Mixed Verdicts in Capital Consultants Case

U.S. Dist. Judge Anna Brown (Ore., Clinton) delivered a mixed bag of verdicts on June 16.  She found Dean Kirkland guilty of paying illegal gratuities to influence the investment decisions of union pension fund trustees.  But citing the vagueness of fed. law, she found the 2 trustees in question, Dean’s father, Gary, and Robert Legino, not guilty of accepting Dean’s illegal gifts, which came in the form of lavish gifts and worldwide hunting trips.


Dean Kirkland was a salesman for the Portland, Ore.-based investment firm, Capital Consultants.  In the 1990s, it catered to union pension funds, which funneled hundreds of millions of dollars into the firm’s risky private investments.  When those investments began to go bad, Capital tried to conceal the losses until fed. regulators seized the firm in Sept. 2000.  Capital clients. mostly union pension funds, lost about $350 million.  Ten people have either pled guilty or been convicted of wrongdoing in the case.


Gary Kirkland was the CEO of Local 11 of the Ofc. & Prof. Employees Intl. Union in Portland, and a trustee of the Local’s benefit fund.  Legino was the chairman of the 8th Dist. Elec. Pension Fund in Aurora, Colo.  During the trial, fed. prosecutors presented evidence that Dean Kirkland paid for hunting trips he took with Gary and Legino to the western U.S., Canada, Africa, Argentina and Mexico between 1997 and 2000.  They also presented testimony that the 2 union officials continued to support their unions’ investments in Capital even after they were warned that they were likely violating anti-kickback provisions of fed. pension law.  Finally, the son of Capital’s founder, Barclay Grayson, testified that he hid damaging information about loans from Local 11 to a firm affiliated with Capital.


Lawyers for the Kirklands and Legino claimed that the trips were not intended to exchange gifts for investments, but were meant to rebuild the Kirklands’ father-son relationship, fractured by divorce and Gary‘s absence from Dean’s life.  But in a 101-pg. ruling, Judge Brown said that Dean Kirkland’s “own damning statements and overwhelming evidence of his illegal actions provided abundant proof of guilt.”  All sides agreed to waive a jury trial, leaving it to Judge Brown to decide on the defendants’ guilt or innocence.


Refuting Kirkland‘s claim that the trips were a form of family therapy, Judge Brown noted that Dean “targeted the business managers and the chairmen of the trusts because they typically controlled the dollars available for management” by Capital Consultants.”  She found Dean Kirkland guilty of 26 counts of wire fraud, obstruction of justice, and the payment of illegal gratuities to union benefit fund trustees.


But Judge Brown acquitted the 2 trustees, stating that fed. prosecutors had not proven a “motivational link” between the gift and the trustees’ actions.  She cited the U.S. Sup. Court’s 1999 reversal of an illegal gratuities conviction against Sun-Diamond Growers.  In that case, the High Ct. ruled that fed. prosecutors had failed to show a clear link between the company’s gifts of dinners, tennis tickets, luggage and a crystal bowl to frmr. Agric. Secy. Mike Espy, and regulatory decision he made that were perceived as beneficial to Sun-Diamond.


Judge Brown voiced frustration at the “murky” state of the law governing the acceptance of gifts by union trustees, and scorned Legino and Gary Kirkland for their “blatant and unethical conduct as trustees.”  Union members “feel betrayed by your selfishness and greed,” she said to the 2 ex-union officials.  “The ‘court of public opinion’ quite justifiably has condemned you.”  While expressing his disappointment with the acquittals, Asst. U.S. Attny. Neil Evans also said, “I think Judge Brown got it absolutely right.  the problem is with the law.” [Oregonian, 6/17/04]