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U.S. says money manager Vilar's lawyer in romance with co-defendant

By Jonathan Stempel

NEW YORK (Reuters) - A lawyer representing money manager and arts patron Alberto Vilar in his criminal fraud case appears to be in an "intimate, romantic relationship" with Vilar's co-defendant, Gary Tanaka, federal prosecutors said on Friday.

The relationship may create a conflict of interest because the lawyer, Vivian Shevitz, has been representing both men as they prepare to be resentenced, the prosecutors said.

Shevitz has represented Vilar and Tanaka in court following their 2008 convictions for promising clients at Amerindo Investment Advisors Inc high returns in seemingly safe "deposit accounts," when in fact they lost millions of dollars investing in technology stocks.

On August 30, a federal appeals court in New York upheld the convictions of both men but said they needed to be resentenced because their punishments, including prison terms of nine years for Vilar and five years for Tanaka plus financial penalties, were based in part on transactions that should not have counted.

In a letter on Friday to U.S. District Judge Richard Sullivan in Manhattan, who will handle the resentencing, Assistant U.S. Attorney Benjamin Naftalis said Shevitz's representation of both defendants may be compromised.

"Ms. Shevitz and Tanaka appear to have developed an intimate, romantic relationship, with Tanaka and Ms. Shevitz living together since the fall of 2012," Naftalis wrote. "This relationship, by all appearances, would impair Ms. Shevitz's duty of loyalty to Vilar and cloud her judgment with respect to Tanaka."

Shevitz did not immediately respond to phone and email requests for comment.

Naftalis also identified a second possible conflict of interest.

He said Shevitz previously argued that Vilar's trial lawyer had been ineffective for failing to raise the issue of relative guilt - in other words, which defendant was more at fault - and that she might be unable to raise the issue now.

"Ms. Shevitz's personal relationship with Tanaka raises serious questions about her ability to represent Vilar with undivided loyalties, particularly in light of her belief that it is in Vilar's interest to argue that Tanaka had greater culpability," Naftalis wrote.

Naftalis suggested that the court address the matter by asking Vilar and Tanaka whether they understood and wanted to waive potential conflicts arising from the joint representation.

The issue of romantic relationships involving defendants has also come up in the government's case against five former employees of Bernard L. Madoff Investment Securities LLC.

In that case, prosecutors on August 8 asked a judge to exclude evidence that various Madoff employees, including four of the five defendants, were at times romantically or sexually involved with one another, including one defendant who was in a "love triangle" with convicted swindler Bernard Madoff himself.

The case is U.S. v. Vilar et al, U.S. District Court, Southern District of New York, No. 05-cr-00621.

(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)

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