F. Lee Bailey behind bars



A couple of months ago F. Lee Bailey seemed to be soaring. 
His legal career, buoyed by his crusty performance in the O.J. Simpson case, was about to spill into the limelight again. 
This time, he was in a highly publicized New York mob case, preparing for a courtroom showdown against Gambino turncoat Sammy “the Bull” Gravano. 
And in another arena, one of Bailey's prized airplanes - a souped-up Piper Twin Comanche he named The Bailey Bullet - had made the cover of Flying magazine, an enviable honor among his circle of airplane tinkerers. Back on the ground, he and his wife, Pat, had fleeted up from the condo life and begun settling into their new $1.175 million home in Manalapan. 
Bailey, at 62, still had all his plates spinning. 
Until Jan. 11. That's the day they began to wobble. The day a big-time marijuana smuggler named Claude Duboc said he was finished with Bailey. 
Bailey had persuaded Duboc to plead guilty to a drug-trafficking charge. Bailey was supposed to sell a couple of French homes Duboc had owned and turn the money over to the government. Duboc couldn't be sentenced until that was done. But it had been 18 months, and Bailey still hadn't sold the properties, and Duboc was getting tired of waiting to see how long he'd have to spend in prison. 
“He repeatedly asked Bailey for reports since August, and Bailey just never responded,” said Mark Lebow, Duboc's new lawyer. 
So Duboc finally decided he was finished with Bailey. And that made Bailey just plain finished. 
Because what held Bailey's high-flying lifestyle together was essentially a handshake deal in the Duboc case, a deal that never existed, according to the government. 
Today, Bailey's in prison. The Florida Bar wants to suspend his law license. Government prosecutors are after his planes, his boats and his new home. And the Internal Revenue Service is ready to pounce on what's left. 
He's the one being cross-examined now. And it's becoming clear that in a long, distinguished legal career, F. Lee Bailey may need to save his greatest defense for himself, because he's painted himself into a corner that leaves two options: riches or disgrace. 
If he persuades a judge to see his view of the unwritten deal, Bailey would reap a $24 million windfall and not have to pay the $5.5 million the government says he owes. 
If his actions these past two years in the Duboc case don't stand up in court - and they haven't so far - Bailey is in deep, deep trouble. 
“I have no ability to pay $5.5 million,” he told a federal judge last month. “I want to make that very clear.” 
 A millionaire on paper 
 On paper, F. Lee Bailey is a millionaire. 
He owns a few small planes and a 74-foot yacht, has about $500,000 in equity in real estate and is worth about $4.5 million, according to a court accounting of his assets. 
But from May 1994 until the end of last year, about 80 percent of Bailey's income came from the Duboc case, income prosecutors claim he never was entitled to. 
It was income that bought two of his planes, became the down payment on his Manalapan home and helped pay the bills from his law practice. And he never paid a dime of income tax on it. 
Bailey raked in $3.5 million from the Duboc case, compared with $800,000 he earned from all his other sources of income during the same period. 
The Duboc money was Bailey's financial base, permeating his whole portfolio of assets. Without it, he's not flying so high after all. 
“You're a millionaire, aren't you?” federal prosecutor David McGee asked Bailey. 
“Apparently not,” Bailey answered. 
Buddy brings him in 
Bailey got the Duboc case the same way he got the O.J. Simpson case, from his former friend, Los Angeles lawyer Robert Shapiro. 
Duboc was arrested March 24, 1994, in Hong Kong and charged with running a marijuana-smuggling business that netted him a fortune of more than $100 million. 
Shapiro said he brought Bailey in on the case because it would be tried in Florida. The two friends drafted a fee proposal for their client, asking Duboc to pay them $3 million. 
Bailey flew to London to ask the smuggler's wife whether Duboc had any legally earned money to put up for his defense. He didn't. All of Duboc's money came from drugs. That was bad for the lawyers, because the government could deny use of drug money to pay for attorneys' fees. 
Somehow, another fee arrangement would have to be reached. Bailey had a plan. 
