The Right Kind of People

Was Kenneth Schnitzer's acquittal on bank fraud charges the result of well-connected friends exercising their influence, or simply sound reasoning by a judge who tossed out a bad jury verdict?

Schnitzer's attorneys say, of course, that U.S. District Court Judge David Hittner was just applying the law logically last week when he voided a jury's four convictions of Schnitzer on charges stemming from two land deals involving his BancPlus savings and loan in the mid-1980s.

But at least one member of the jury whose decision Hittner overturned is incensed by the judge's action and the idea that he and his fellow jurors had wasted three weeks hearing the government's case against Greenway Plaza developer Schnitzer and two co-defendants.

"It was almost like they didn't need us," says David Pierce, a high school teacher and coach. "We were a front, and when we didn't do what was wanted, it was changed."

Pierce says he understands that one basis of Hittner's ruling was the judge's determination that the accounting standards cited by the prosecution were not yet in use when the land transactions occurred in 1986. But the accounting question was not a factor in the trial or the jury's decision, Pierce explains. Instead, he says, the panel agreed with the government that Schnitzer and his associates had tried to disguise a land swap as two different deals to register inflated profits for the since-failed S&L.

The accounting standards issue, however, was raised in a "friend of the court" brief submitted by eight of Schnitzer's friends and business peers for consideration by Hittner as part of the defense's request that the judge overturn the jury's verdict. Schnitzer's supporters paid unspecified thousands to David Crump, a respected University of Houston law professor, and Larry Finder, a partner in the Haynes & Boone law firm and a former interim U.S. attorney, to compile the brief.

Organizing the effort on Schnitzer's behalf was Jack Trotter, an attorney and banker who has sat on the boards of Rice University, Baylor College of Medicine and First Interstate Bank, among other locally influential institutions. After seeking advice on who the group should hire, Trotter says, he concluded that Crump was "the only choice" as lead attorney.

Trotter, however, claims he was unaware that Crump and Hittner are best friends. But their relationship is no secret in legal circles: the judge recently served as best man at the professor's wedding, and Crump and Diana Marshall, a lawyer who was not involved in preparing the written brief but sat with Crump while he presented his arguments to Hittner in court, play with the judge in an all-lawyer band called the Bar Flies. Crump and Hittner also frequently stage legal education programs together.

Hittner would not comment to the Press on his ruling, and Crump, while suggesting his friendship with Hittner may have provided the defense with some insight into the way Hittner thinks, says he does not believe it influenced the judge's decision.

"I think it is a good idea in general for a litigant to obtain a lawyer who can discern what the judge is thinking," says Crump. "When you go to court in front of a judge you don't know, you ask other lawyers about the judge first."

In their brief, Crump's clients characterized themselves as investors in projects that "changed the face" of Houston and helped the city "become a thriving urban center," and they voiced the concern that their own ability to conduct business in an established manner would be jeopardized by Schnitzer's convictions.

"We all wanted to do the right thing for the right kind of people," explains Don Sanders, an investment banker with Sanders, Morris and Mundy and one of Schnitzer's benefactors.

Trotter says he and his cohorts financed the effort because they believed that the government was willing to erode the "business judgment rule," which is commonly applied in civil court cases and allows directors and officers of corporations the discretion to take reasonable risks. (Assistant federal prosecutor Fred Dailey rejects that assertion, saying the rule was not an issue in Schnitzer's case.)

In addition to Sanders, Trotter secured funding from Walter Mischer, the former Allied Bank chairman and political kingmaker of the 1970s and '80s; Milton Carroll, the chairman of Instrument Products Inc. and a director of the Federal Reserve Board in Dallas and the Houston Endowment; Stanford Alexander, the chairman of Weingarten Realty; Steve Lasher, the CEO of Gulfstar Corporation; and Jerry and Nannette Finger of the Finger Companies.

Hittner did hear oral arguments from Crump. But after acquitting Schnitzer and his co-defendants Philip J. Barber and Walter M. Ross, the judge ruled that the Trotter-led group's brief would not be included in the record of the case that is now likely to go before an appellate court. It is not known whether Hittner even read the brief, but there's little doubt that Crump's participation bolstered the defense's effort to have the convictions nullified.

"Obviously, I can't deny that Crump and the judge are on the same frequency," says Robert C. Bennett, an attorney for Barber. But Bennett notes that the arguments made by the defendants themselves covered the points made by Trotter's group. "I don't believe that the presence of the [brief] in this case had anything to do with what the judge did," Bennett says.

Other jurors contacted by the Press said the notion that they may have used the wrong accounting standard as a yardstick made the judge's voiding of their verdict easier to take.

"I was incredulous at first. I didn't know a judge could just nullify a jury's verdict," says Daniel O'Roark, an engineer at a pipeline company. "It takes away from the jury process when they don't tell you that."

But O'Roark says that if what he has read about the case is true, and the accounting standard the jury applied was not in effect at the time of the land deals, he has no quarrel with Hittner.

"There were some other jurors who thought everything about the deal was stinky. But I thought there's nothing illegal about making a whole lot of money and nothing illegal about losing a whole lot of money. On the surface, I thought it was no big deal that they violated one accounting rule. But I came to understand that the rule was the law."

Another juror contacted by the Press, who asked not to be identified by name, professes to be unperturbed by Hittner's decision.

"I think he based his decision on a set of facts different than those set forth for the jury," the juror says.

Meanwhile, some close observers of the federal courthouse conjectured that Hittner, believing the government's case was weak, had been looking for a way to intellectualize an acquittal. What made the case different, one experienced federal trial lawyer surmises, was that Schnitzer's conviction sent "there-but-for-the-grace-of-God-go-I" shivers through prominent social circles in Houston.

And such circles, the speculating attorney adds, can sometimes include lawyers and judges, as well as bankers and developers.

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