Former Salomon executive's plea bargain hits snag

January 12, 1993|By New York Times News Service

NEW YORK -- A plea agreement between the U.S. government and Paul W. Mozer, the central figure in the 1991 Treasury securities scandal at Salomon Brothers, appeared to fall apart yesterday, and government lawyers said they would now seek to indict him. They did not specify the charges.

But criminal lawyers not involved in the case said Mr. Mozer now runs the risk that the government could bring more serious charges against him, including wire fraud and insider trading.

After months of negotiation, Mr. Mozer had agreed Thursday to plead guilty to two counts of making false statements to the government concerning unauthorized bids he made at an auction of five-year Treasury notes Feb. 21, 1991.

Mr. Mozer, former head of the government-bond department at Salomon, was expected to enter that plea at a hearing yesterday before Judge Robert Patterson in U.S. Court in Manhattan.

But during the hearing, Stanley Arkin, Mr. Mozer's lawyer, clashed with Laurie E. Brecher, the assistant U.S. attorney prosecuting the case for the government, over what Mr. Mozer was pleading to.

Mr. Arkin said he was concerned about language in the plea relating to future criminal actions that might be brought by the government against Mr. Mozer. Mr. Arkin contended that the plea as he understood it would bar the Justice Department, which is still investigating his client on possible antitrust violations, from bringing such charges.

Mr. Arkin said his belief was based on discussions with members of the U.S. attorney's office, whom he did not name, that took place during the plea negotiations.

"In the event an antitrust case were brought by the government against Mr. Mozer, my initial defense would be that an agreement had been reached with the government," Mr. Arkin said in court.

Mr. Arkin's interpretation was rejected by Ms. Brecher.

"This plea agreement does not intend to bind any other authorities," Ms. Brecher said. "If Mr. Arkin's understanding is any different, we have no agreement."

In a Nov. 19 letter to Mr. Arkin detailing the agreement, Ms. Brecher said that in return for Mr. Mozer's plea to the two counts, "except for criminal tax violations Paul Mozer will not be further prosecuted by the office for any crimes related to his participation in auctions of the United States Treasury" committed during the period from Aug. 1, 1989 through Aug. 9, 1991.

Ms. Brecher said the agreement applied only to the U.S. attorney's office in New York and not to Justice Department prosecutors in Washington.

Wrangling over language in the plea went on for an hour during the morning, and continued almost an hour more at a lunchtime hearing.

At the end of those arguments, Judge Patterson said he would not accept the plea without both sides coming to "a meeting of the minds."

Ms. Brecher then said her office intended to indict Mr. Mozer but refused comment on when an indictment might be forthcoming, or what charges it might contain. The government's presentation to a grand jury has been completed.

Mr. Arkin, who later called what went on in court "an unfortunate interpretation problem," said he intended to file papers within the next few days that "hopefully will persuade the court that the plea should go forward."

Lawyers outside the case were not so sure.

"In light of the government's disavowal, I cannot imagine anything Mr. Arkin can send the judge that would allow the plea to go forward," said Gerald B. Lefcourt, a partner at Gerald B. Lefcourt PC, a New York law firm that specializes in criminal and securities law.

John J. Coffee, Jr., a professor at Columbia University Law School, said the government "could come back and make an indictment on half a dozen other counts."

Mr. Mozer, 37, sat quietly by Mr. Arkin's side during the hearing yesterday. He was dismissed as the head of Salomon's government-bond trading desk in August 1991 after the firm admitted to improper bidding at several Treasury bond auctions between 1989 and 1991.

The scandal involved billions of dollars of illegal bids placed at Treasury auctions. The unauthorized bids were placed in order to buy more than the 35 percent of the securities offered that the firm was allowed to purchase.

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