Guilty Plea on 4 Counts Halts Trial of Attorney

Ending his trial on its 22nd day, attorney Phillip DeMassa, a central figure in the government’s investigation of the “Coronado Company” marijuana-smuggling ring, pleaded guilty to three counts of illegal currency transactions and one count of harboring a fugitive.

Local defense attorneys and others familiar with the trial called the plea-bargain agreement favorable for DeMassa because prosecutors agreed to drop drug-related counts. Since the crimes he pleaded to do not involve moral turpitude, DeMassa may be able to keep his law license.

But the plea bargain, which was reached late Tuesday afternoon, prohibits DeMassa from practicing in federal court until the California Bar Assn. investigates the matter. In its investigation, the bar will decide whether DeMassa should be allowed to practice in state court.

U.S. Atty. Peter K. Nunez, whose office has prosecuted the case aggressively since the investigation of DeMassa began in earnest in April, 1983, called the plea bargain a victory for Assistant U.S. Attys. Herbert B. Hoffman and Joan P. Weber, who prosecuted the case.

“We were satisfied with the disposition. He pleaded guilty to four felony counts . . . and he agreed to resign from (practicing in) the federal bar,” said Nunez.

The highly publicized case grew out of charges by Nunez that DeMassa was involved in a drug conspiracy with members of the so-called Coronado Company marijuana smuggling ring.

The government’s investigation of DeMassa created a national furor among criminal defense attorneys in April, 1983, when federal agents conducted a three-day search of his office and home. Agents from the Internal Revenue Service, Drug Enforcement Agency and the U.S. Attorney’s office justified the raid on grounds that they were looking for evidence that would link DeMassa to Coronado Co. smuggling activities. Ninety-five cartons and more than 1,000 of DeMassa’s files were confiscated.

Last September the 9th Circuit Court of Appeals ruled that the search was illegal because it violated DeMassa’s clients’ right to privacy.

Agents from the Drug Enforcement Administration in 1977 began probing the Coronado Company, which was founded by young men who used surfboards to bring marijuana into the United States from Mexico. As the ring’s smuggling techniques became more sophisticated, the investigation was broadened in 1981 to include a task force of agents from the Bureau of Alcohol, Tobacco and Firearms, the Internal Revenue Service, Customs Service and other federal agencies.

About 60 people have been indicted and convicted since 1977, and about 20 have served time in federal prison. Louis Villar, the ring’s mastermind, turned government informant and was placed on five years probation in exchange for his testimony against his former ring members.

“The government conceded the weakness of the (drug) case against Phil by dismissing the worst stuff,” said a source close to the case. This source, who requested anonymity, said that U.S. District Judge Earl B. Gilliam had privately been urging both sides to reach a plea bargain. Otherwise, the trial was expected to last until May.

“Judge Gilliam has been telling the prosecution that their case on the drug charges wasn’t that strong. The sense of the court was that this had to be settled,” said the source.

Gilliam declined to comment. “It’s not proper for me to comment. I still have to sentence Mr. DeMassa and I have to keep an open mind,” said Gilliam.

Nunez declined to comment on whether Gilliam had urged a settlement.

The agreement was reached after a lengthy series of negotiations. DeMassa is scheduled to be sentenced by Gilliam on Dec. 24..

Other sources close to the case said that two other judges were also involved in the plea bargain talks. U.S. District Judge Leland C. Nielsen attempted to mediate an agreement before the trial, and U.S. District Judge Lawrence J. Irving helped both sides reach a settlement during the trial.

DeMassa, a well-known San Diego criminal defense attorney, who has defended drug defendants and members of the Hells Angels, among others, was indicted twice in 1984 by a federal grand jury on 16 counts of drug charges, mail fraud, currency violations and harboring a fugitive.

The currency violation convictions stem from charges that DeMassa made deposits of $10,000 or more without providing the bank with information about the source of the money. Nunez charged that DeMassa attempted to circumvent the law by making deposits of $30,000 on June 1, 1981; $18,000 on Dec. 16, 1981; and $36,000 on May 3, 1982. The deposits were made in amounts of less than $10,000.

The charge of harboring a fugitive resulted when DeMassa harbored Robert Kent Lahodney for one night a week before Lahodney turned himself in to federal authorities. Lahodney, who was represented by DeMassa, had been indicted by a federal grand jury investigating the Coronado Company.

On Wednesday, DeMassa said that the terms of the plea bargain prohibited him from discussing the case publicly, and his attorney, Barry Tarlow, could not be reached for comment.

Sources close to DeMassa said he agreed to the plea bargain because “the question was what’s acceptable and what’s allowable.” These sources said that DeMassa’s primary concern was to keep his license to practice law.

“From Phil’s standpoint, it was a very favorable resolution. The counts he pleaded to did not involve moral turpitude and he will probably be allowed to continue his practice,” said San Diego attorney Michael McCabe.

McCabe and other prominent members of the San Diego defense bar have argued that the U.S. Attorney should not have prosecuted DeMassa.

Although DeMassa faces a maximum sentence of 20 years and fines totaling $1.5 million, McCabe said he would be surprised if DeMassa is sentenced to more than six months in custody. The plea bargain limits DeMassa’s fine to $100,000. Nunez said that DeMassa’s jail sentence will be up to Gilliam, but he said that his office is “going to ask for custody.”

Jerry Markle, a spokesman for the California State Bar, said there is a possibility that DeMassa may be disbarred. Current state law prescribes that all felony and misdemeanor convictions of attorneys be filed with the state Supreme Court. The court then refers the matter to the State Bar for a recommendation on how to deal with the convicted attorney.

“The bar’s inquiry is not whether the lawyer is guilty or innocent of the crime, but if he’s qualified to continue practicing law. The bar will also investigate the counts that were dropped . . . If the crime involves moral turpitude, the lawyer will be placed on interim suspension during the inquiry. If it’s not a moral turpitude crime, the lawyer will not be placed on interim suspension and will be allowed to practice while we look into the matter,” said Markle.