The opinion of the court was delivered by: Owen. District Judge:
Defendant Richard Gladstone was acquitted following a four week trial
before me for securities fraud and two and one-half days of jury
deliberation. He now moves for attorney's fees and expenses pursuant to
the Hyde Amendment,*fn1 asserting he meets its requirement of showing
that the prosecution of him was "vexatious, frivolous . . . or [in] bad
In June 2000, a Grand Jury had indicted him and three others, Howard
Helfant, Gus ("Tommy") Geldman and Robert Wade, charging violations of
the federal securities laws, and specifically that Gladstone owned and
controlled IvyEntertainment.Com, Inc. and that he deliberately concealed
material information from investors in the sale of Ivy's promissory notes
by failing to disclose to them (1) the enormous (in some cases fifty
percent) amount of secret commissions paid to brokers and others selling
the notes, and (2) that much of the proceeds raised in the private
placements would be used by Gladstone and another conspirator for personal
purposes in violation of 15 U.S.C. § 77q(a) and 77x. The Gladstone
case tried before me was but one of eleven indictments arising from some
one thousand hours of court-ordered bugging of the offices of DMN
Capital,*fn2 Gladstone in his moving papers putting before me its
reputation as a mob-operated financial firm located in lower Manhattan.
*fn3 (Aff. of John F. Lauro, Ex. I.)
Among other witnesses, Bernard Thomas, an alleged co-conspirator and
cooperating witness, testified that he met Gladstone through co-defendant
Gus Geldman in early 1999 and, subsequently, learned of the Ivy deal.
Geldman informed Thomas that he (Geldman) made a deal with Gladstone to
obtain a fifty percent commission on the sale of Ivy securities. Geldman
sought Thomas' assistance in selling the notes and offered to share a
portion of the fifty percent commission. Thomas testified that these
payments were in fact made. Thomas also testified that, at the direction
of Gladstone and Geldman, he met with Liese and offered a twenty percent
commission if Liese raised under $100,000 and a twenty-five percent
commission if he raised over $100,000. Thomas further testified about a
twenty-five percent commission he offered, after consulting with
Gladstone, to Sean Campbell, one of the Government's cooperating
witnesses whom Thomas met through co-defendant Robert Wade. After this
conversation, Thomas testified that Campbell's FBI-created fictitious
client invested $10,000 in the private placement and Thomas received a
commission of $4,000, or forty percent, from Ivy's bank account. Thomas
stated that he paid Campbell $2,500 and kept the rest for himself. Bank
records confirmed the transaction.
FBI Agent Kevin Barrows testified regarding certain unusual pre-arrest
and pre-indictment statements by Geldman in which he told Barrows that he
wanted to cooperate, that Ivy was a fifty percent deal with Gladstone and
that he paid thirty-five percent in commissions or more to Thomas or
others if they found an investor for Ivy.*fn5 Barrows also supervised
Follick in later taped conversations with Geldman. In one conversation,
the transcript of which is quoted hereafter, Follick told Geldman about a
possible investor (actually created by the FBI) who would invest $5,000 in
the Ivy private placement and Geldman offered Follick a forty percent
commission with a twenty-four hour turn around on getting his money,
Geldman keeping ten percent for himself. Geldman also told Follick that
Gladstone was behind Ivy and would confirm that there would be no problem
getting paid, which Gladstone did.
Bank records confirmed the transactions.*fn6 The transcript of the above
conversation, recorded on September 7, 1999, begins with Geldman on the
line with Follick and defendant Howard Helfant and reads in relevant
Gus Geldman: Okay, now this is what . . . I'm bringing
this guy in personally here, Howie.
Geldman: All right? I . . . just like the other guys I
brought in, you know they . ., the best investors in Ivy
are mine. Are we . . . a, a, agree on that, right?
Helfant: Yes, yes, we have.
Helfant: And you know the merger is taking place
Geldman: Uh . . . exactly. And what I'm telling you now
is that Bruce will always do the right thing. Okay? He's
stand up or I wouldn't even put him on the phone with
you. Okay? Uh . . . and basically I told him . . . uh . .
. and I want Bruce to know that I told you basically uh .
. . his four will go directly through you guys and the
one*fn7 that I'm taking, I'm actually holding back until
. . . and ensure the paperwork is done right, right?
Helfant: All con . . . consulting fees should be paid
according to what Tommy told you.
Helfant: That's all I'm gonna tell you over the phone.
Geldman: Fair enough, exactly right. All right, Bruce?
Bruce Follick: So . . . uh, uh . . . wait a minute, I
didn't . ., who's Tommy?
Helfant: Oh, I call him, Gus, Tommy. Yeah.
Follick: . . . so uh . . . the bottom line, if a wire
comes in today for five, I'm seeing two back or what?
Helfant: or you'll get . ., you'll probably receive it
tomorrow morning. You know, it depends what time of the
day, I mean, I don't sit by the phone, but I, if I get a
phone call. it's either today or tomorrow, put it that
way. Twenty-four hour turn-around basically. As long as I
[Thereafter Helfant gets off the phone and Follick is
alone on the line with Geldman]
Geldman: Stay there. I told you he wasn't gonna go but so
far, Bruce. But . ., hold on, stay with me . . . he's not
stupid. None of these people are stupid, Bruce.
Follick: And I hear you, man.
Geldman: You know. But you heard what you needed to
hear, you'll get your two of your five immediately.
All right? And you'll be able to call it all the way
through. You'll. . .
Geldman: Hold on, stay with me. Just don't get so damn
specific with him, all right?
Geldman: Ask . ., you know what? I'll get him to tell you
that Howard. . .
Follick: If you want I won't even talk.
Geldman: I'll, I'll get him to say that Howard speaks for
him and that you don't gotta worry. If Howard says
something is gonna happen, it'll happen. How's that sound?
Follick: I just wanna hear the guy say, "Yeah, you're
gonna get your money. This is what you're getting."
Even if he says it . . . I don't care if he doesn't
say it to me, I just wanna know for sure that the guy
is really gonna pay.
Geldman: All right. Don't say a flicking word.
Follick: What, what should I do, ask him for the money up front?
Geldman: No, you (unintelligible). . .
Follick: Then I know he's paying.
Geldman: No, you don't say a flicking word. All right?
Geldman: I don't want him to know, you know, you're on
the fucking phone.
Follick: I won't say not a peep.
Follick: Tell him you got a big guy on the street and he
wants four and if he can get up to a hundred he wants
Geldman: Um-hum, no, I can't say all of that. Right now
we're gonna do just the one thing and we'll talk more in