The arrangement involved 602,000 shares of BioChem Pharma, a Canadian pharmaceutical company. Duboc owned the stock, which was worth about $10 a share, and had deposited it in an account in Luxembourg. 
Duboc sat down with prosecutors and told them where to find his assets around the world. When he brought up the BioChem Pharma stock, he urged the government not to sell it yet. 
“He indicated that he had information that the company that this stock was being held in was on the verge of marketing a drug for the treatment of AIDS,” chief assistant U.S. attorney Greg Miller said. 
Miller said Duboc was trying to be cooperative because he thought it might help him at sentencing time if he forfeited as much money as possible. 
Gambling with his own fee 
Bailey, however, said Duboc had mentioned the stock to him because he hoped there was a way Bailey could get the profit and return it to Duboc. 
“He wanted BioChem profits for himself,” Bailey said. “I could not promise him or give him any of the profits.” 
But Bailey did like the idea of hanging onto the stock to use as a source of money for attorneys' fees and costs in the case. The government agreed. Nothing was put in writing. Prosecutors gave Bailey, an adversary, $6 million worth of stock without spelling out any conditions of the transfer. 
Prosecutors say they took the deal to mean this: Bailey would use the stock to pay for the expenses of selling Duboc's two houses in France, his yachts, his boat slip at Cannes and any other assets. When everything was sold, the attorneys would go back to court, where Bailey would turn over all of the money and remaining stock to U.S. District Judge Maurice Paul, who then would decide how much money the lawyers in the case should get. 
Bailey said he viewed it differently. 
“I didn't hold the stock in trust for anyone,” he said. “I agreed to hold $6 million.” 
That was the value of the stock at the time. Bailey said he was gambling with his own fee. 
“In effect, my risk, my gain,” he said. “If I took the risk, I could make $100 million, just like any other person who owns stock.'' 
While Bailey was working out the deal, Duboc hired a third criminal defense lawyer, Ed Shohat, from Miami. 
Shohat said Bailey told him he had a “secret agreement'' with the government. When Shohat found out about it, he tried to do the same thing for himself, asking the government to give him control of $700,000 worth of a Japanese energy stock Duboc owned.  
Parting of the ways 
He was denied. Prosecutors said Bailey already controlled enough money for the two of them. Bailey and Shohat didn't get along after that. 
“Mr. Shohat had kept me in the case for only one reason,'' Bailey said. “I had the money. He wanted half of it.'' 
Shohat said: “I did not want to be on Mr. Bailey's purse string in this case.'' 
Shapiro, the first casualty in the tug of war among defense lawyers, let Bailey and Shohat handle Duboc's guilty plea on May 9, 1994. 
Duboc signed over the shares of the BioChem stock to Bailey, who flew to Geneva and put them in a personal account at Credit Suisse. Later that month, Bailey and Shohat flew to France to view Duboc's properties and begin trying to sell them. 
We were sitting in seats facing each other on this wonderful French train, and Mr. Bailey was reading a magazine or a newspaper or something, and I said to Lee: `Lee, listen to me for a second. I think with all of the money involved in this case, it would be a good idea if we each had copies of all the financial records, so that nobody can suggest that one of us doesn't know what's going on,''' Shohat said. 
Bailey ignored him, Shohat said. He never did see an accounting and, instead, had to hound Bailey to get paid. 
Mr. Bailey cut off all communications with me,'' Shohat said. “He wouldn't speak to me. He wouldn't return my phone calls.'' 
Months later, Shohat would pull out of the case, and Bailey would send him a check for about $50,000 for his services. 
Shohat said he assumed that Bailey had gotten the fees approved by the judge. But in reality, Bailey was on his own in the handling of that account. 
During summer 1994, Shapiro landed the O.J. Simpson case, and once again he brought Bailey in as co-counsel. 
By then, Bailey had established a pipeline of cash from the Swiss account. He used the stock as collateral for a line of credit. When he needed money, he would have it transferred from the Swiss account to his Barnett Bank money-market account in West Palm Beach and from the money-market account to his personal checking account at Barnett. 
Shapiro said Bailey asked him if he needed any Duboc money to help him with cash-flow problems while defending Simpson. 
