Sunday, December 19, 2004
A decision issued on Dec. 17 by the D.C. Circuit, SEC v. Loving Spirit Foundation Inc. (No. 03-5234), involves inter alia the referral of two attorneys to the disciplinary authorities for misstatements to the court. The case involves an action by a receiver for a disgorgement fund created out of the SEC's litigation against Paul Bilzerian in the early 1990s. Bilzerian was convicted of securities fraud, and in a related civil action the court ordered him to disgorge over $60 million. Among the assets were those in foundations controlled by Bilzerian's wife, and the litigation at issue here involves the appeal by the foundation of District Judge Lambreth's refusal to recuse himself. The D.C. Circuit found two bases for referring the lawyers for disciplinary proceedings related to the appeal: first, the motion to recuse and the appeal appear to be frivolous because of the lapse of time in the filing of the motion and false statements as the basis for the motion; second, the filing of an affidavit in bad faith seeking the District Judge's recusal under 28 U.S.C. 144.
The litigation in this case has been, not surprisingly, quite contentious, and the attorneys have now been caught--or put themselves--in the cross-fire. There is some animosity toward Judge Lambreth, who is not always easy to get along with (just ask the Department of the Interior about their internet access), but the effort to force him off the case appears to have gone too far. This is an important case for litigators to review to keep a case from spinning out of control and putting the lawyer's license at risk. (ph)