Blackstone Exec Goes Undercover To Get Father-In-Law Arrested

Story first appeared in the Wall Street Journal.
A bizarre legal drama involving a leading private-equity financier at Blackstone Group has taken a new twist.
As part of a family feud worthy of "Law and Order," David Blitzer, a senior managing director at Blackstone, worked undercover in a sting operation that led to the arrest in 2008 of his father-in-law for attempted extortion. Now Mr. Blitzer has been named in a civil lawsuit by an 82-year-old attorney who represented his father-in-law.
The attorney, Stuart Jackson, says he was caught in the crossfire of a vicious squabble that spun out of control.
Mr. Jackson was arrested along with Mr. Blitzer's father-in-law, Stuart Ross. Mr. Ross pleaded guilty last year to a charge of attempting to extort money from his son-in-law through a harassment campaign. The 74-year-old entrepreneur, who is credited with bringing the Smurfs cartoon characters to the U.S., was sentenced to five years probation.
Mr. Jackson, for his part, ultimately was acquitted of criminal charges related to the affair. He filed a lawsuit last month in Manhattan federal court, claiming that the 41-year-old Mr. Blitzer, along with his wife, Allison, his lawyer and employees of the Manhattan district attorney's office, illegally conspired to prosecute him based on the actions of Mr. Ross.
The suit alleges false arrest, malicious prosecution and other violations of his civil rights, saying that a sting operation was orchestrated to set up Mr. Jackson.
A spokeswoman for Manhattan District Attorney Cyrus Vance Jr. declined to comment, as did representatives for Mr. and Ms. Blitzer and for Blackstone. Mr. Blitzer's lawyer, Roger Stavis, also declined to comment. Mr. Ross couldn't be reached.
Mr. Blitzer is well-known in private-equity circles. The Blackstone executive is co-chairman of the firm's private-equity group and is part of a group buying a stake in the Philadelphia 76ers basketball team. He joined Blackstone in 1991 after graduating from the University of Pennsylvania's Wharton School, and established the firm's investment presence in Europe a decade ago.
His family's longstanding conflict with his father-in-law took a turn for the worse in 2007.
In testimony at Mr. Jackson's trial, Mr. Blitzer said that he had given Mr. Ross tens of thousands of dollars over the years for different ventures, and the money was never returned. Mr. Blitzer's wife is estranged from her father and had cut off contact with him around 2002.
But Mr. Ross resurfaced in December 2007, asking again for money and to see his grandchildren. Despite his success with the Smurfs, Mr. Ross had lost most of his money through failed business deals, according to court records.
Mr. Blitzer gave him $65,000 and arranged a meeting for Mr. Ross at Blackstone. But when he balked at handing over another $50,000 in June 2008, his father-in-law unleashed a series of angry emails and phone messages, the executive testified.
Mr. Ross called and emailed Blackstone employees, from top executives to secretaries, attempting to discredit his son-in-law, the executive testified.
Mr. Jackson became involved in the dispute, his suit says, after Mr. Ross asked him to convey an offer to Mr. Blitzer to forgo contact with his grandchildren and other family members in exchange for money.
He began negotiating with Mr. Blitzer's lawyer, Mr. Stavis. In testimony, Mr. Stavis said Mr. Jackson told him that Mr. Ross expected to be paid $5.5 million. That's to stop the harassment of the family. (Mr. Stavis later admitted in testimony that the word "harassment" was used by him, and not Mr. Jackson.) At first, Mr. Jackson said Mr. Ross would cut off contact with Blackstone as a "bonus"; later, Mr. Jackson told him that would actually cost $5.5 million more, for a total of $11 million, Mr. Stavis said.
That offer was rejected, but the four men arranged a negotiating session at a New York social club that produced the key evidence in the case.
Mr. Stavis testified that he had contacted Manhattan prosecutors after hearing threatening voice mails left by Mr. Ross for Mr. Blitzer. The district attorney's office then outfitted Messrs. Blitzer and Stavis with tape recorders under their clothes for the negotiation at the Union League Club in Midtown Manhattan on Aug. 21, 2008.
With an investigator from the district attorney's office listening remotely, Mr. Blitzer agreed to pay Mr. Ross $250,000 to stop contacting his family and Blackstone. He gave Mr. Jackson $50,000 pending a final settlement, according to court records.
The next day, Messrs. Ross and Jackson were arrested.
In an interview, Mr. Jackson said he was unaware of Mr. Ross's threatening emails and calls, and thought he was engaged in a legitimate settlement of a family dispute when he was arrested and held in jail overnight without his diabetes medication.
His lawsuit also accuses Mr. Blitzer of harboring "ill will" against the lawyer because of his work for Mr. Ross on a failed real-estate deal for which the son-in-law had supplied $120,000.
Stephen Gillers, a law professor at New York University, said Mr. Jackson's lawsuit faces difficult odds because law-enforcement officials usually have immunity from liability in civil suits. Private parties such as Messrs. Blitzer and Stavis don't have immunity, but Mr. Jackson still would have to prove they had effectively become agents of the government and violated his rights.
Mr. Jackson's attorney, Amy Marion, said her client is seeking to recover $200,000 he spent to defend himself, as well as money for unspecified damages for harm to his reputation.
Mr. Jackson, a lawyer since 1957 and mostly involved in civil matters, said the experience had convinced him the criminal justice system is "broken."