“Should I need additional money . . . there would be no problem in him advancing to me 100 or 200 thousand dollars from the Duboc money,'' Shapiro said. 
Shapiro said he didn't accept Bailey's offer. 
$3.5 million for Bailey   
Bailey spent some of the Swiss money to maintain Duboc's houses and get them ready for sale. But 81 percent of the money Bailey withdrew from the account - about $3.5 million - he spent on himself. 
Palm Beach Roamer, his business that remodels planes and yachts, received $1.4 million from the Swiss account. Another $900,000 went to his law business, which includes Computer Law, a legal consulting firm. 
And he used the money to pay off $1.4 million in personal expenses - everything from his American Express card to electric bills to a life insurance policy. The $115,000 down payment on his Manalapan home came from the Swiss account money. 
When Duboc fired Bailey two months ago, prosecutors say they got their first inkling that he had been using the stock in ways they never intended. 
Bailey had sold 200,000 shares of it, and the remaining 402,000 shares were being held as collateral on an additional $2.3 million Bailey had used up on the line of credit. 
Meanwhile, the stock price, as Duboc had predicted, had shot up. Bailey got it at about $10 a share, and in 18 months it had jumped to $46 a share. 
Bailey was sitting on a fortune. 
But according to the government, it was a nest egg that never belonged to him. 
“We did, in fact, to some degree trust Mr. Bailey, and your honor, we sincerely regret that trust,'' federal prosecutor McGee told Judge Paul in a hearing last month. “But the fact that we have wrongfully placed our trust in an officer of this court, Mr. Bailey, does not excuse his stealing $20 million from our clients, the people of the United States.'' 
Jealous prosecutors? 
Bailey bristled at being called a thief. Prosecutors, he said, were just upset that he had made a good deal with them and that he stood to collect handsomely from it. 
“I would never have made an agreement where I took the downside risk and turned over any gains,'' Bailey said. “It would have been insane.'' 
Judge Paul ordered a freeze on the account and told Bailey to surrender the BioChem stock and turn over to the government all records showing what he did with it. 
Prosecutors, who were already furious with Bailey, soon got a reason to be even more angry with him. Despite the freeze order, Bailey continued to spend the Swiss money, transferring some $330,000 to his personal checking account, and spending all but $12,500 on personal and business expenses. 
Prosecutor McGee told the judge there would be only one way for the court to get Bailey's attention and the stock. 
I ask that the court place him in jail,'' McGee said. “With him working against us, we will never get it.'' 
Both Shohat and Shapiro have turned into government witnesses against Bailey. Shapiro, who had a fallout with him during the Simpson case, paid his own way to Florida to testify against Bailey about the Swiss stock. 
“You don't do that,'' Shohat testified about Bailey's version of the deal. “Aside from the pure issue of self-dealing in the money, you can't do that. I haven't seen it in my 23 years of law practice.'' 
Bailey seems incapable of complying with the court order that's keeping him jailed on a contempt of court charge. 
He is supposed to replace the $3 million he took from the Swiss account and then surrender the stock, which means coming up with another $2.3 million to erase a lien placed on the stock by Credit Suisse. 
His attorney, Roger Zuckerman, had offered to pledge to the government everything that Bailey owns to keep him out of prison. 
But prosecutor McGee said that isn't enough. 
“When the government takes over the property, we're going to lose money, particularly with the property like they're talking about - old airplanes, real estate with big mortgages,'' McGee said. “We're not going to be able to make any money on it.'' 
    
 A Bailey Chronology 
March 1994 - Claude Duboc is arrested in Hong Kong on drug-smuggling and money-laundering charges. Duboc hires Los Angeles criminal defense attorney Robert Shapiro to defend him. Because the case will be tried in Florida, Shapiro brings in close friend F. Lee Bailey as co-counsel. 
April 25-26 - Bailey meets with federal prosecutors to work out plea agreement for Duboc. Government agrees to turn over to Bailey 602,000 shares of BioChem Pharma, a Canadian pharmaceutical stock, owned by Duboc. The stock will be used to pay for the costs of liquidating Duboc's $100 million drug empire as well as attorney's fees, which will be decided by U.S. District Judge Maurice Paul at the end of the case. The agreement is not put in writing. 
