A top white-collar defense attorney tells allOctober 31, 2012: 8:58 AM ET
Herbert Stern, 75, dishes on his colorful career as the prosecutor who tamed the most corrupt state in the nation, New Jersey.
FORTUNE -- No regular event on my calendar is more richly entertaining than my monthly dinners with a beloved friend from prep school, Alan Marcus. The setting is invariably the Post House, a steak restaurant on Manhattan's Upper East Side. The stories are as predictable as the venue. Alan -- whom I alone in the world call by his sometime teenage nickname "Big Al" -- recounts riotous tales of our misadventures at the Hun School, a then scrappy, decidedly non-aristocratic, now elite and thriving, prep school in Princeton, New Jersey.
One of his classics recalls how his buddy, a Saudi princeling bearing a strong resemblance to his grandfather King Faisal, went on a hunger strike to protest the banality of his courses. Big Al aided the sheikh's cause by smuggling cheeseburgers to his hospital room. That Al and I keep revisiting the same material hardly detracts from our amusement. We're constantly adding changes in rhythm, improvisational touches, and original grace notes to freshen the old stories. After all, did genius jazzman Coleman Hawkins play his masterpiece "Body and Soul" only once? Did Picasso paint each new muse on a single occasion?
Exalting those dinners is the parade of distinguished guests invited by Big Al, who runs a prominent public relations firm in New Jersey. The roster includes a mega-watt real estate magnate, the chief of a great New York hospital, and the former CEO of a major financial exchange. A couple of years ago, as a surprise, Big Al brought a trim, soft-spoken septuagenarian sporting a white Panama hat whom he introduced as Judge Herbert J. Stern. Though I hadn't heard of Judge Stern, it was soon evident that I should have. Big Al ran through Stern's amazing resume. Stern served 13 years as a federal judge, and is now arguably the top white-collar defense lawyer in America, representing ex-Cendant chief Henry Silverman in lawsuits over his disastrous merger with CUC (the cases continue).
Stern also serves as a counsel for Chevron (CVX) in one of the longest-running, most highly-publicized cases in the annals of the oil industry, appealing the nation of Ecuador's $18.2 billion judgment against Chevron for allegedly polluting villages on the Amazon in past decades. One larger-than-life client was Bernard Lafferty the late, heavily-tippling butler to heiress Doris Duke, who inherited millions from her estate.
Even Hollywood has come calling. In 1979, the State Department chose Stern as the only judge ever to try a post-War case in West Berlin. Stern presided over the trial of two East Germans who, using a fake handgun, hijacked a passenger aircraft and forced the pilot to land in West Berlin. The events were recounted in a 1988 feature film Judgment in Berlin, based on Stern's book by the same name. Martin Sheen played Stern, and Sean Penn, son of the director Leo Penn, co-starred. "Martin is a totally straight-laced, plain-spoken guy who's been married to his wife Janet for 41 years, and loves taking her on location with him," declares the judge.
Then, in September, Big Al sent me a pre-publication version of Stern's new book, Diary of a DA. It rushes headlong from his role in indicting the assassins of Malcolm X to ridding then shockingly-corrupt New Jersey of dozens of criminal politicians and mobsters to stopping a heroin ring run by the head of France's CIA to showing the US Attorney in Maryland how to catch pols on the take, resulting in the resignation of America's Vice President, Spiro Agnew. The book covers just 12 years, ending in 1974, when Stern became a federal judge at age 36. Packed into that interval are triumphs that explode from the page like firecrackers, chronicling one of the great law enforcement records of the past half-century.
So I invited the judge to dinner to learn more about how he sustained his relentless quest despite opposition from politicians and bureaucrats, and what he thought of the current state of law enforcement. Naturally, we met at the Post House. Over the lamb chops, Stern wasn't coy, stating "I would have gone after the Wall Street firms far harder than the authorities did, including using criminal indictments against the banks themselves if necessary. They were making billions selling mortgages to the public that they knew were bad." At the same time, he blames the system for filling our jails with addicts, diverting money and time from chasing the big-time criminals. He strongly advocates de-criminalizing marijuana and most other drugs. "It's undermining the public's faith in our laws," says Stern. "It's the practice of imposing laws from the bottom of society and not the top."
Most of all, I wanted to know where he found the fire to barrel through case after case. "How could you not?" he replies. "I found myself in the most corrupt state in the nation. It was a once-in-a-lifetime opportunity." I also was intrigued by how Stern handled prosecuting so many politicians who had returned from World War II as heroes, only to fall prey to a culture of bribery and extortion. "I had to show juries that I revered their service as brave soldiers," says Stern. "In other circumstances, I would have asked for their autographs. But I also argued they'd betrayed the memories of the heroes they'd left behind on the battlefields of Europe and the islands of the Pacific."
Diary of a DA opens in early 1962 when Stern is sworn in as an Assistant District Attorney in New York City. "They give you a badge with your name on it. It looks just like a detective shield, only it isn't," he writes. "It's not official. But it's good for showing friends, particularly girls." In an early case, Stern is asked to prosecute a famous composer and conductor who's been sending out letters trying to arrange orgies. At our dinner, as in the book, Stern declined to give the musician's name. Stern thought the case was ridiculous, and managed to settle it quietly while keeping the affair out of the newspapers. The conductor, Stern remarks in the book, "thinks his lawyer did a great job. And he did." Meaning Herb Stern.
