Bloomberg News

Bet-The-Company Lawyer Steps In Between Government, S&P

February 08, 2013

John Keker’s San Francisco law firm declares on its website that it takes the “the make or break cases where companies, careers and reputations are riding on the result.”

“True to our roots as trial lawyers, we relish the courtroom battles,” the firm says.

Keker, a Marine Corps platoon leader during the Vietnam War, may face as many as 18 of those judicial skirmishes as he goes to war in defense of the bond ratings firm Standard & Poor’s Financial Services LLC and its parent, the McGraw-Hill Cos. (MHP:US)

S&P was sued this week by the U.S. Justice Department, 13 states and the District of Columbia for allegedly inflating ratings on mortgage-backed securities to boost its own profit. Illinois, Connecticut and Mississippi previously sued the New York-based company.

The U.S. alone seeks as much as $5 billion in penalties. The defendants, which deny wrongdoing, this week added Keker to a defense team that already included free-speech advocate Floyd Abrams and his New York-based law firm, Cahill Gordon & Reindel LLP (1271L:US).

“John Keker will have a central role in the trial of this case if there is a trial,” Abrams said in a Feb. 7 phone interview. “Cahill Gordon and I will be working with him.”

Abrams said the precise division of labor among the lawyers hasn’t been determined. Lawyers from both firms will be in court for any trial, he said.

‘Extraordinary Skill’

Abrams said his co-counsel was hired for his “extraordinary skill as a trial lawyer.” Keker didn’t respond to phone or e-mail requests seeking comment on his role in the case.

His clients have included former Black Panther Party leader Eldridge Cleaver and banned cyclist Lance Armstrong, as well as vindicated investment banker Frank Quattrone, Enron Corp (ENRNQ:US). executive Andrew Fastow and class action lawyer William Lerach.

A founding partner of Keker & Van Nest LLP (932197L:US), Keker, 69, was once voted by 100 of his California colleagues as the first lawyer they’d hire if they were charged with a serious crime.

“His name was mentioned more often than any other when our surveyed lawyers were asked who they’d turn to,” California Lawyer magazine reported in 2001.

‘Slashing and Smashing’

In a 2003 Bloomberg News profile, Keker said he honed his “slashing and smashing” defense tactics in white-collar crime trials and corporate litigation.

“He’s not afraid of anything,” Cristina Arguedas, a criminal defense lawyer who has known Keker since 1980, said in a Feb. 7 interview. The two have represented co-defendants in at least 30 cases, she said.

“He’s not your typical big firm, white-collar lawyer. He’s a real fighter. He lives to try cases,” said Arguedas of Arguedas Cassman & Headley in Berkeley, California. Her clients have included former San Francisco Giants outfielder Barry Bonds, who was convicted of obstructing a federal probe of performance-enhancing drugs, and former Atheros Communications Inc. Vice President Ali Hariri, who pleaded guilty in the Galleon Group LLC insider-trading probe.

Keker’s greatest strength, she said, is his ability to “see defenses that other people maybe don’t see and make them simple to understand.”

Ohio, Illinois

Cahill Gordon has defended S&P from allegations of bond ratings hype leveled by attorneys general in Ohio and Illinois.

“Cahill is our firm,” Edward Sweeney, an S&P spokesman, said Feb. 6 in a phone interview.

Last year, Abrams successfully argued against an appeal by Ohio, which in 2011 lost a case claiming five public employee pension funds were misled by securities’ ratings assigned by S&P and two other firms.

In November, Abrams’s firm failed to win dismissal of a year-old case against S&P brought by Illinois Attorney General Lisa Madigan.

A state court judge in Chicago rejected defense arguments that the alleged misrepresentations by S&P were opinions, making them speech protected by the U.S. Constitution’s First Amendment.

“I don’t have any magic First Amendment wand in my pocket for this one,” Abrams, 76, said Feb. 5 of the U.S. allegations in a Bloomberg Television interview.

