6/26/08

Cleary appeals sanctions over Congo witness row

Author: Anthony Lin

Published: 26/06/2008 11:17

 

Cleary Gottlieb Steen & Hamilton yesterday (25 June) took to the courts in a bid to overturn sanctions brought against the firm for improperly attempting to dissuade a witness from testifying, writes The American Lawyer.

Lawyers from the firm, led by managing partner Mark Walker, filled many of the gallery seats in the 2nd US Circuit Court of Appeal as Cleary attempted to reverse a stinging sanctions order by Southern District of New York Judge Loretta Preska last August saying the firm had shown "a willingness to operate in the murky area between zealous advocacy and improper conduct" in attempting to interfere with the deposition of a non-party witness.

"That's a pretty stigmatising statement for a court to make about an entire firm," Cleary's lawyer, Roy Reardon of Simpson Thacher & Bartlett, yesterday told the panel of judges - Ralph Winter, Jose Cabranes and Roger Miner.

Preska had also ordered Cleary to pay its opponent's costs and, perhaps most gallingly, circulate a formal reprimand to each of its 950 lawyers around the world.

Reardon said Preska's "stark and harsh" decision was wrong and maintained that Cleary's lawyers broke no ethical rules. He claimed the sanction order was the result of a calculated campaign by a global hedge fund to impugn the integrity of the firm, which frequently opposes its efforts to collect on distressed sovereign debt.

The sovereign debt at issue in the underlying case, Cleary Gottlieb Steen & Hamilton v Kensington International, was that of longtime Cleary client the Republic of Congo.

Kensington, a branch of hedge fund Elliot Associates, had obtained a $57m (£28.9m) judgment on Congolese debt from a London court and went to federal court in Manhattan seeking both enforcement and discovery to determine the money's whereabouts.

Kensington, represented by Philadelphia firm Dechert, subpoenaed Médard Mbemba, a French-Congolese businessman and one-time confidant of Congolese President Denis Sassou-Nguesso. Mbemba, who lives in Paris, agreed to appear for a deposition to be conducted by Dechert counsel Arnon Siegel in Washington DC, on 4 February, 2005.

The Cleary lawyers working most directly on the matter, led by counsel Boaz Morag, were unavailable on that date. They tried to arrange an alternative date, eventually proposing as a venue Paris, where both firms have offices. But on 2 Febraury Dechert informed Cleary that it would go ahead with the deposition in Washington as planned.

The sanction order stems from what came next. Morag asked Jean-Pierre Vignaud, Cleary's relationship partner for Congo and a Paris-based member of the firm's executive committee, to call Mbemba. Cleary claims the subsequent communications between the two were totally above board, with Vignaud urging Mbemba not to attend a US deposition without a lawyer. At most, Cleary says, Vignaud permissibly explained the point of view of Cleary's client that the case involved a "vulture fund" whose activities could "destabilise" Congo.

But Preska agreed with Kensington that Vignaud, who was not otherwise involved in the case, was chosen because he was a well-known figure in Congolese political circles. Mbemba, who ultimately decided to proceed with the deposition, testified at the sanctions hearing last year that Vignaud appealed to him as a "Congolese patriot," suggesting that participating in the deposition would be "very dangerous" for Congo.

"This court can but conclude that Cleary feared Mbemba might reveal damaging information or offer evidence of illegal conduct and thus attempted, in bad faith, to influence Mbemba's testimony or, better still, to avoid the deposition altogether," Preska wrote in her August sanctions order.

Reardon denied that Vignaud appealed to Mbemba's patriotism but he acknowledged there were "two versions of what happened in those conversations". He said Mbemba's testimony was also motivated by his current opposition to Cleary's client, the Congolese Government.

Reardon called Preska's finding of bad faith "absolutely inappropriate," saying the judge was wrong as a matter of law to find that a lawyer acted improperly in having his own client's interests in mind when talking to a non-party witness.

Kevin Reed of Quinn Emanuel Urquhart Oliver & Hedges argued the appeal for Kensington. The 2nd Circuit judges asked him whether Kensington had been unreasonable in insisting that the deposition be held on 4 February in Washington when a Paris deposition seemed a reasonable compromise.

"Everything would grind to a halt if lawyers couldn't accommodate each other," said Judge Miner.

"Everything would grind to a halt if everyone resorted to self-help as Cleary did here," Reed replied. He later added: "You don't go to the witness and say the sort of things Vignaud said, which can only have the effect of intimidating a witness and shaping his testimony."

The sanction against Cleary now under appeal is the sole remaining issue in the case, which settled in February. But Reardon said Kensington and its affiliates had already raised the sanctions order in other cases.






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