(Bloomberg) -- The Platinum Partners fund manager convicted last month by a jury of rigging a bondholder vote may have an unlikely ally in his quest to stay out of jail -- the federal judge at his trial.

US District Judge Brian Cogan has already voided two jury convictions for Platinum Partners executives. Now, the veteran judge has invited lawyers for Daniel Small, who was found guilty of securities fraud and conspiracy, to submit arguments by Friday on why he should set aside that conviction too.

A judge overruling a jury is relatively rare. Doing it three times -- even after a higher court has reversed him -- is almost unheard of. Cogan has indicated that he doesn’t understand why the government is bringing these cases as criminal matters, when they should be civil.

Following an appeals court’s decision to reinstate the convictions of Small’s colleagues, Mark Nordlicht and David Levy, Cogan has signaled he might not send them to prison. And the judge told prosecutors after Small’s two-week trial in Brooklyn, New York, that he wasn’t ready to set a sentencing date for the executive.

Read More: Platinum Partners Executives’ Fraud Convictions Reinstated 

“There are very serious issues about a verdict that comes out this way on facts like I heard in this case,” the judge said.

Cogan declined to comment on the case.

During the trial, Cogan suggested to prosecutors at one point the case would be better handled as a lawsuit. At another hearing, he called prosecutors “myopic” and asked, “Where is the government going to stop?”

Legal experts say that if the judge moves to undo Small’s conviction -- or refuses to send him to prison -- he risks another reproach by the US Second Circuit Court of Appeals in Manhattan. Appeals courts have even been known to take a judge off a case and assign it to another jurist if they conclude that’s the only way the matter can be fairly resolved.

“He’s being stubborn,” said Columbia Law School Professor John Coffee Jr. But Coffee said the judge may also think he can win over the appeals court by crafting his ruling to clear up points that were ambiguous the first time around. 

“He may well think ‘I know these facts, and that panel didn’t,’” Coffee said.

The alleged crimes stem from the sale of Houston-based Black Elk Energy Offshore LLC’s most valuable assets in 2014 as the oil and gas company was heading toward bankruptcy. Black Elk was one of Platinum’s largest investments.

Prosecutors argued Small and his co-defendants defrauded Black Elk’s third-party bondholders by rigging a solicitation vote and ultimately diverting the $70 million in proceeds from the sale of the oil company’s assets to Platinum, even though Black Elk bondholders had priority.

When Nordlicht and Levy went to trial in 2019, a jury acquitted them of charges that they ran the hedge fund as a Ponzi scheme. However, the two were found guilty on the allegations tied to Black Elk.

But Cogan overruled the jury, finding that prosecutors failed to prove that Levy acted with criminal intent and acquitting him. He also granted Nordlicht a new trial, saying the evidence showed he went to “great lengths” to comply with the law, which Cogan said prosecutors failed to disprove.

“Letting the verdict stand against Nordlicht would be a manifest injustice,” the judge said at the time.

Cogan’s reset didn’t last long. The three-judge appeals panel that resinstated the convictions cited a “wealth of evidence, circumstantial and otherwise” that supported the jury’s finding and concluded Cogan had “abused” his discretion.

When Cogan was appointed to the bench in 2006 by then-President George W. Bush, he didn’t come from a prosecutors’ office, as many federal judges do. Instead, he’d spent about 25 years as a commercial litigator at Stroock & Stroock & Lavan LLP. Among his cases, which ranged from bankruptices to business disputes, he helped a German bank recover $39 million in losses from a loan to Enron Corp. after the energy trader collapsed in scandal.

A key issue for Cogan at Small’s trial was whether the fund manager intended to defraud bondholders by not disclosing that some bonds issued by Black Elk were actually controlled by him and his colleagues through Platinum affiliates. 

Small claimed he didn’t mislead investors. His lawyer argued that Small relied on the advice of high-powered lawyers at Black Elk and Platinum who had misinterpreted the laws for bond-consent solicitation.

Outside the jury’s presence, the judge expressed concerns that prosecutors failed to prove Small knowingly committed a crime because the evidence wasn’t clear that he was intentionally deceitful in the bondholder vote.

The judge also described the case as problematic for businesses that engage in similar transactions because it turns on a fine reading of the rules on bond indentures.

“The problem in this case is that it is taking a civil, flexible rule that lawyers fight about all the time and it’s basically converting it into a criminal case,” he said. 

Prosecutor Lauren Elbert diplomatically suggested to Cogan that the appeals court saw evidence of criminal wrongdoing in its ruling last year where the judge had not.

“I understand it’s a close question in Your Honor’s mind, but I think in view of that record, to act as though there is something outlandish about the government taking the position that this is a crime is unfair,” she said.

Small’s lawyer, meanwhile, said he plans to take up the judge’s invitation to point out flaws in the government’s case. 

“They indicted on a statute that didn’t apply. They don’t have any witnesses. They don’t have any documents,” attorney Seth Levine said. “They have nothing. And we all know they have nothing. And to allow this case to go forward, I mean, it really -- it basically creates a huge problem in the whole legal ecosystem.”


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