UBS’s $5 Billion Retrial, Theranos Shelved in Virus Backlog (1)

Courts reopening around the globe are confronting a backlog of thousands of cases, including UBS Group AG’s $4.9 billion tax-evasion penalty, former TheranosCEO Elizabeth Holmes’s alleged fraud and even the 2016 Brussels terrorist attacks that killed 32 people.

The volume of cases shelved as courthouses were shuttered in response to the coronavirus pandemic may take months, possibly years, to work through. Many courts are adopting measures to help clear dockets, whether simply dropping minor matters, throwing more judges at the issue, or plea-bargaining cases that might otherwise have gone to trial.

Stay-at-home orders imposed across Europe and the U.S. forced judges, lawyers and prosecutors to turn to technology to try to keep the wheels of justice turning. But the use of Zoom and other video conferencing have not kept courts moving at their pre-virus pace, not least because many parties still want live hearings and are willing to argue for them.

‘Frightening’

“Not only were decisions not being rendered during the lockdown, but proceedings weren’t advancing, so it’s going to take a very long time before things go back to normal,” said Stephane Bonifassi, a white-collar criminal lawyer in Paris. “We’re looking at one year and that’s frightening.”

About 400 scheduled criminal cases a week were postponed in the French capital during the lockdown, leaving a backlog of 3,200 cases, chief Paris prosecutor Remy Heitz told a French parliamentary commission earlier this month. The civil case overload is greater still at around 6,000, according to Stéphane Noël, the president of the Paris Court of First Instance.

On April 27, U.K. civil, family and criminal courts held 4,066 hearings, mostly by video or phone. That’s less than half the pre-virus daily average, Chris Philp, justice minister, said in a May 4 video briefing. That means the backlog of criminal cases in England and Wales, which stood at 37,434 at the end of 2019, is likely to have grown considerably during the outbreak. The Justice Ministry has said it plans to add more shifts for judges to help address the issue.

In New York, the epicenter of the U.S. outbreak and home to one of the busiest court systems in the world, the numbers are even more staggering. State courts there have managed to resolve by settlement or plea bargain some 13,000 cases since mid-April using phone and video hearings. But that’s still a drop in the bucket for New York, which usually handles around 3.5 million new criminal and civil cases each year.

Parties are still often loath to conduct a case’s big moments remotely. Federal prosecutors in Manhattan recently opposed a video sentencing for Bryan Cohen, a former Goldman Sachs Group Inc. investment banker who pleaded guilty in January to insider trading, arguing that the “ends of sentencing are best served when all parties and the court are able to interact and engage in-person” and asking for a delay until the courthouse resumed normal operations.

Deluge of Hearings

But the judge said Cohen would be sentenced by video on June 4. “Delaying every sentencing would multiply the existing backlog of cases in the federal court system and generate a deluge of hearings once in-person proceedings can safely resume,” he said.

Bonifassi said the shutdown was also forcing lawyers in France to adjust longstanding approaches. “Though it’s the French system to always go to trial, we will have to adopt more of a plea-bargaining approach to cases” to work through the backlog, he said. “This crisis should be a wakeup call.”

To deal with Paris’s backlog, Heitz said prosecutors would drop about a third of the least serious cases, while another third will be dealt with through simplified proceedings or plea agreements. Some jury trials, usually reserved in France for the most violent crimes, may now be decided by judges.

Delays have hit many of the highest-profile cases. The fraud trial of Elizabeth Holmes, the founder of the once high-flying blood-testing startup Theranos, has been pushed to Oct. 26 from its original July 28 date. The case is closely watched in Silicon Valley where, before the company unraveled due to alleged fraud, it attracted the backing of some of the leading venture capital firms and achieved a valuation of $9 billion.

One of the U.K.’s biggest trials to be delayed is an $800 million shareholder suit against Tesco Plc. The hearing into fraudulent accounting at the supermarket giant has been moved from June to October, according to a spokeswoman for the lawyers behind the case.

Maybe Next Year

Some matters that have already gone on for years may now wait at least another year before moving forward.

The case against suspects in 2016 terrorist attacks on the Brussels airport and metro system has been put on hold by the virus. Federal prosecutors in Belgium said last month it wouldn’t be feasible to hold a hearing to decide which court should try the suspects due to social distancing concerns.

“The number of people who should be able to attend that session and the number of police officers required to ensure security make it very difficult, if not impossible, to organize such a session in the current situation,” the prosecutors said. A session initially scheduled for April 30 was scrapped, and an initial trial might only begin in September 2021.

Another matter that may be delayed until at least next year is UBS’s appeal of the record 4.5 billion-euro ($4.9 billion) penalty imposed by the French government for helping clients stash undeclared funds in offshore accounts. Though the Swiss banking giant had hoped its petition would go ahead in June, judges at the Paris Court of Appeals last month postponed the case. A new date will be set next week.

(Adds details on delayed Tesco trial)

--With assistance from Aoife White, Stephanie Bodoni, Karin Matussek, Ellen Milligan, Jonathan Browning, Chris Dolmetsch, Patricia Hurtado and Peter Chapman.

To contact the reporters on this story:
Hugo Miller in Geneva at hugomiller@bloomberg.net;
Gaspard Sebag in Paris at gsebag@bloomberg.net

To contact the editors responsible for this story:
Anthony Aarons at aaarons@bloomberg.net

Anthony Lin, Peter Jeffrey

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