A STATEMENT BY COUNSEL FOR ANDREW WIEDERHORN
June 5, 2004
Contact for further information:
Marc D. Blackman
Andrew Wiederhorn at all times relied on the advice of his attorneys.
Our exhaustive investigation convinced us that Andrew Wiederhorn acted in good faith in all his business dealings, including those with CCI. He relied on the best lawyers, told them everything, and followed their advice. The court has ruled that reliance on counsel is no defense under 18 USC §1954. We think that is bad public policy – businessmen should be encouraged to seek legal advice, not punished for following it. But the federal sentencing guidelines do not encourage efforts to change public policy through criminal litigation. Given the likelihood that a jury would be instructed that good faith reliance on the advice of counsel is no defense, Mr. Wiederhorn was left with only one rational option for bringing closure to this matter – the plea agreement announced today.
Andrew Wiederhorn was open and cooperative with the government throughout its investigation.
Andrew Wiederhorn was open and cooperative with the government throughout this inquiry. He took the extraordinary step of waiving attorney-client and accountant-client privilege to assure the government’s access to the records and testimony of his business lawyers and CPAs. He insisted on taking three lie detector tests and passed them all. He directed us to give the government access to the records we gathered and organized. He directed us to share our knowledge of the facts as we gained it.
Mr. Wiederhorn’s good faith cooperation with the government was remarkable and completely consistent with the good faith we found to be part of each of the business transactions under scrutiny.
The ERISA violation to which Mr. Wiederhorn plead guilty is an obscure, strict liability offense.
The Ninth Circuit has construed 18 USC §1954 to be a “strict liability” statute that does not require criminal intent. So despite all the rumor and innuendo, after four years of intensive government investigation, the case came down to the claim that Mr. Wiederhorn violated an obscure provision of ERISA that none of the outstanding business lawyers who advised Mr. Wiederhorn was aware of and that the courts have held is broken even if you don’t know you are doing something wrong.
The Tax Plea Resulted in No Tax Benefit.
As for the false tax return count, the sale of the SFI notes to Longpond was designed by tax attorneys and accountants, resulted in no tax benefit to Mr. Wiederhorn, and caused no loss to the government. The sale was designed by the same tax attorneys and accountants who designed Larry Mendelsohn’s sale of his S&S debt to John Condas. As Mr. Mendelsohn’s lawyer, Ron Hoevet, noted in his sentencing memorandum in
Mr. Mendelsohn’s case a couple of weeks ago:
This case is the least fraudulent tax fraud case with which I have ever been associated in 30 years as a defense lawyer and federal prosecutor…[T]he truth is Larry actually lost all the money he claimed as capital losses on his return…The losses were real, the sale of the notes was not.
The Pleas Allow Mr. Wiederhorn to Mitigate Risk to His Family and Business
Faced with years of expensive and disruptive litigation and the unfair federal sentencing guidelines, Mr. Wiederhorn chose not to gamble his, his family’s, and his business’s future. No one should fault him for this choice.