A federal judge handed Scott Peterson's lawyer a victory over federal securities officials in a separate case in Rhode Island.
The U.S. Securities and Exchange Commission was wrong to urge that Mark Geragos be held in contempt of court for arranging payments to himself from clients with frozen assets, the judge ruled last week.
"I hate to say I told you so, but the thing was totally groundless to begin with, and obviously the judge saw through it," Geragos said Monday.
Also cleared were George Buehler, an attorney in Geragos' Los Angeles law firm, and a Beverly Hills accounting firm that received similar payments.
Martin Laffer, a co-owner of the accounting firm, said SEC officials likely "realized they had a lot of publicity potential with this thing" because of Geragos' stature as a celebrity lawyer.
Geragos is in the midst of representing Peterson, the accused double-murderer from Modesto, and entertainer Michael Jackson, accused of child molestation, and has formerly represented actors Robert Downey Jr. and Winona Ryder, and former Rep. Gary Condit of Ceres.
Geragos started representing Jackson earlier this year, though the relationship was not made public until authorities issued an arrest warrant for Jackson on Nov. 19, the day after a Stanislaus County Superior Court judge ordered Peterson to stand trial.
Peterson, 31, is charged with murdering his pregnant wife, Laci, and their unborn son, Conner. Prosecutors are seeking the death penalty.
In the SEC case, Geragos masterminded payments of $50,000 to his firm and $41,350 to Laffer's despite a Rhode Island judge's order freezing assets of Dennis Herula, a former securities broker, and his wife, attorney Mary Lee Capalbo.
Under Geragos' direction, the couple cobbled funds from various credit card advances -- a source not tied to the couple's assets, Geragos insisted in September.
U.S. District Judge Mary M. Lisi agreed, writing in her decision: "A credit card does not fit within the definition of an asset because it is something used to obtain items of value, rather than having any intrinsic value of its own."
Geragos said, "One would have hoped the SEC knew the difference between an asset and a debit."
Also, SEC officials in an unrelated Texas case acknowledged a distinction between credit cards and other assets -- suggesting they should have known better than to go after Geragos, Lisi wrote.
"The SEC's position that a credit card is an asset is a joke," Laffer said.
Some legal observers have said that federal regulatory agencies are notorious for trying to financially starve their targets.
Laffer said the SEC tried "subterfuge" to hamper the clients' constitutional right to obtain legal counsel.
"The SEC and other government agencies try to freeze out defendants from their ability to hire attorneys," Laffer said. "If they take all your money and prohibit you from borrowing, nobody wants to defend you."
Added Geragos, "It was a patent attempt to intimidate and muzzle his lawyer, which obviously was not going to happen."
Herula, Capalbo and other people pushing a fraudulent scheme had promised investors returns of nearly 300 percent in 12 banking days, according to the SEC. The group collected $52 million and returned $32 million, with the remaining $20 million "misappropriated, transferred or lost," according to the SEC.
Herula is being held in Colorado in a separate case, and the SEC has brought yet more charges against him and Capalbo in a federal court in California.
Bee staff writer Garth Stapley can be reached at 578-2390 or firstname.lastname@example.org.