Judge tosses Modesto businessman Katakis’ obstruction conviction

05/14/2014 4:06 PM

05/14/2014 5:48 PM

Saying a rational jury could not have found Modesto businessman Andrew Katakis guilty of destroying evidence to throw off investigators, a federal judge has thrown out Katakis’ March 11 obstruction conviction. Katakis said he is “gratified” and will seek a new trial to reverse the same jury’s guilty verdict of rigging bids at public foreclosure auctions.

“I have always maintained that I am innocent of the government’s claim of obstruction of justice,” Katakis said in an email to The Modesto Bee. “Fortunately, my trial was in front of a judge who does care about the truth.”

How the overturned conviction or a new-trial motion might affect Katakis’ sentencing on the bid-rigging charge, scheduled for June 9, could not be determined.

After a four-week trial and four days of deliberating, jurors declared Katakis and Donald Parker guilty of bid rigging in San Joaquin County, and Katakis guilty of obstruction. Jurors could not agree on whether the men had committed mail fraud, and they cleared auction crier Ted Longley of having a role in a conspiracy involving 11 other defendants who had pleaded guilty earlier.

Katakis hired another law firm and asked that the obstruction conviction be tossed. Last week, U.S. District Court Judge William Shubb, who had presided at the trial, agreed.

In his order, Shubb noted that federal prosecutors relied on various theories of Katakis deleting supposedly incriminating emails in 2010, moving from one to another and then a third when the first two theories fell apart. A former FBI agent hired by Katakis’ defense team discredited a prosecution computer expert, who was forced to admit the error when recalled, Shubb noted.

Prosecutors had argued that Katakis, two days after learning from an Oakdale-based bank that a federal grand jury had indicted him, bought software allowing him to scrub emails and to cover up the deletions. But “undisputed evidence from both experts at trial” should have convinced jurors that the software could not have done what prosecutors claimed, the judge said in his decision.

Prosecutors then turned to a theory that Katakis manually double-deleted emails by moving them to a “trash” file and then deleting items in that file. But in “the ordinary course of business,” that action “is a common and legal practice” done every day by people who use computers, Shubb concluded.

“None of the evidence was sufficient for the jury to find beyond a reasonable doubt that Katakis knowingly destroyed or concealed the emails with the intent to obstruct an FBI investigation,” the judge found.

Katakis said Tuesday, “I am fortunate that I was able to afford to hire an expert to show the judge that the government’s expert’s testimony about what he claimed happened was not possible.”

In an unsuccessful brief aimed at preserving the obstruction charge, prosecutors said Katakis paid his expert more than $300,000.

Saying conspirators were fueled by “greed, arrogance and control,” prosecutors said the men cheated at auctions of repossessed homes during the mortgage meltdown in 2008 and 2009, defrauding lenders and freezing out honest buyers while splitting proceeds among members of their group. Katakis helped finance most of the 254 homes scrutinized by the FBI and other federal and local agencies.

Katakis, who owned California Equity Management Group in downtown Modesto and was managing partner of Lenders Financial Group LLC, contended that he was duped by a middle man and was personally involved only in legitimate business deals. His attorney said law enforcement “ignored inconvenient facts” that should have pointed to Katakis’ innocence.

In a post-trial document, his lawyers said prosecutors concocted the double-delete theory after Katakis’ camp had presented his witnesses, preventing his attorneys from adequately defending him. A prosecutor then retreated to the software-scrubbing theory in her closing statement, knowing it was false; that constitutes prosecutorial misconduct and “warrants a new trial,” the brief says.

“The government’s misstatements of law and repeated and deliberate telling of a story that it knew to be false during closing argument rendered the trial constitutionally unfair,” the document says.

The obstruction conviction could have handed Katakis a 20-year term in federal prison and a $250,000 fine. Penalties for bid rigging include sentences of up to 10 years and a fine of $1 million or more, depending on how much money was swindled.

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