In the Courts

Weimert managed to secure two offers to buy the property in early 2009. The first came from the Burke Real Estate Group, which owned the remaining 50% interest in Chandler Creek and had a right of first refusal if IDI attempted to sell its interest in the property. Weimert also solicited an offer from real estate developer Nachum Kalka, which Weimert used as a “stalking horse” to pressure the Burke Group. In exchange, Weimert offered Kalka a $75,000 “break-up fee” if his offer was not selected. Id. at 22.

As negotiations heated up, Weimert “saw an opportunity to insert himself into the deal personally” as a partner to the potential buyers. Id. at 1. He convinced both potential buyers to allow him to purchase a 5% interest in the property in order to remain involved in managing it. After securing interest from both buyers, Weimert had IDI's counsel draft a template letter of intent, which included two problematic provisions: 1) Weimert would “stay in the deal” due to his institutional knowledge; and 2) IDI would pay Weimert a fee of 4% of the purchase price for his role in facilitating the deal. Weimert intended to use the 4% commission to pay for his ownership share in the property.

In February 2009, Weimert presented both offers to the Board and wrote a short summary of the “evolution of this deal.” In this report, Weimert falsely explained that he “had no intention of being involved in this Project,” but both potential buyers were now insisting on Weimert's continuing involvement, and his ownership stake in the property was needed to close the deal. Id. at 10.

In light of the obvious conflict of interest, IDI's Board sought outside legal advice to determine whether Weimert's involvement was illegal. After concluding that the transaction was necessary for the company and could not be completed without granting Weimert a financial stake in the property, IDI's Board of Directors decided to waive the conflict and accept the Burke Group's offer of $8 million ' $2 million more than IDI's minimum price. In the end, Weimert received a 4% fee from IDI, totaling $311,000, and paid $100,000 to the Burke Group for a 4.87% ownership interest in property. The deal closed on March 30, 2009, allowing AMBC to make its loan payments the next day. Id. at 11.

Two years later, as part of an investigation into AnchorBank's use of TARP funds, Weimert and IDI's directors gave conflicting testimony about the Chandler Creek deal. Weimert said that he was “an earmark to the deal,” and claimed that he had informed the Board that he “wasn't absolutely necessary for this deal.” IDI's directors testified that Weimert had told them that his participation was required by the Burke Group. Id.

Based on this testimony, Weimert was indicted in February 2014 on six counts of wire fraud under 18 U.S.C. ' 1343. The judge sentenced Weimert to 18 months in prison, three years of supervised release, a $25,000 fine, $322,515 in restitution, and a relinquishment of his interest in the property. Id.

On appeal, the circuit court ordered Weimert's acquittal, noting that “no previous case at the appellate level has treated as criminal a person's lack of candor about the negotiating positions of parties to a business deal.” In an opinion by Judge David Hamilton, the court held that the Government failed to prove the “materiality” element of wire fraud. While Weimert misled both parties about negotiating positions, “[a]ll the actual terms of the deal [] were fully disclosed and subject to negotiation. There is no evidence that Weimert misled anyone about any material facts or about promises of future actions.” Id. at 1.

Throughout its opinion, the court expressed concern about over-criminalizing common business practices. “Deception and misdirection about a party's values, priorities, preferences, and reserve prices are common in negotiation,” wrote Judge Hamilton. “We must be wary of criminalizing these tactics.”

In the Courts and Business Crimes Hotline were written by Micah D. Stein, an associate at Mayer Brown, Washington, DC.