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Judge Refuses to Pull Out of Drexel Lawsuit

Times Staff Writer

In a sharply worded ruling, a federal judge Monday rejected a request that he disqualify himself from presiding over the Securities and Exchange Commission’s lawsuit against Drexel Burnham Lambert Inc.

Lawyers for the investment firm said they would immediately appeal the ruling by U.S. District Judge Milton Pollack.

Drexel, which fears that Pollack is biased against the firm, asked him to disqualify himself because his wife, Moselle Pollack, stands to receive $30 million from the sale of her interest in a Texas clothing store chain. Drexel is helping to raise financing for the sale. Drexel’s lawyers had argued that Pollack’s continued handling of the case, and 13 related private lawsuits, would create an “appearance” of impropriety because of the Texas transaction.

In his opinion, however, the judge said his wife won’t receive any money from Drexel and that she won’t be selling her shares in the chain to Drexel. The investment firm’s only role is to act as a consultant and potential underwriter for the buyer of the chain, Pollack said, and once the sale closes on Oct. 31, no member of the family would have any continuing interest in the company or the buyer.

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The judge, who during earlier court proceedings had strongly criticized lawyers for Drexel and other defendants in the case, implied in his ruling that the defense lawyers were merely trying to delay the case.

He said evidence supplied of a conflict of interest seemed to him “ludicrous and hardly a basis for a judge to step aside from cases.” In an apparent reference to an alleged scuffle that took place in the court clerk’s office when the lawsuit was filed, the judge also stated that “The antics of counsel in attempting to frustrate the filing of the commission’s complaint . . . are an affront to the civility which must attend the conduct of litigation.”

Lawyers for Drexel and the other defendants have denied any wrongdoing.


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