Jeffrey L. Grayson, the indicted former union fund manager, has tentatively agreed to cooperate with federal prosecutors in Oregon in the fraud and money-laundering case stemming from his investment firm’s collapse. His cooperation could mean that a plea agreement is imminent, which would allow Grayson to avoid a trial on 22 counts of fraud, conspiracy, money-laundering, witness-tampering and making illegal payoffs to a union trust fund trustee. Harvey Silets, a Chicago criminal defense lawyer representing Grayson, said that “we’ve been in discussion with the government. No plea agreement has been signed.” Asst. U.S. Atty. Lance Caldwell said essentially the same thing. “The only thing I can confirm is that there have been discussions.”
The Securities & Exchange Comm’n and the Dep’t of Labor seized the firm, Capital Consultants in Sept. 2000, accusing Grayson of running a Ponzi-like scheme to conceal investment losses. A court-appointed receiver estimated the losses, mostly to union pension and benefits funds, at $355 million. Unless Grayson and the government finalize their plea deal, he is due to go on trial Mar. 26. If convicted on all counts, Grayson could face eighty years in prison.
The fate of Grayson’s prison-bound son, Barclay L. Grayson, ex-president of Capital Consultants, played a role in the senior Grayson’s decision to seek a deal. Sources close to the case said Barclay helped persuade his father to negotiate with prosecutors. “If an agreement is reached between Jeff Grayson and the government, this could benefit Barclay Grayson,” said Steven Ungar, Barclay Grayson’s Portland attorney. Prosecutors could file a motion requesting the judge reconsider Barclay Grayson’s sentence.
Barclay Grayson is due to report in May to the Fed. Correctional Institution at Sheridan where he will begin serving a two-year term after pleading guilty to mail fraud. The unexpectedly stiff penalty, imposed in Oct., drew cries of dismay from Barclay Grayson and his family, who had hoped for a suspended sentence.
John Abbott, former co-chairman of three Laborers’ Int’l Union of N. America pension and benefit funds, also is headed for prison in May. He was sentenced to 15 months in Nov. 2001 after admitting in federal court he accepted nearly $200,000 in secret payoffs from Jeffrey Grayson while steering the trust funds’ money to Capital Consultants.
Jeffrey Grayson’s cooperation could prove valuable to the ongoing criminal investigation of the case. “There is a substantial amount of information concerning other people that has yet to be told to anyone,” Jeffrey Grayson said an e-mail to friends uncovered by the Oregonian. “I already know that [there is interest] in information concerning existing defendants as well as those that have not been named.” Andrew Wiederhorn and Lawrence Mendelsohn were both notified last spring that they were targets of a federal grand jury investigation. The duo headed the former Wilshire Credit Corp., which borrowed and failed to repay $160 million from Capital Consultants. The default threw Capital Consultants into financial disarray. After the firm’s collapse, several unions and others filed civil lawsuits against Wiederhorn, Mendelsohn and their company, accusing them of having an “undisclosed corrupt relationship” with Grayson and Capital Consultants. Caldwell declined to comment on where the investigation may now lead. [Oregonian 2/22/02]