New Haven Independent

The decision by Judge Janet Arterton late Thursday appears to end an unprecedented white-collar crime drama in the courthouse across from the New Haven Green — and spare a jail sentence for local broker John Lucarelli (at right in photo with defense attorney Dominic Amorosa). Arterton broke new legal ground in her decision acquitting Lucarelli.

Lucarelli, an Orange native and Yale School of Management graduate, technically faced up to 30 years in jail. Attorneys believed that, because of federal sentencing guidelines, the true prospect was between 18 months and three years.

Click here to read Arterton’s decision.

“John Lucarelli is a decent and honest person. The jury’s verdict along with Judge Arterton’s decision yesterday validates his good character,” exulted attorney Amorosa.

Tom Carson of the U.S. Attorney’s Office said, “”We are currently in the process of reviewing Judge Arterton’s ruling in order to determine whether or not the government will seek an appeal.”

Lucarelli was the local broker who lined up bank depositors to accept money from New Yorker Robert R. Ross (pictured) to buy shares of NewAlliance Bank in its 2004 initial public offering (IPO). The depositors pretended they were buying the shares with their own money, not Ross’s, since Ross was not legally entitled to buy them. The IPO was available only to bank depositors, and Ross didn’t have a New Haven Savings account. Ross and the depositors agreed to share the instant profits when they resold the shares upon the offering being made available to the general public.

Such deals were part of a broader scam that enabled wealthy out-of-towners to illegally muscle their way into a lucrative IPO reserved just for bank depositors.

That practice is known to occur widely when mutual banks convert to public stock corporations. Until this case, though, the federal government had never caught and prosecuted anyone for the crime. Ross pleaded guilty and cooperated with the government. He testified against Lucarelli, who pleaded innocent. Last July 28 a jury convicted Lucarelli of conspiracy and securities fraud.

At the same time, Arterton asked the jury to answer two “special interrogatories.” She asked whether they were finding that Lucarelli conspired specifically to defraud the bank. And she asked whether they were finding that Lucarelli conspired specifically to defraud the bank’s depositors.

The jury answered no in both cases.

Lucarelli’s attorneys argued that those answers contradicted the guilty verdict. How, they asked, could Lucarelli have helped engineer a rip-off — if no one was ripped off?

Government prosecutors countered that, among other arguments, the word “depositors” was vague: It was unclear whether the jury’s answer meant specific depositors who entered into the shady deal with Lucarelli and Ross; or all the 2,100 bank depositors who, because of all the fraudulent purchases, weren’t able to buy as many shares in the IPO as they otherwise would have been. The prosecution also argued that the general guilty verdict takes precedence over specific answers in jury interrogatories.

That issue had been decided in previous federal civil cases, giving interrogatories precedence. In one previous criminal case a judge sent a case back for retrial after interrogatories contradicted a general verdict. With Thursday’s decision, Arterton has set a precedent that the interrogatories take precedence.

Judge Arterton posed extensive questions to both sides during a court hearing on Feb. 8. From the bench she seemed troubled by the implications of a problem she may have helped create through unclear instructions. She also seemed intrigued by the legal issues raised on what was new terrain.

The central question had been decided in previous federal civil cases (giving interrogatories precedence). In one previous criminal case a judge sent a case back for retrial after interrogatories contradicted a general verdict.

With Thursday’s decision, Arterton has set a precedent that the interrogatories take precedence.

“I expect there to be a lot of interest in this particular fact situation, where the judge in essence says this very specific interrogatory will always control over the general verdict,” said defense attorney Amorosa.

Ultimately, the decision also reflects why hustlers usually get away with these white-collar crimes — they’re hard to prove, and it’s particularly hard to explain to a jury who exactly gets hurt.

The government still has a trophy: Robert Ross, the guy who made the real money on the deal. He pleaded guilty. He may avoid jail, since he cooperated with the government, but he will nevertheless face some form of penalty at his upcoming sentencing.

For John Lucarelli, legal troubles aren’t over, even if the U.S. attorney doesn’t appeal Arterton’s ruling. Lucarelli still faces a civil suit filed by the federal Securities and Exchange Commission; that suit had been on hold pending the outcome of the criminal trial.

However, Lucarelli would no longer face the prospect of serving time in jail.

Amorosa argued Friday that the outcome of the criminal case will help Lucarelli in his SEC civil case — by highlighting a central defense claim, that the bank knew about the scam and therefore couldn’t have been an injured party.

“The reason the jury made that special interrogatory was they believed that Lucarelli and everyone else that that bank was aware of what was going on. If the bank knows what’s going on - and Lucarelli knows what’s going on,” then the bank can’t be a victim, Amorosa argued.

A bank official adamantly denied knowing about the scams when he testified in this criminal case. He argued that bank officials tried to stop the scams. Click here to read about that.