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Judge Wants Disciplinary Hearing on Drexel Lawyers

Times Staff Writer

A visibly angry federal judge in the Drexel Burnham Lambert Inc. insider trading case said Tuesday that he is requesting a disciplinary hearing against defense lawyers who had asked the judge to disqualify himself.

U.S. District Judge Milton Pollack, 81, also said Tuesday that he would rule soon on whether he should give up the case, a civil lawsuit filed Sept. 7 by the Securities and Exchange Commission.

The decision to call for disciplinary proceedings represented a worsening of the already acrimonious relations between the judge and defense lawyers in the case. In a brief court hearing, Pollack said he would ask the chief judge of the district, Charles L. Brieant, to determine whether disciplinary action should be taken against lawyers at the prominent New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. The firm represents Michael Milken, head of Drexel’s “junk bond” department in Beverly Hills.

Among the lead attorneys from the Paul Weiss firm involved in the case is Arthur Liman, who as chief counsel to a Senate committee cross-examined Lt. Col. Oliver North during televised hearings on the Iran-Contra affair.

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In court papers, Judge Pollack claimed that Liman and the other lawyers may have violated attorney-client confidentiality by taking information gained in an unrelated case handled by their firm and using it as the basis for their motion to get the judge to remove himself from the Drexel case.

Called ‘Astounding’

“I have decided to refer the conduct of the parties of this case for disciplinary resolution by the chief judge,” Pollack said. He made his ruling without allowing Liman or anyone else to speak during the hearing. He then abruptly left the courtroom, leaving Drexel’s lawyers surprised and angry.

“This thing today is the most astounding thing I’ve ever seen,” Liman said later outside the courtroom. He asserted that the proceeding was highly irregular because Pollack “was acting as both complainant and judge.”

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In court filings, the lawyers have denied that they violated any ethical standards. Liman said he and his co-counsel would vigorously oppose any disciplinary proceedings and continue to press for Pollack’s removal from the case. “I do not intend to roll over,” he said.

Defense lawyers have claimed that the judge has a potential conflict of interest because his wife, Moselle Pollack, stands to receive $30 million from the sale of her interest in Palais Royal, a Texas clothing store chain. Financing for the transaction is being arranged by Drexel. The judge has a reputation for being tough on defendants in securities law cases, and Drexel’s defense lawyers are known to believe that he is biased against them.

The judge claimed in court papers that Liman and others found out about the transaction involving his wife because other partners in the firm had been hired over a year ago to give tax advice to several major shareholders in the store chain, including Moselle Pollack.

SEC Opposes Move

One defense lawyer, Peter Fleming of Curtis, Mallet-Prevost, Colt & Mosle, said in court Tuesday that the defense first learned of the link between Drexel and the judge’s wife on Sept. 9, when Drexel Chief Executive Frederick H. Joseph called Fleming’s firm with the information.

In a separate hearing later Tuesday on the motion to disqualify Pollack, SEC lawyers argued that there wasn’t any conflict of interest and that Moselle Pollack wouldn’t be receiving any money directly from Drexel.

There were several angry exchanges between the judge and defense lawyers. At one point, the judge asserted that the filing of a certain document by the defense was the result of “impertinence and impropriety.” And later, when Fleming accused the SEC of misstating when the defense lawyers first learned of the judge’s potential conflict, the judge said: “You can take that lecture somewhere else.”

A clerk for Judge Brieant said late Tuesday that no date had yet been set for a hearing on Judge Pollack’s request for a disciplinary hearing.

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