Fraud Case

“It’s not a First Amendment case because the government is alleging that S&P didn’t believe what it said,” Abrams said. “The First Amendment doesn’t protect against that.”

Abrams denied S&P had committed any fraud in rating collateralized debt obligations from 2004 to 2007.

“The ratings were independent,” he said. “The ratings were the best judgment by S&P at the time about what the future would bring.”

Catherine Mathis, an S&P spokeswoman, said in an e-mailed statement after the Justice Department sued that the company would defend itself against “these unwarranted claims.”

“Claims that we deliberately kept ratings high when we knew they should be lower are simply not true,” she said.

The federal case was assigned to U.S. District Judge David O. Carter in Santa Ana, California.

Carter, 68, was nominated by President Bill Clinton in 1998. Before becoming a federal judge, he was an Orange County homicide prosecutor and a California state court judge. He earned a Bronze Star and a Purple Heart during his service with the U.S. Marine Corps in Vietnam.

Vietnam, Yale

Keker graduated in 1965 from Princeton University in New Jersey and served as a U.S. Marine Corps infantry platoon leader in Vietnam, according to a biography on his law firm’s website. After being wounded and retiring in 1967 from the corps, he graduated from Yale Law School in 1970 and clerked for Supreme Court Chief Justice Earl Warren from 1970 to 1971, according to the website.

He was part of the special prosecution team in the case against Oliver North, the U.S. Marine Corps lieutenant colonel enmeshed in the Iran-Contra scandal that enveloped the later years of President Ronald Reagan’s second term as president.

Keker defended Quattrone in successive trials on charges of obstruction of justice and witness tampering. The case against Quattrone was based partly on e-mails in which the Credit Suisse banker allegedly told subordinates to “clean up” their files after learning of a pending grand jury investigation into the firm’s allocation of shares in initial public offerings.

Quattrone Juries

While the first jury deadlocked in 2003, the second convicted Quattrone on the obstruction charge in 2004. Keker sparred with U.S. District Judge Richard Owen at both trials, accusing him of interfering with the defense.

During the first trial, Owen likened Keker to “a fire hydrant on the corner of somewhere in New York City in the summer and I can’t turn you off.”

Prosecutors dropped the case after the U.S. Court of Appeals in New York threw out the conviction in 2006 and ordered a new judge be assigned.

Later that year, Keker won leniency for Fastow, who had pleaded guilty to separate counts of conspiracy to commit wire fraud and securities fraud, then testified against Enron founder Kenneth Lay and Chief Executive Officer Jeffrey Skilling.

While Fastow’s plea agreement called for a 10-year prison term, Keker cited his client’s cooperation with prosecutors and got a reduction to six years.

Keker also represented the lawyer Lerach, who had recovered more than $7 billion for investors who sued Enron. Lerach pleaded guilty to paying client kickbacks and agreed to forfeit $7.75 million.

Lance Armstrong

Representing Armstrong, who was stripped of his seven Tour de France victories and who admitted in January to doping during his career, Keker and his firm spoke with federal investigators in 2011 about Armstrong’s belief that information from a grand jury probe had been leaked to the media.

“The leaker(s) have made it abundantly clear that these leaks come from the investigation’s inner circle,” Keker said in a court filing in July 2011. The leaking was similar to what happened in a federal investigation of steroid use among Major League Baseball players, he said.

Keker’s firm asked for a court order directing investigators to show why they shouldn’t be held in contempt for violating grand jury secrecy rules.

The U.S. Attorney’s office in Los Angeles announced Feb. 3, 2012, that a criminal investigation of Armstrong’s team was closing without charges being brought.

“He is a criminal defense lawyer,” Arguedas said of Keker. “You can see that in all the ways in which he approaches the case. He’s not a government guy. He never was a government guy.”

The case is U.S. v. McGraw-Hill Cos., 13-00779, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at

aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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