D.A., FBI Investigate Judge’s Alleged Financial Misdeeds

From his bench at Citrus Municipal Court in West Covina, Judge Patrick B. Murphy has often heard the results of prosecutors’ criminal investigations. Now officials say Murphy is the subject of such a probe into alleged financial fraud.

The Los Angeles County district attorney’s office confirmed Thursday that it is investigating allegations that the judge helped a wealthy physician friend conceal more than $1.8 million in assets from creditors. Those funds were at stake in the friend’s divorce case and subsequent bankruptcy, according to court records.

“The investigation is continuing,” said Sandi Gibbons, the district attorney’s spokeswoman. She declined to speculate about when the matter might be resolved.

Through his attorney, Murphy, 44, denied any wrongful involvement with the friend’s finances and stressed that the district attorney’s office has yet to interview him.

“We welcome any investigation,” said Murphy’s attorney, Thomas P. Dovidio of Diamond Bar. “He is anxious to clear his name.”

Dovidio said the judge has been falsely implicated by others seeking to save their own skins.

Murphy has been absent from the bench for the last few months, reportedly due to illness. Because of those absences, he was reassigned April 12 from criminal matters to small claims cases but was due to return to criminal hearings when he recovered, according to Presiding Judge Rolf Treu.

Now, because of the investigation, Murphy will stay on small claims cases at least until the probe ends, Treu said.

In court papers filed recently, a federal trustee assigned to the bankruptcy case said Murphy played a key role in his friend’s effort to “hinder, delay and defraud” creditors.

The friend, physician George Taus, filed for bankruptcy in November, and the trustee is seeking the money on behalf of the doctor’s former wife and other creditors.

The trustee alleges that the $1.8 million disappeared through a “sham company,” a phony payment by that company for a supposed sexual harassment case and the purchase of gold coins.

FBI agents have interviewed many people involved in the matter, including the doctor’s former wife, according to lawyers. The FBI declined to comment on the case.

“My client is the victim in all this; her children are victims too,” said Pauline Rosen, attorney for Taus’ ex-wife. Only about $400,000 of the $1.8 million has been located, the bankruptcy trustee stated in court filings.

Murphy, known as a dynamic judge, upset Citrus’ presiding judge in a 1992 election to win the six-year seat and was unopposed for reelection last year.

A former registered nurse, Murphy graduated in 1984 from the Southwestern University School of Law in Los Angeles and then specialized in medical legal work. In 1996 the West Covina resident made an unsuccessful bid for an open seat on the Los Angeles Superior Court.

Taus’ attorney, Richard F. Seone, said his client has done nothing wrong. Associates, not including Murphy, wrongfully took the money from Taus when the doctor was clinically depressed, the lawyer said, adding that Taus does not know its whereabouts.

In 1996, two years after Susan Taus filed for divorce from George Taus, division of their common assets still had not been settled. The bankruptcy trustee alleges that in September 1996, George Taus withdrew $1.2 million from their joint community property accounts without his wife’s knowledge. In addition, the trustee contends that Taus took about $680,000 from their children’s trust accounts and other family assets.

Taus then invested the money in Copex International, a newly formed firm headed by a friend, according to bank records in Taus’ bankruptcy filing.

About a month afterward, Copex paid out all the money to a woman named Maryanne Baumgarten, who reportedly complained about sexual harassment at Copex, according to court records and depositions. Baumgarten, an Irwindale-based paralegal, had worked in the past as a paralegal for Murphy’s law practice.

The bankruptcy trustee called those transactions “inherently unbelievable” and said the money was “merely being laundered to conceal it from creditors.”

The $1.8 million was first transferred to the trust account of Encino attorney Paul Ottosi, who then turned it over to Baumgarten, court papers say. Ottosi, in court documents, said he allowed the account to be used as a neutral custodian at Murphy’s request for Taus and distributed the funds at the judge’s and doctor’s request. The judge accompanied Baumgarten to pick up the checks in January 1997, according to Ottosi and Baumgarten’s sworn statements.

Ottosi said that he did nothing wrong and that he reported the transaction to the FBI and the Internal Revenue Service after becoming concerned about it.

After Baumgarten allegedly received it, the money then went through various complicated moves, court papers say, which in turn have triggered a series of lawsuits.

Neither Baumgarten nor her attorney returned numerous telephone calls seeking comment, but in court papers Baumgarten said she distributed the money at Murphy’s direction.

Meanwhile, Susan Taus through arbitration has received $750,000 from the securities firms that gave the couple’s life savings to her husband without her permission. The brokerages are now suing George Taus for that money and recently added Murphy, Ottosi, Baumgarten and others to the case as co-defendants.