Ex-Eaze CEO Quizzed After Pot Biz Trial Loses Another Juror

By Pete Brush
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Law360, New York (March 15, 2021, 7:44 PM EDT) -- Counsel for two men on trial in Manhattan for allegedly fooling banks into processing $150 million worth of credit and debit payments for Eaze quizzed the California cannabis app's former CEO Monday, after another COVID-19-related departure of a juror.

The events came as a third week of businessmen Hamid Akhavan and Ruben Weigand's trial on bank fraud conspiracy charges got underway before U.S. District Judge Jed S. Rakoff.

Akhavan and Weigand are accused by the Manhattan U.S. attorney's office of depriving banks of property rights by tricking them into handling federally illegal transactions on behalf of Eaze, the San Francisco-based marijuana delivery service, from 2016 until 2019.

In the morning, Judge Rakoff informed the jury that a second juror was excused due to COVID-19 concerns. The juror's child attends a school where stepped-up testing is taking place because of a positive test, he said.

Judge Rakoff said that the likelihood that the juror could have contracted the coronavirus as a result of a student's positive test at school was "extremely low."

"Nevertheless, the most important thing is to make sure you are safe at all times," the judge told remaining jurors. "I wanted you to be aware of it."

The announcement came after the March 4 release of a juror who reported a positive test result. Judge Rakoff has now excused four jurors in total — two related to the coronavirus and two for other reasons — leaving the trial to be heard by a jury of 12 with no alternates.

That news was followed by a day of testimony by James Patterson, a former Eaze CEO, who on Feb. 19 pled guilty to a count of bank fraud conspiracy — the same offense with which Akhavan and Weigand are charged — and is cooperating with the government.

Patterson testified that he didn't know Weigand well, but said he came to view Akhavan as a loose cannon as they worked together on payment processing. The ex-CEO said Akhavan issued a "physical threat" to him in March 2018 upon learning that Eaze was working with other payment processors.

"I felt scared. I didn't feel like I could ignore his threats," Patterson told the jury — describing the alleged encounter over objections from the defense as prosecutors showed screen shots of profane texts allegedly sent by Akhavan via an encrypted platform.

Patterson, an Air Force veteran, said also that he initially balked at working at Eaze before deciding to join in May 2016. He said he once told Eaze founder Keith McCarty, another former CEO, "if you are not careful here, you could end up in jail."

Marijuana is legal for adults over 21 years of age in California, the state where Eaze operates. But U.S. banks and credit card companies do not generally process cannabis payments because the substance is illegal under federal law. Akhavan and Weigand both contend that they had no intent to break the law.

On cross-examination, Patterson conceded that he never sent a contemporaneous email or text to Eaze's board that shows he believed he was breaking the law while he worked with Akhavan and Weigand. Patterson conceded also that, despite asserting he was scared of Akhavan, he never brought that up with the Eaze board either via a contemporaneous email or text.

"I did say that I wasn't comfortable doing business with him. I didn't tell the board I was directly threatened," Patterson testified.

Patterson was also grilled about his potentially valuable 1.5% ownership stake in Eaze — which could be worth $3.7 million or more depending upon future performance.

Patterson deflected a suggestion that he cooperated to preserve that financial stake, saying any financial sanction he might face as part of his plea deal would be determined at his sentencing.

Eaze has said that it is fully cooperating in the feds' investigation and that it has since transitioned to new payment systems.

Akhavan is represented by William Burck, Christopher Tayback and Sara Clark of Quinn Emanuel Urquhart & Sullivan LLP and Ira Rothken and Jared Smith of the Rothken Law Firm LLP.

Weigand is represented by Michael Gilbert, Shriram Harid, Steven Pellechi and Amy Lesperance of Dechert LLP and by Michael Artan of Michael H. Artan PC.

Patterson is represented by Emily R. Schulman of WilmerHale.

The government is represented by Nicholas Folly, Tara La Morte and Emily Deininger of the U.S. Attorney's Office for the Southern District of New York.

The case is U.S. v. Weigand, case number 1:20-cr-00188, in the U.S. District Court for the Southern District of New York.

--Editing by Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.

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