May 9 - A Luxembourg bank transfers 602,000 shares of BioChem Pharma stock to Switzerland into Bailey's new personal account at Credit Suisse. Stock value: $5.89 million. 
May 17 - Duboc pleads guilty. 
May 19 - Bailey flies to Geneva and applies for a line of credit from Credit Suisse, using the stock as collateral. 
May 24 - Bailey draws $40,000 against the line of credit and transfers it to his Barnett Bank money-market account in West Palm Beach. 
June 14 - Bailey transfers $250,000 from Swiss account to Barnett account. 
August 11 - Bailey transfers $199,960 from Swiss account to Barnett account. 
Oct. 21 - Bailey sells 150,000 shares of the stock for $1.55 million. 
Jan. 1995 - Bailey sells another 52,000 shares of BioChem for $850,000. 
Sept. 15 - Bailey buys $1.175 million home in Manalapan using $300,000 from Swiss account. 
Jan.-Dec. 1995 - Money transferred from Swiss account to Bailey's money-market account comprises about 90 percent of his incoming cash for the year. 
Jan. 11, 1996 - Duboc fires Bailey and hires another lawyer. At a court hearing, prosecutors say they learn for the first time that Bailey claims the stock to be his. 
Jan. 12 - Judge Paul freezes all assets Bailey has gotten from the stock. Court orders Bailey to make a “full accounting of the monies and properties held in trust by him for the United States.'' By now, Bailey has withdrawn $3.5 million for personal and business expenses and another $1.1 million for expenses in liquidating Duboc's assets. 
Jan. 19 - Bailey meets with prosecutors in Tallahassee and argues that the stock, now worth about $24 million, belongs to him. All he owes, Bailey says, is the stock's $6 million cash value when it was transferred to his account, minus his expenses and legal fees. 
Jan. 22 - Prosecutors demand that Bailey surrender the stock. 
Jan. 25 - Judge Paul orders Bailey to appear in court in six days with all the BioChem Pharma stock and all records showing what he did with Duboc's assets. 
Jan. 25-29 - Despite the freeze order, Bailey signs 15 checks, drawing another $330,000 from the Swiss account to spend on personal and business expenses. 
Jan. 26 - Bailey pays off a $150,000 loan for airplane expenses from Republic Bank. 
Feb. 1 - A day before Bailey's required to show up in a Florida courtroom with the BioChem Pharma stock, his Swiss attorney, Charles Poncet, notifies Swiss authorities that the stock is the proceeds of drug trafficking, prompting the Swiss to put a freeze on the stock, blocking its release. 
Feb. 2-3 - Bailey appears in Judge Paul's courtroom without the stock, explaining that it's frozen by the Swiss government and also encumbered as collateral on $2.3 million worth of withdrawals from the account. Paul finds Bailey in contempt of court, but gives him until the end of the month to bring in the stock and repay the government the $3 million in withdrawals he made from the account. 
Feb. 4-27 - Bailey and his associates turn over some 10,000 documents showing where the money from the Credit Suisse account has gone. An accountant determines that he spent $2.3 million on his law, boat and airplane businesses and another $1.3 million on personal expenses. About 14 percent of the money went to pay for expenses in liquidating Duboc's assets. 
Feb. 27 - Swiss authorities remove freeze on the BioChem stock. 
Feb. 29 - Credit Suisse frees up 164,000 shares, worth about $7 million, and transfers it to government account set up at PaineWebber. 
Feb. 28-29 - In another two-day hearing, Bailey testifies that he has been unable to raise the $2.3 million to free up the lien and the $3 million to pay off his withdrawals on the account. His lawyer asks for another 21 days. Prosecutors urge that the best way to motivate Bailey to cooperate would be to put him behind bars. Judge Paul orders Bailey to prison for six months.Bailey's lawyers appeal. 
March 6 - Bailey ordered to present stock by 5 p.m. or surrender to the U.S Marshals Office in Tallahassee. Bailey surrenders at 4:34 p.m. 
Source: U.S. District Court files 
 


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