Reginald Fowler, the Arizona businessman tied to hundreds of millions of dollars of Tether and Bitfinex’s missing money, appears to have conned his own defense team.
As I explained in a previous post, Fowler’s lawyers are seeking to withdraw from his case due to nonpayment. (The US government is accusing Fowler of operating a shadow banking operation for cryptocurrency exchanges.) But the details are privileged and confidential, so the judge overseeing the case agreed to allow them to file an ex parte sealed letter.
Judge Andrew Carter has now received the letter—from Hogan Lovells on behalf of itself and Rosenblum Schwartz—reviewed it, and filed a response. As I had suspected, Fowler appears to have hoodwinked his own defense team. Here is the judge’s eight-page opinion and order.
“Money isn’t everything,” the SDNY district judge writes. “But in this case, it is the only thing.” [Emphasis mine.]
According to Carter, Fowler’s jilted defense team recounted several conversations with their client in which Fowler promises to pay, but does not, effectively stringing them along.
“Mr. Fowler assured his attorneys he could pay, referring to planned business transactions, real property and bank accounts,” the judge said.
The defense counsel apparently understood that many of Fowler’s assets were frozen, but the hope was that Fowler could unfreeze certain assets by demonstrating that the assets had no connection to case.
However, during the time Fowler’s lawyers had been pressing him for payment and Fowler telling them he did not have the available funds, the lawyers learned that Fowler had plenty to pay his other lawyers—a large international law firm (name withheld) and an unnamed lawyer.
I’m not sure what exactly this means (a tip-off that Fowler had funds hidden away somewhere?) but Carter said: “The anonymous lawyer gave defense lawyer advice regarding Fowler’s ability to pay legal fees from funds that might not be related to criminal activity.”
So why did Fowler’s lawyers wait this long before asking the court if they could dump their client when the troubles with getting paid started back in February?
According to Carter’s retelling, they thought the case would have been resolved with a guilty plea in January. However, the plea bargain blew up when Fowler learned it would require him to forfeit $371 million.
Recall that after that, federal prosecutors responded with a superseding indictment that added a fifth charge, which would have required a lot of additional (unpaid) work from the defense team.
Fowler’s defense team “decided they would continue representing him even though they had been owed a great deal of money for several months,” Carter said. “But largess shrinks when confronted by the prospect of additional, unpaid hours dedicated to trial preparation.”
There is still the issue of whether Fowler’s defense team should be allowed to withdraw from the case. But federal prosecutors needs to know more about their reasons for seeking withdrawal, so they can respond.
Some information in Hogan Lovells’ sealed ex parte needs to be made public and some needs to remain sealed, Carter said. Certain information about Fowler’s assets should remain sealed. Any information about plea negotiations needs to remain sealed as well.
However, details about the amount and timing of Fowler’s payments to the defense counsel is “highly relevant and should be made public.”
The name of the large international law firm should also be made public, Carter said, stating that “the size and nature of the firm is relevant to the fact that Mr. Fowler paid something to that firm—but did not fully pay Hogan and Rosenblum—and whether Hogan’s and Rosenblum’s acceptance of relatively low retainers was reasonable.”
Low retainers? This may be a sticky point, and something federal prosecutors make a big issue with in their next response.
The judge ordered Fowler’s defense team to file three versions of their letter—a public version redacting what should not be revealed to the government or the public; a sealed version, redacting what must not be disclosed to the government; and a third ex parte sealed version with no redactions.
All filings need to be completed by Dec. 1; the government has until Dec. 8 to respond. Replies are due by Dec. 11.
Nov. 24: Updated to clarify a few details, like what Fowler is being accused of and to emphasize that the retainer issue will likely come up again in the government’s response.
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