Throughout Diary of a DA, Stern draws a sharp distinction between "doing law and doing justice." In 1972, the Nixon Administration, with the endorsement of FBI chief J. Edgar Hoover, launched a crusade against anti-war activists. A Justice Department mole, masquerading as a peacenik, provided burglar tools and cash to a group of priests and other dissidents, which they used to break into a Selective Service Office and destroy records. Hoover personally requested that Stern's office, renowned for its aggressiveness, handle the prosecution.
In the highly publicized "Camden 28" case, the blithe defendants were playing guitars in the hallways on breaks. Stern's lawyers let the peaceniks say whatever they wanted, and were far from displeased when the jury dismissed all charges. The defendants and spectators chanted "Amazing Grace" as the foreman announced the verdict. Years later, at the funeral the Stern deputy who tried the case, Stern learned that a priest who was one of the Camden 28 insisted on assisting at the mass. That priest, quips Stern in Diary of a DA, needs to attend another funeral to express gratitude for his acquittal -- Herb Stern's.
In another early case, Stern wanted to indict a police officer who pulled a pistol when a driver refused to pull over, and, in a fit of anger, fired at the car, killing a pedestrian. But in those days, the District Attorney's office zealously protected cops, and barred Stern from prosecuting. Stern was appalled, and said so. The conflict caused severe tension between Stern and his bosses, and convinced the young prosecutor he should leave the DA's office. "Fortunately, that practice of protecting police officers when they commit crimes would never happen today," says Stern.
But before he departs, Stern is dancing in a Manhattan club, "bouncing up and down," as he puts it, on a Sunday afternoon when he overhears a fellow reveller say that Malcolm X has just been murdered. As it happens, Stern is the Assistant DA on duty that day for Manhattan and is pretty relaxed, since Sundays are generally a quiet time in the law enforcement world. Stern assigns detectives to interview dozens of the 300 or 400 people who crowded Harlem's Audubon Ballroom when three gunmen fired on Malcolm. Within two weeks, Stern had all three, militant members of the Black Muslims, in custody.
The book contains excerpts from Stern's interview with Malcolm's widow, Betty Shabazz, who was basically stonewalled Stern's inquiry. "She clearly didn't trust law enforcement people," says Stern. Years later, Shabazz entered Stern's courtroom in a case against a record company that was using Malcolm's voice. After finding in her favor, Stern asked Shabazz, "Do you remember me?" She replied, "I certainly do, and you're more mellow now."
In late 1965, Stern joined the Department of Justice as an Assistant US Attorney, rising to become US Attorney for all of New Jersey in 1971, at age 34. At the time, mayors and officialS in Newark and other cities, many of them former war heroes, were taking bribes from contractors, orchestrating scams with mobsters who inspired the malefactors in the Sopranos, and forcing city employs to pay a percentage of their paychecks into their coffers. Senator Clifford Case declared that the "state left a stench in the nostrils of the nation." The culture of corruption crossed party lines in a bi-partisan travesty of the rule of law.
Starting with a case against a crooked union official suspected of accepting bribes on a pipeline project, Stern developed a template he'd use time and time again. He subpoenaed the financial records of the contractors, and looked for checks written to cash around the time the contracts were awarded. He then deposed the executives under oath, many of whom confessed to distributing envelopes stuffed with cash to union leaders and politicians.
In the early 1970s, Stern convicted the mayors of Newark, Jersey City, and Atlantic City, a congressman, the governor's chief aid, and numerous mobsters. In a hilarious vignette, he prods one Anthony Russo to disclose his nickname to the jury. "Little Pussy" exclaims the mobster sheepishly. One juror became so excited by the revelations at one trial that Stern thought his bow tie would start spinning like a helicopter blade and lift him from the juror's box.
Stern also encountered a Jersey-style French Connection. The case wasn't the same as the drug caper that inspired the celebrated movie, but the intrigue was even more dramatic. In 1971, an operative for the French intelligence service, the SDECE, was arrested for smuggling 100 pound of heroin into Port Elizabeth, hidden in the panels of a VW camper. He quickly talked, charging that the chief of the service, a Colonel Fournier, had ordered him to make the delivery. The French first denied Fournier existed, then admitted he existed but was completely innocent. Stern indicted Fournier, and publicly demanded he be sent to the US to stand trial. The French minister of defense accused Stern of creating "a serialized novel." French President Pompidou called President Nixon and threatened to call off a scheduled meeting between the two leaders in the Azores unless Stern stopped making his demands. Stern did quiet down, but kept pursuing the case.
Stern was summoned to Paris, where he spent three days with the Ambassador, Arthur Watson, son of the IBM (IBM) legend Thomas Watson. The ambassador even led him into a room lined with heavy plastic so they wouldn't be bugged. Watson eventually sided with Stern. Just before Stern departed, Watson delivered a rather odd message. "Do you know what my father told me on my deathbed? Clothes do not make the man, but they make the businessman." Since Fournier remained in France, the case couldn't progress. But the French government soon removed him as chief of its CIA.
At our Post House dinner, Stern evokes surprising praise for the press, calling it "his greatest ally" during his years as a prosecutor. In his colorful phrase, "the press can summon the wind." He argues that politicians are like windmills. They start "spinning in one direction trying to deceive the public, then the press summons the wind, and they spin in the other direction, since they're forced to tell the truth." For more from this master of the law and metaphor, don't miss Diary of a DA.