John B. Torkelsen, who lived in a $3.5 million mansion on Princeton’s Library Place not too long ago, has been a guest of the federal government for nearly two years now, and may be extending his stay. In 2005 he struck a plea deal over the theft of $1.9 million from Acorn Technology Fund, which he founded, and over defrauding the Small Business Administration of $32 million (U.S. 1, October 12, 2005). He started serving time in a minimum security prison in 2006. (U.S. 1, October 12, 2005 and July 19, 2006).
Torkelsen, funder of a number of Princeton area companies, including Mikros Systems, Princeton Video Image, and VeriVoice, is now charged with even greater crimes.
On February 28 Torkelsen filed a plea agreement in the United States District Court in Philadelphia in which he admitted that he had lied to numerous federal judges across the country who were presiding over securities class action suits in which he testified as an expert witness. As principal in Princeton Venture Research and Equity Valuation Advisors, Torkelsen testified in hundreds of class actions and shareholder actions in federal and state courts throughout the country, giving his opinion on the extent of damages allegedly suffered by the people and institutions bringing the suits and on the appropriate value of settlements to be awarded.
Under the law, expert witnesses like Torkelsen, who are hired by law firms to analyze the facts of a case and to testify on their findings, have to be independent. They cannot be paid on a contingency basis where their fee is determined by whether or not they are able to help secure the ruling that the law firm and its clients want. But Torkelsen has admitted that that is exactly what he did.
In pleading guilty to perjury for concealing arrangements with law firms, Torkelsen has said that law firms secretly paid him on a contingency fee basis and concealed the payment arrangement from the courts, the defendants, and absent class members.
A news release by United States Attorney Thomas P. O’Brien states that Torkelsen "submitted more than $60 million in bills to plaintiff’s class action law firms between 1993 and 1996. More than $7 million of those fees were written off or adjusted when the firm did not prevail. To make up for this, bills on other cases were fraudulently adjusted upward more than $7 million."
The news release singles out a New York law firm to which "Torkelsen submitted bills with fraudulent upward adjustments of more than $4 million." It does not name that firm, but the Wall Street Journal identifies it as Milberg Weiss. As far back as November, 2006, there were reports that the federal government was most eager to have Torkelsen’s testimony involving Milberg Weiss (U.S. 1, December 13, 2006), but until recently he was not cooperating.
The United States Attorney’s announcement of February 28 indicates that Torkelsen is finally talking about his arrangements with the law firm, which has been a focus of a number of States Attorneys’ offices as well as the U.S. Postal Inspection Services.
In closing its news release on Torkelsen’s plea bargain, B. Bernard Ferguson of the Postal Service says: "This investigation has shown that often times greed trumps integrity. The magnitude and scope of lies told to courts about compensation paid to plaintiffs and experts simply shock the conscience."