Fugees rapper Pras Michel pitches unusual deal to fund criminal defense

(Reuters) - At the end of this month, Grammy award-winning rapper and social activist Prakazrel (Pras) Michel, best known as a member of the Fugees hip hop trio, will go to trial on U.S. Justice Department charges that he conspired with fugitive Malaysian financier Jho Low in three alleged schemes to influence two different U.S. presidential administrations.

Michel is accused of illegally funneling millions of dollars in foreign money from Low into Barack Obama’s 2012 re-election campaign, of illegally lobbying on behalf of the Malaysian government for Donald Trump’s Justice Department to drop an investigation of Low, and of conspiring with Low, Trump officials and a Chinese government minister to pressure Trump to extradite Chinese dissident Guo Wengui. (Wengui was indicted Wednesday on unrelated fraud charges.)

Michel contends that he is not guilty, was engaged only in legitimate business deals and has been unconstitutionally targeted by prosecutors.

His trial in federal court in Washington, D.C., is expected to be a blockbuster, with a witness list that may include movie star Leonardo DiCaprio and casino mogul Steve Wynn, as well as former Trump officials. Michel even wanted to call Obama and Trump as witnesses, but U.S. District Judge Colleen Kollar-Kotelly shut down that prospect earlier this month.

To pay for the elaborate defense the case demands, Michel needs at least $2.6 million just to get through the trial, according to litigation finance broker Peter Petyt of 4 Rivers Services Inc.

So Michel and Petyt are looking for an investor to put up the money, in what would be an extremely unusual litigation funding deal for a criminal case.

In exchange for an advance of defense costs, Petyt said, Michel is offering a share of about $75 million that the rap star forfeited to the U.S. government but expects to recover if he is acquitted. Alternatively, Petyt has proposed that investors can take a stake in Michel’s future earnings as a performer.

Petyt pitched the investment in Michel’s case on Tuesday via the Litigation Finance Insider, a widely-read email newsletter. The unusual email pitch did not identify Michel by name, referring only to “a high-profile artist and music producer who has promoted various social justice causes around the globe,” and broadly describing the government’s allegations.

Petyt confirmed in a phone interview on Tuesday that the unnamed client in the email pitch is Michel. The former Fugee, he said, “has spent millions in legal fees and expenses,” since the government first brought an indictment against him in 2019. “His funds have become tight,” Petyt said.

Michel confirmed in a text message that he is working with Petyt. He did not provide additional comment, although he sent links to recently published feature articles in which Bloomberg and Rolling Stone portrayed him sympathetically. (Rolling Stone reported, for example, that Michel was slammed with a sweeping conspiracy indictment in 2021 because he refused to accept the Justice Department’s offer of plea deal on the original election fraud charges.)

Michel’s current counsel in the criminal case in federal court in Washington, D.C., David Kenner of the Kenner Law Firm, did not respond to telephone and email messages. Michel has previously been represented by high-profile defense lawyers Barry Pollack and Benjamin Brafman.

A Justice Department spokesman declined to comment on Michel’s proposed litigation funding deal. In September, the government defeated Michel’s bid to dismiss his indictment. Earlier this month, prosecutors persuaded Kollar-Kotelly to exclude trial testimony from Michel’s expert money laundering witness, who would have told jurors that bank records belie the government’s conspiracy theory.

Litigation funding expert Maya Steinitz, a law professor at the University of Iowa, told me she hasn’t seen a deal like the one Petyt and Michel are shopping, in which a defendant in a criminal case pledges possible future assets in exchange for an advance to cover defense costs. Typically, Steinitz said, litigation funds invest in commercial cases in return for a cut of any settlement or jury award. In criminal cases, she said, there’s not usually an obvious route to recovery for a litigation funder.

But both Steinitz and litigation funding ethics authority Lucian Pera of Adams and Reese said that because Petyt has structured the proposed deal as an agreement between Michel and a litigation funder, the arrangement would not raise ethics concerns for Michel’s counsel.

Pera said in an email that the proposal is akin to a deal in an asset forfeiture proceeding, since Michel and Petyt are linking the funder’s payout to recovery of the money Michel forfeited to the U.S. government. A lender, he said, would probably want to build in assurances that Michel is using its money only to fund his defense. Conversely, Michel would likely insist on a deal in which he is obliged to repay the advance only if he recovers some of the forfeited assets. Either way, Pera said, “I don’t see any unique ethics issues for [Michel’s] lawyer.”

So far, Petyt said, the Litigation Finance Insider email has led to calls and emails from funders who were intrigued by his pitch, but no agreement. “It’s going to be difficult to finance because it’s so different from the usual case,” he said.

Steinitz agreed. Funders have deep experience in evaluating their potential recovery in commercial cases, she said. But assessing risk and rewards in a criminal case – particularly when your recovery depends not just on acquittal but also the recovery of forfeited assets – is outside of most funders’ expertise.

Still, Steinitz said, someone may be willing to jump at Michel’s “creative” deal. “It sounds speculative,” she said. “But sometimes you find an investor with an appetite for speculation.”

Read more:

U.S. charges exiled Chinese businessman Guo Wengui with $1 bln fraud

Rapper Pras plugs his album while proclaiming innocence in election fraud case

U.S. charges Ex-Fugees rapper, Malaysian businessman Low over funding in 2012 election

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