U.S. District Judge Frederic Bloc declared a mistrial on four other counts against Espada and on all charges against the combative politician's son and co-defendant, Pedro Gautier Espada. The jury - in its 11th day of deliberations in federal court in Brooklyn - had told the judge it was hopelessly deadlocked on the undecided counts.
It was not immediately clear if prosecutors would seek a retrial in the embezzlement case. Espada declined to comment as he left the courtroom.
During the past week, the jurors had sent the judge separate notes saying that one juror was refusing to deliberate, that they wanted to give up and - finally late last week - that they had only a partial verdict. In each instance, the judge urged them to keep trying.
Given the unusual length of the deliberations, "It appears to have been a compromise verdict," said Espada's attorney, Susan Necheles.
She called it a "sad day" for the father and son, but also described her client as "a very resolute person."
Espada was at the center of the two most tumultuous years in the history of the New York Senate. He has described the scrutiny by the U.S. attorney's office and then-state Attorney General Andrew Cuomo as a political "witch hunt." The scandal cost him his Senate seat.
"Those who would abuse the public trust have a pointed lesson in the downfall of former Senator Espada. ... Today the jury spoke loud and clear making Mr. Espada a convicted felon," Cuomo, now governor, said in a statement.
The trial, which lasted nearly six weeks, was a landslide of paperwork that delved into the intricate financial dealings of a low-income health care network run by the Espadas.
The Bronx Democrat started Soundview clinics in 1978 in the South Bronx, which is located in one of the poorest counties in the U.S. In the past three decades, the clinic grew to include four centers that provide health care and social services. Espada's son, Pedro Gautier, 38, grew up to run the business with his father.
Prosecutors introduced scores of checks, bank statements and credit card bills that they said detailed a secret scam in which the Espadas would pilfer funds out of Soundview Health Care Network by overcharging for cleaning fees paid to a separate company they also owned.
The Espadas used the company as a personal ATM, spending on tickets to games and the pony rides, birthday parties, theater and fancy cars, prosecutors said. The clinics were left to struggle with out-of-date machinery, major cash flow problems and few doctors.
"The defendants took money meant for the poor, for health care, and put it in their own pockets," Assistant U.S. Attorney Todd Kaminsky said in his closing argument.
Espada's attorneys argued that the clinics provided - and still do - excellent health care for people living in areas where they would otherwise have nothing available to them. The Espadas may have made a lot of money, but it was their company and they were allowed to do so, the attorneys argued.
"It's not a crime to get paid for your work," Necheles said. "It's not a crime to do well in America."
As the case dragged on, the health care network has struggled to stay open. The network is no longer able to accept Medicaid payments, the government-administered health care program for low-income people, which means there has been little money coming in. That decision is being appealed.
The 58-year-old Espada rose from a poor street fighter in Puerto Rico to a Fordham University graduate to bold manipulator of Albany's old-boy political power structure. Within days of his re-election in 2008, Espada formed a coalition with two other Democrats to threaten his own Democratic majority. He demanded leadership positions in part for what he said was a needed Latino voice, or the three would join Republicans and end the Democrats' first majority in a half-century.
In June 2009, Espada and freshman state Sen. Hiram Monserrate of Queens, then under investigation in a domestic violence case that would later cost him his seat, carried out the threat. They joined the Republicans, with Espada gaining the title Senate president.
More than a month of gridlock ensued, with neither side recognizing the other's authority - even holding simultaneous sessions at one point and locking each other out of the chamber. It ended when Democratic Gov. David Paterson appointed a lieutenant governor.
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