An attorney for a former Morgan Stanley investment adviser accused of defrauding NBA stars by feeding them overpriced insurance investments and stealing funds told a Manhattan federal jury Thursday the players' own words and other evidence belie the government's claims.
Jurors heard the second day of closing arguments in the trial of Darryl Cohen, who's accused of engaging in a two-pronged scheme to rip off clients from around 2017 to 2020 by secretly profiting off of his clients' investments in viatical life insurance settlements, and stealing their funds to pay off an aggrieved Major League Baseball player and build an upscale gym in his backyard.
Over the course of a roughly monthlong trial before U.S. District Judge Vernon Broderick, the jury heard testimony from Portland Trail Blazers star Jrue Holiday, and former NBA players Chandler Parsons and Courtney Lee, both of whom played for the Dallas Mavericks, the Memphis Grizzlies and the Houston Rockets, who all testified to being unaware of Cohen's alleged crimes and feeling blindsided when they were revealed.
Cohen is facing one count each of wire fraud, investment adviser fraud and wire fraud conspiracy.
However, on Thursday, a lawyer for Cohen, Michael Bloch of Bloch & White LLP, told jurors that the players' claims of being in the dark about Cohen's investment activity stand in stark contrast to their remarks to law enforcement, text messages, emails and financial documents, especially with respect to Parsons, who the defense blames for many of the allegations against Cohen.
"This isn't proof beyond a reasonable doubt. It's garbage, that's what it is. It's a joke. Except it's not a joke for Darryl Cohen," Bloch said.
Cohen's attorneys have spent much time at trial seeking to rebut prosecutors' narrative about how Cohen allegedly misappropriated funds from Parsons and Lee without their knowledge — arguably the more complicated scheme of the two for which Cohen is accused.
Prosecutors say Cohen secretly diverted hundreds of thousands of dollars from Parsons and Lee disguised as charitable donations to a Los Angeles-area youth basketball program of which Cohen's son is a member. Cohen is alleged to have used some of the funds to build a high-end gym in his backyard.
Cohen also is accused of using Parsons' money to repay another client, former MLB outfielder Nyjer Morgan, who had become enraged at Cohen over a purportedly outstanding debt, but Bloch said Parsons had authorized the transactions, which Cohen also documented.
Bloch told the jury that the backyard athletic training facility was for Beast Basketball, and a nascent and clandestine sports agency that Parsons was developing while he was still playing in the NBA — a major league foul, the jury has heard.
According to Bloch, Parsons did indeed authorize hundreds of thousands of dollars in donations to Beast Basketball. Bloch showed the jury a 2019 Morgan Stanley document that listed Parsons' charitable donations, which included Beast Basketball.
The document was signed by Parsons, who testified that he didn't know about Beast Basketball until Oct. 2020, when he said he became suspicious after tallying up his charitable contributions as part of membership applications for exclusive golf clubs.
Parsons testified that he routinely did not examine documents closely before he signed them.
Bloch showed the jury text messages between Cohen and Parsons where they discussed how the founder and head of Beast Basketball, Ramel Lloyd Sr., could purportedly help Parsons' sports agency, called Gold Sports Agency, recruit top talent. Following that exchange, Bloch said that Parsons hired Lloyd to recruit players for his sports agency.
"For him to claim under oath that he has never heard of Beast Basketball is ludicrous," Bloch said.
As for the viatical settlement investments, Bloch told the jury that those deals were squarely in the wheelhouse of Brian Gilder, Cohen's childhood friend and an independent financial planner who did taxes for Parsons, Lee and Holiday.
Viaticals allow policyholders to sell their policies for a lump sum to investors, who take over the premium payments and receive any death benefit when the original policyholder dies.
Prosecutors say Cohen and Gilder had arranged for Johnson Bjornlie & Merritt, a law firm controlled in substantial part by Gilder, to purchase the viaticals and sell them to the players for millions of dollars over the firm's purchase prices.
"The government failed to prove that beyond a reasonable doubt, because [Cohen] hid absolutely nothing from his clients," Bloch told the jury.
Bloch argued that Gilder misled Cohen about how much the viaticals cost, and that Cohen had no idea what Johnson Bjornlie & Merritt made from the deals. Moreover, the money Cohen made from those investments was perfectly in line with the 1% to 2% fee that jurors have heard he was supposed to charge for his investment advisory services.
The disconnect, Bloch argued, is that Cohen was entitled to both a percentage of his clients' assets under management and a cut of individual investment products that he advised on. Parsons, Holiday and Lee each stood to make between $10 million and $15 million dollars from the viaticals once the original policyholders died.
"The idea that the players thought that [he] wouldn't, or he shouldn't, get compensated for that at all is absurd," Bloch said.
According to the defense, Parsons turned on Cohen as his professional basketball career was ending, in hopes of making a mint by suing Morgan Stanley, which he did. In order for that case to stick, Parsons had to blame Cohen, the financial firm's former investment adviser, as opposed to Gilder.
Parsons, Holiday and Lee all filed claims with the Financial Industry Regulatory Authority against Morgan Stanley, which were later settled for millions of dollars.
In a rebuttal summation, Assistant U.S. Attorney Kevin Mead argued that the defense is misrepresenting the evidence and testimony, not only from the players, but other fact witnesses as well.
"It's just bad luck that all these different people woke up one morning and decided to lie on the witness stand," Mead said. "Bad luck that [Cohen] ended up with hundreds of thousands of dollars in stolen money and a state-of-the-art gym in his backyard."
As was the case in the government's initial closings, Mead reminded jurors that the players testified about how Cohen was not just their investment adviser, but also a close personal friend.
Mead said it makes sense that if Cohen's clients thought of him like family and trusted him, that they didn't pay close attention to the details of their investments and all the documents they signed.
"This wasn't a crazy way to commit a crime, ladies and gentlemen. This is exactly how my financial adviser would try to rip off three clients," Mead said.
Following an internal investigation, Morgan Stanley fired Cohen, who was also banned from the securities industry by FINRA.
The jury is slated to begin deliberations Friday.
Gilder was indicted alongside Cohen and pled guilty to wire fraud conspiracy, as did another co-defendant and former NBA agent Charles Briscoe, who worked for Gold Sports for a time. He was accused in a loosely related scheme with Georgia businessman and recidivist fraudster Calvin Darden Jr. of defrauding Parsons and eight-time NBA All-Star Dwight Howard out of $8 million.
Judge Broderick sentenced Gilder and Briscoe to time served. Darden went to trial and was convicted on all counts he faced. Judge Broderick subsequently sentenced him to 12 years in prison.
The government is represented by Kevin Mead, William Kinder and Brandon Thompson of the U.S. Attorney's Office for the Southern District of New York.
Cohen is represented by Michael Bloch, Benjamin White and Deborah Frankel of Bloch & White LLP, Andrew Wise of Miller & Chevalier Chtd., and Mark Sedlander of Mancini Shenk LLP.
The case is U.S. v. Cohen et al., case number 1:23-cr-00134, in the U.S. District Court for the Southern District of New York.
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