The Oregonian

 

Grayson Agrees To Cooperate

 

JEFF MANNING and JAMES LONG

02/22/02

 

Jeffrey L. Grayson, the indicted former chairman of Capital Consultants, has tentatively agreed to cooperate with federal prosecutors in the fraud and money-laundering case stemming from the 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, confirmed to The Oregonian that "we've been in discussion with the government. No plea agreement has been signed."

 

Assistant U.S. Attorney Lance Caldwell said essentially the same thing. "The only thing I can confirm is that there have been discussions," he said.

 

The U.S. Securities and Exchange Commission and the Department of Labor seized Capital Consultants in September 2000, accusing Grayson of running a Ponzilike 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, the embattled financier is due to go on trial March 26.

 

If convicted on all counts, Grayson could face eight years in prison.

 

Silets and Caldwell both refused to talk about the substance of Grayson's tentative deal, although Silets acknowledged, "someone in his position cannot be laying down conditions." Silets said a "substantial factor in contemplating negotiations is his health." Grayson, 59, has multiple sclerosis and uses a wheelchair. "He wants to be left alone."

 

The fate of Grayson's prison-bound son, Barclay L. Grayson, former 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 lawyer. Ungar would not elaborate. Prosecutors could file a motion requesting the judge reconsider Barclay Grayson's sentence.

 

Barclay Grayson's role in his father's negotiation with prosecutors appears to represent a significant change in their relationship. Barclay Grayson said in his October sentencing hearing that his once-close ties to his father appeared over. "I don't know any other way to put it – I mourn the loss of my father," he said. "We have not spoken in more than a year, and we may never again."

 

Barclay Grayson, 32, is due to report in May to the Federal 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 October, 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 Union pension and benefit funds, also is headed for prison in May. He was sentenced to 15 months in November 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. As CEO and chairman of his investment firm for more than 30 years, no one knew more about its controversial dealings. He said so himself in an e-mail to friends in March.

 

"There is a substantial amount of information concerning other people that has yet to be told to anyone because I've represented about 90 percent of our firm's relationships," Jeffrey Grayson said. "I already know that the Receiver is interested 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, lawyers for former clients filed civil lawsuits against Wiederhorn, Mendelsohn and their company, accusing them of having an "undisclosed corrupt relationship" with Grayson and Capital Consultants.

 

Caldwell, of the U.S. attorney's office, declined to comment on where the investigation may now lead.

 

You can reach Jeff Manning at 503-294-7606 or by e-mail at

jmanning@news.oregonian.com.

You can reach James Long at 503-221-4351 or by e-mail at
jimlong@news.oregonian.com.

 

 


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