We were the biggest sucker and it was embarrassing."

The company lost $700 million--$699 million to be exact, Wells said emphatically. He then wondered how his client could be accused of aiding and abetting the fraud at Parmalat, when it was hurt the most by the fraud. Using his deep baritone voice and a grave visage, he declared that Citigroup was "a victim."

In contrast to Parmalat lawyer Kenneth Chiate of Quinn Emanuel, Wells delivered his remarks passionately and without notes. He also avoided arcane financial language and constantly reminded jurors to use "common sense."

The fraud at Parmalat was simple, said Wells. The company forged financial statements and made up sales contracts. Nobody at Citigroup knew that Parmalat managers were stealing from the company. Wells promised to jurors that no fact, witness, or document presented in the case would show otherwise.

"You don't have to be an accountant or a professor" to understand the case, said Wells. "You just have to use your common sense."

Wells's performance inside the Hackensack court is a homecoming for the litigator. Over the last few years, he's been on the road, representing individuals like the former CEO of McKesson Corp. in a California criminal trial, and I. Lewis Libby in Washington, D.C., in the Plame trial. More recently, he was seen at the side of former New York attorney general Eliot Spitzer during his resignation.

But Wells's roots are in New Jersey. After law school, he clerked for Judge John Gibbons, who was then on the Third Circuit Court of Appeals. Wells later went to work at Lowenstein Sandler in Roseland. When New Jersey senator Bill Bradley ran for president, Wells served as his treasurer. Today Wells lives in New Jersey with his wife, Nina Mitchell Wells, who is the New Jersey secretary of state.

He's clearly in his element in Hackensack. He could barely contain his joy in describing the ways in which Parmalat managers conducted the fraud. He said one forged document would go down in "financial history" because it was so brazenly fraudulent. 

Wells is expected to wrap up his remarks this afternoon. His colleague John Baughman is expected to finish Citi's opening arguments tomorrow morning.


Opening Arguments: Kenneth Chiate for Parmalat--Posted 1:33 p.m.

It's a good thing Quinn Emanuel doesn't need any referrals from investment banks. Kenneth Chiate, who gave the opening argument for Parmalat in its case against Citigroup, landed some punches against the bank. He told the eight jurors that the case is about "greed," "cover-up," "concealed loans," "red flags" that were ignored, and an "exit strategy." For dramatic effect, he wrote the words on a whiteboard in black marker. (He told the jury that he meant to use a red marker to write "red flags.")

Chiate, who is based in the firm's Los Angeles office, has tried to paint Citigroup as one of the facilitators of Parmalat's multibillion-dollar fraud. He has explained to jurors that Parmalat, which emerged from bankruptcy in 2005, is under new management.

The dairy company's suit is about recovering losses due to the fraud by old Parmalat managers--who were allegedly assisted by Citi bankers. So Quinn Emanuel has to show jurors how Citi abetted Old Parmalat's chicanery. In a slide displayed on a wall in the courtroom, the Quinn lawyers made clear why they think Citi should pay: "Because Citibank knowingly helped Parmalat's corrupt owners falsify financial statements, loot the company, and cover up the losses, Citibank should compensate the New Parmalat so the company can repair the damage . . . "

On several occasions, Chiate anticipated Citigroup's response: Its employees had no idea of Parmalat's true financial health and relied on the company's financial statements. Chiate argued preemptively that Citibank managers helped manage Parmalat's financial statements, so they had to know the state of the company.

Wearing a blue pinstriped suit with a paisley yellow tie, Chiate tried to keep Parmalat's case simple, but he couldn't avoid using terms like "puts," "derivatives," "special-purpose entities," and "off-balance sheet funding." With the case expected to last three months, it will be a challenge for the lawyers on both sides to keep jurors from falling asleep. On this opening morning, all eight seemed very attentive and many of them took notes. How long that lasts is anybody's guess.

Chiate's style is fairly straightforward, best described as just-the-facts. He hasn't tried to be folksy or funny. So far, he's played well, doing nothing to diminish Quinn Emanuel's reputation as a top-notch trial shop. The firm claims to have won more than 90 percent of the 1,200 trials that its lawyers have tried.

Chiate has some serious competition, though. Star litigator Ted Wells of Paul Weiss is expected to give the opening argument for Citigroup later this afternoon. More on that to come.

Before Opening Arguments--Posted 11:23 a.m.

Parmalat is seeking $2.2 billion from Citigroup for its role in abetting the fraud at the Italian food company, which went belly up in 2003.

We feel lucky to have made it inside the tiny courtroom of Judge Jonathan Harris. There are only three benches for spectators. Most of the space has been taken by lawyers at Quinn Emanuel, counsel for Parmalat, and Paul, Weiss, Rifkind, Wharton & Garrison, counsel for Citigroup.

The big news so far is the dismissal of two jurors--number 7 and number 10. The former claimed she couldn't have served impartially because her employer, UBS, was in litigation with Parmalat. Juror number 10 cited pending medical exams.

We're now minutes away from openings. Sitting in the front row for Quinn Emanuel are partners Kenneth Chiate and Steven Madison. For Citigroup, Paul Weiss partners Theodore Wells, Jr., and John Baughman are front and center.


 

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