Former Justice Department prosecutor John William Sellers faces a disciplinary hearing next month over allegations he secretly negotiated with a financial institution under criminal investigation to effectively fire an employee that Sellers, by one account, thought was “bad for banking.”
The former trial attorney in the Asset Forfeiture and Money Laundering section of the Department of Justice’s Criminal Division will go before Judge J. Michael Wachs in Anne Arundel County Circuit Court in Annapolis on Aug. 28 and 30. The Attorney Grievance Commission of Maryland will ask that Sellars be punished for reckless and unprofessional misconduct in his pursuit of a Florida banker, including keeping secrets from his DOJ superiors and going way beyond the bounds of his authority. (See commission document.)
In a telephone interview with Main Justice, Sellers’ lawyer, James P. Nolan of Annapolis, said “we adamantly deny any violation” of professional rules, and he insisted that Sellers “acted within the scope of his authority at all times” while at the DOJ, where he had “a distinguished career.”
Well, not entirely distinguished. In 2010, a DOJ internal inquiry reportedly concluded that Sellers had behaved recklessly and unprofessionally in going after the banker, Sergio Masvidal.
Nolan said his usual practice is “not to play the case out in the press” ahead of time. The DOJ, too, has declined comment.
Masvidal and his lawyers have been less reticent. In interviews and through his lawyers, Masvidal has accused Sellers of doing his best to wreck his life by entering into secret agreements to keep him from working. “If I had not saved some money, I’d be driving a cab today,” Masvidal said in a recent interview with the Miami Herald.
One of Masvidal’s lawyers said in an interview with Main Justice that the DOJ should have fired Sellers, instead of allowing him to slide into a job at the Treasury Department after the DOJ internal probe found against him.
Masvidal, it appears, became “collateral damage” when the Miami-based bank that he headed, American Express Bank International, was investigated starting in 1999 on suspicion of money laundering.
In a deferred prosecution agreement, American Express Bank International paid $65 million in 2007 to settle charges that it kept sloppy deposit records and was lax in enforcing laws meant to flag drug money. At the time, American Express was looking to sell its Bank International unit and wanted to dispose of any legal problems as quickly as possible. American Express did sell the Bank International unit that September, to the British company Standard Chartered, for $823 million.
But there was more to the deferred prosecution agreement, and to the eventual sale. Under a “side letter” to the deferred prosecution agreement, Masvidal was not supposed to keep his job if the Bank International unit were sold. For that matter, even if it were not sold, Bank International was supposed to get DOJ permission to keep Masvidal on the payroll upon the expiration of the deferred prosecution agreement.
This “side letter” was kept secret, according to the Attorney Grievance Commission’s petition against Sellers — secret from Masvidal (along with another bank executive similarly affected), secret from a federal judge in the Southern District of Florida who should have known about it and secret, it turned out, from Sellers’ superiors at the DOJ.
In 2007, after learning about the blackballing letter, Masvidal retained James W. Cooper of Arnold & Porter LLP in Washington. Sellers told Cooper that Masvidal, who had never been charged with anything, was nevertheless “bad for banking,” and so Sellers was determined “to follow him for the rest of his life,” the Attorney Grievance Commission of Maryland asserts. (The commission was created in 1975 to oversee discipline of lawyers in Maryland, where Sellers was licensed. A commission document says Sellers lives in Jeffersonton, Va.)
If Judge Wachs finds that the charges against Sellers are substantiated, he can recommend a reprimand, suspension or even disbarment. The judge’s recommendation is to be handed down within 45 days of the conclusion of the hearing, Commission Counsel Glenn M. Grossman told Main Justice. The judge’s recommendation will be reviewed by the Maryland Court of Appeals, the state’s highest tribunal.
A lawyer who has represented Masvidal recently, Joseph DeMaria of Tew Cardenas LLP in Miami, told Main Justice that Masvidal will testify before the grievance commission. DeMaria said he himself may testify.
Masvidal’s complaints about Sellers are backed up by the DOJ itself. In May 2010, as part of a DOJ settlement with Masvidal, Deputy Assistant Attorney General Kenneth A. Blanco wrote a rare letter of exoneration acknowledging that the “line prosecutor” had engineered an unauthorized side letter, and that the investigation of the bank had uncovered no wrongdoing by Masvidal himself. “Mr. Masvidal may provide this letter to any prospective employer or regulator who may have questions regarding his absence from the banking industry these past two years,” Blanco wrote.
After obtaining the letter of exoneration, Masvidal initiated the complaint that gave rise to the Maryland proceeding. DeMaria asserted that the DOJ should have punished Sellers rather than “outsourcing” the issue to the Maryland state bar, and that Sellers should never have been able to get another government job. The DOJ declined to comment, citing federal privacy laws, in a recent article on the matter in USA Today. The Justice Department did not respond to a Main Justice request for comment.
Sellers also stumbled in another Florida case, his 2008 pursuit of a Miami lawyer on suspicion of money-laundering. The DOJ was forced to drop the case in 2009 after losing an appeal over the basis of the case, an episode chronicled in the Miami Herald.
Finally, the secret dealings between Sellers and the American Express bank unit — and its lawyers — suggest that some people were perfectly happy to sacrifice Sergio Masvidal in secret — all for the greater corporate good, of course.
As DeMaria put it, “When elephants fight, mice get squashed.”
