Federal Informant Hit With $1.3 Million Verdict
By Mark Hamblett New York Law Journal
An informant who lied while helping federal prosecutors obtain an ill-fated obscenity indictment will have to pay for his actions following a verdict late Wednesday in the Eastern District.
The informant, convicted pornographer Mark Carrier, was ordered to pay $1.25 million after a jury returned a verdict of malicious prosecution in favor of Teddy Rothstein, who Carrier said controlled a company that shipped adult fetish magazines across state lines.
The indictment against Rothstein was later dropped by federal authorities without explanation.
The verdict, said victorious attorney Robert F. Katzberg, was the first successful civil recovery against an informant nationwide.
Following one day of deliberations before Judge Nina Gershon, the jury ordered Carrier to pay $250,000 in compensatory damages and $1 million in punitive damages.
The same jury rejected a claim by Rothstein, who runs an adult book and magazine business from his offices on Jay Street in Brooklyn, for intentional infliction of emotional distress.
During the one-week trial, the jury heard evidence that Carrier had paid $3.6 million in forfeitures and fines as part of plea bargains in three obscenity prosecutions brought against him by the federal government.
In the third prosecution, brought in Kentucky, Carrier faced serving a prison term for the first time. To avoid prison, Rothstein alleged, Carrier made a deal with federal prosecutors in Washington to testify against Rothstein and implicate him in a Florida obscenity prosecution based on the interstate shipment of tapes from the Brooklyn-based Bizarre Video company.
Carrier told the government that $40,000 in cash had been delivered to the owner of Bizarre Video, Morty Gordon, but that the money was really intended for Rothstein, who he alleged was the de facto owner of Bizarre Video.
Rothstein, Gordon and a third man were indicted in January 1996, but the government dropped the charges in February 1997. Rothstein, claiming that his life was turned upside down during the 13 months the charges were pending, turned around and sued Carrier that same year.
During the trial, Carrier's lawyer, Arnold Schwartz of Denver, alleged that Bizarre Video and Rothstein's company, Star Distributors Inc., were one in the same. He said they operated out of the same offices at 2040 Jay Street, and Rothstein helped with Gordon's purchase of Bizarre Video from its California owners.
But Katzberg countered with witnesses and exhibits showing that Rothstein played no role in the day-to-day operations of Bizarre Video. He also succeeded in demonizing Carrier as a man who would say "anything" to protect himself, and who saw Rothstein as his "ticket out of jail."
Katzberg said it was unclear from the jury verdict whether the $250,000 in compensatory damages included the $120,000 he sought in attorney's fees.
Katzberg said further that he was "delighted" by a verdict that was delivered despite Rothstein's own prior conviction for obscenity -- he said he feared the jury might say, in effect, "a plague on both your houses."
Schwartz could not be reached for comment.
Katzberg said that his research by the time the case was filed in 1997 revealed no instance where a defendant who had either been acquitted or had had his indictment dismissed had successfully sued an informant for malicious prosecution.
In 1999, San Francisco lawyer Patrick Hallinan tried but failed to win a malicious prosecution case against a former client who had implicated him in drug money laundering.
Schwartz asked Judge Gershon to dismiss the case pretrial, arguing that malicious prosecution cases can only be brought against police or prosecutors. But Judge Gershon, in a case of first impression, found that Rothstein had stated a claim upon which relief could be granted, in part because the testimony of Carrier made up the lion's share of the evidence leading to Rothstein's indictment.
Katzberg said there are good reasons why a defendant who had escaped criminal charges would refrain from suing government informants.
"It's no accident that these kinds of cases aren't brought," he said Wednesday. "They are extremely difficult to prove, because it is hard to prove a lie and it's a rare thing that a cooperator has money and is therefore worth suing.
"And it's an even rarer thing for a criminal defendant who gets off to want to stand up and have his case reexamined and insist on justifying his position," he said.
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