Andrew Stolper eyes the foam running down the glass of craft beer he just took a swig from at a Corona del Mar bar and launches into an explanation of his noble experiment.
The former federal prosecutor and his ex-FBI agent business partner recently opened Crux Capital, a litigation-finance firm in Irvine. Relatively new to the United States but practiced with gusto in the United Kingdom and Australia for a quarter-century, litigation-finance firms put up some of the costs of legal cases in exchange for percentages of jury awards or financial settlements.
Stolper and partner Peter Norell believe they can help level the playing field in courtrooms and lead to more justice by essentially giving individuals and small companies a fighting chance against fat cats, large corporations and their fierce legal teams. But the U.S. Chamber of Commerce is pushing back hard to stop litigation finance from flourishing.
Lisa Rickard, president of the chamber's Institute for Legal Reform, tells the Weekly her office is calling for “common-sense safeguards to prevent third-party financing from undermining our justice system.”
She maintains that relying on the legal community to monitor litigation finance “will further turn our courthouses into cash machines while bogging down our legal system in a continuing flood of lawsuits. Third-party litigation financing encourages meritless lawsuits, since one windfall can subsidize many losses, and investors verify a lawsuit's 'jackpot' potential, not its legitimacy.”
Stolper has heard this before. But in between sips of his porter, he mentions he finds it curious the chamber, which is supposedly all about protecting small businesses, is essentially siding with big corporations that might screw over, say, mom-and-pop shops.
“My clients are members of the U.S. Chamber of Commerce,” Stolper notes. “My clients are not likely to be big businesses. They have their own lawyers. What does the U.S. Chamber have against smaller American businesses?”
Rickard counters that companies such as Crux Capital will not help small businesses, as advertised. “At its core, third-party litigation financing is about making money off of the little guy,” she says, “not benefiting him or advancing justice.”
Stolper calls it “fair criticism” to fret about more junk cases clogging courts, but adds Crux Capital is not out to generate more litigation only to help offset mounting legal costs.
The firm's partners are used to controversy. Norell pleaded guilty in 2010, which was around the time he left the FBI, to illegally accessing Bureau records and threatening to launch a criminal probe to help an acquaintance collect a debt. U.S. District Judge Andrew J. Guilford ruled in July that Norell was “factually innocent” of the misdemeanor charge he pleaded to, which removed the conviction.
A rising star in the U.S. Attorney's office's white-collar-crimes unit coming off a successful prosecution that was part of the government case against Enron, Stolper went on to find himself chastised by Santa Ana-based federal Judge Cormac Carney in the feds' case against Broadcom a few years later.
The Irvine chip maker's stock price had reached all-time highs in the mid-2000s, which translated into huge bonuses for upper management and some employees. Later came a restatement of the company's value that drove the stock price down, even though the bonuses had already gone out based on the higher value. Known as backdating, this mechanism can be rife for fraud.
To Stolper, it was a classic insider-trading case that had to be prosecuted to preserve investor faith in the market. But in an unusual move, Carney dismissed the counts against not only the defendants Stolper was prosecuting, but also a company co-founder who had already pleaded guilty. The judge was incensed that Stolper had contacted a Broadcom defense attorney heading into a hearing and, depending on who tells the story, threatened the lawyer with prosecution or reiterated the government's case.
Despite the scarlet letter from Carney, Stolper points to a Department of Justice (DOJ) investigation that he says showed he did nothing improper in his Broadcom prosecution. He also claims various officials, up to and including federal judges, have told him Carney's Broadcom rulings were curious.
Queried by the Weekly, a persuasive lineup of former DOJ colleagues vouched for Stolper.
“Andrew has been a fearless, fierce advocate for victims of crime,” says Joseph McNally, an assistant U.S. Attorney. “He brought justice to countless victims of crime across the country who were bullied and taken advantage of by sophisticated fraudsters. He was among the best white-collar prosecutors in the country, and his leaving the U.S. Attorney's office is a real loss.”
“Andrew is an outstanding, intelligent trial lawyer with a strong work ethic,” responds Dennise D. Willett, chief of the U.S. Attorney's Santa Ana branch office. “He was routinely assigned to prosecute the most complex white-collar cases in the Santa Ana branch office and other AUSAs [assistant U.S. Attorneys] routinely sought his advice and assistance on their cases. Andrew was a valuable member of our office, not only for his exceptional work, but also for the assistance he provided to his colleagues.”
“Andrew has worked every variety of white-collar case and was a wealth of legal, factual and political knowledge on how the cases are investigated, prosecuted and, ultimately, resolved,” observes Charles Pell, another assistant U.S. Attorney who transferred to the Santa Ana office from Riverside in 2011. “Andrew is one of the most persuasive lawyers I've worked with because he employs a powerful cocktail of intellect, humor, moxie and passion to make his arguments compelling.”
“I consider Andrew a good friend, and he was one of the brightest and hardest working colleagues I've had here at the U.S. Attorney's office,” echoed Brett Sagel, a federal prosecutor whose name you may recall from R. Scott Moxley's coverage of disgraced, ex-Orange County sheriff Mike Carona. “Even while Andrew was busy with his own caseload, he was available to give invaluable assistance to others. From personal experience, he probably gave me more and better ideas for my opening statements in the Carona trial than anyone else, and he wasn't even on the case.”
“During the cases on which we collaborated, AUSA Stolper always applied fairness and kept an open mind, dealing with defendants objectively,” says a current FBI agent who'd worked with Stolper since 2002 but asked not to be identified per FBI policy. “Many of his cases required dedication beyond the call of duty, and Mr. Stolper always exceeded my expectations. . . . I worked on several matters with AUSA Stolper that resulted in trials and was always impressed by Mr. Stolper's acumen in legal matters and abilities in the courtroom. Mr. Stolper was an asset to the furtherance of justice, and he will be missed.”
Now that Crux Capital is up and running full-time, Stolper and Norell are dealing less with critics than potential investors and hedge-fund managers. Anyone can invest but that won't give you a vote in which cases Crux Capital gets behind, Stolper notes. “They are betting on us to make the right calls,” he says—or, to put it in baseball terms, those investments will reap dividends overall if Stolper and Norell “have one or two outs, five or six doubles and triples, and one or two homers.”
Portions of this story originally appeared on our news blog, Navel Gazing.
OC Weekly Editor-in-Chief Matt Coker has been engaging, enraging and entertaining readers of newspapers, magazines and websites for decades. He spent the first 13 years of his career in journalism at daily newspapers before “graduating” to OC Weekly in 1995 as the alternative newsweekly’s first calendar editor.