By a Staff Writer

Litigation over the disappearance of nearly $2 million will come to an end today if the many parties to the case--including Superior Court Judge Patrick B. Murphy--approve a tentative settlement agreement.

U.S. District Court Judge Wm. Matthew Byrne Jr. spent four hours Thursday afternoon meeting individually with lawyers for the three plaintiffs and eight defendants to hammer out a deal to end the fraud and conversion lawsuit.

The case stems from one of the defendants, Dr. George Taus, liquidating his Individual Retirement Accounts in September 1996, deriving $1.8 million--none of which was shared by him with his ex-wife, Susan Taus, who was entitled to half of the funds, under a marital settlement agreement.

Susan Taus claimed that Smith Barney, Inc. and Prudential Securities, Inc. were to blame for having handed the funds over to her ex-husband, and a National Association of Securities Dealers arbitration panel agreed with her, ordering the firms to pay her in excess of $780,000. They, in turn, brought the action now before Byrne aimed at recovering these funds from George Taus and the other defendants.

The firms accused seven other defendants of "devis[ing] and implement[ing] a systematic, organized and premeditated plan to improperly obtain the funds in Taus' IRAs held with Plaintiffs and/or then 'launder' the funds so that Plaintiffs and Susan Taus would be unable to recover those funds."

Taus' attorney, Richard Seone, told the MetNews Friday that only Taus and Murphy would making substantial contributions to the settlement. He said "several" of the other defendants would not pay anything, but added that Taus and Murphy were not the only parties that would contribute.

Other Defendants

Besides Murphy and Taus, the defendants are Maryanne Baumgarten, a paralegal who worked for Murphy before he was elected to the bench in 1992; attorney Paul Ottosi, a former friend of Murphy; Azusa attorney Stephen Alexander; Arnold Secord, a friend of George Taus and head of a startup company that was allegedly used to bank and then transfer the money: Winnie Eisen, Baumgarten's sister; and Colby Cotta, a nurse and friend of Murphy, who was himself a nurse before he became a lawyer.

The convoluted saga entails Murphy reportedly entrusting the $1.8 million to Ottosi, who says he turned the funds over to Baumgarten, on Murphy's direction.

The case has included allegations--denied by Murphy--that Murphy and Baumgarten attempted to launder part of the funds in Las Vegas. Apparently, part of the funds were converted to gold, with Murphy at one point purportedly having been in possession of $85,000 in gold.

Taus filed for bankruptcy in Nov. 1998, and was then sued by the trustee representing his estate. The trustee's attorney also had standing in the case before Byrne and participated in the settlement talks.

Identical Facts

The facts in the two suits are identical and they were joined for purposed of discovery. Murphy's attorney Tracy Green told the MetNews Friday that the settlement, if approved, would also resolve the bankruptcy case.

Green said the trustee's lawyer was in touch Thursday with Susan Taus, the major creditor in the bankruptcy, since she also had to approve the settlement.

Byrne gathered the parties into his courtroom to inquire whether he could finalize the settlement, but some attorneys said they did not yet have their client's approval. Byrne designated one of the plaintiff's lawyers, Paul Schumacher of Keesal, Young & Logan, as a coordinator and ordered the other parties to call Schumacher by 10 a.m. today. That lawyer is to then inform Byrne's clerk whether the case has been settled.

Byrne ordered the attorneys to return to court Thursday morning if the case is not settled, at which time, he said, he would consider a motion that the securities firms' suit and the bankruptcy trustee's suit be joined for trial.

Byrne said he would also set a trial date if a Thursday session is necessary. The jurist indicated that he might extend the original April 11 date by a few weeks to give Murphy's latest attorneys--who joined the case only last week--time to catch up.

An earlier settlement agreement fell apart in January, apparently because Murphy was not granted immunity by the U.S. Attorney's Office, Ottosi's lawyer said at the time.

Thursday's agreement was held up when Murphy's attorneys said they needed to check whether funds were available to cover the amount Murphy would pay. Also, attorneys for the securities firms were unable to contact their clients in New York to get final approval.

Green told the MetNews Friday that it was in Murphy's best interest to settle, but he said they delayed approval "to be 100 percent sure that the money's there."

She said they needed to check with the attorney for Murphy's sister, Barbara Parsons, a defendant only in the bankruptcy suit, since she would also be contributing to the pending settlement. Taus' attorney also told the MetNews that part of the money Murphy would be rendering would come from his sister.

After the earlier settlement fell apart, Ottosi's lawyer said Murphy and his sister had agreed to contribute money. But Gary Laff, Parsons' lawyer, said Friday he had no idea whether the pending settlement deal involved money from his client.

Innocent Bystander

On Thursday, Laff said Parsons was "an innocent bystander" in the case, whom the bankruptcy trustee had added as a defendant "at the 11th hour." He said the trustee's attorneys had violated her rights by telling her she was not a party to the case and that she did not need an attorney when they deposed her.

Laff said it was inappropriate for the trustee, David A. Gill, to be represented by Gill's law firm, Danning, Gill, Diamond & Kollitz, LLP, charging that the firm was looking out only for its own interests. He said Danning Gill had referred the matter to the U.S. attorney as a way of coercing defendants into settling.

Laff said he planned to sue Danning Gill for malicious prosecution for bringing Parsons into the case.

Danning Gill's attorney in the case, Richard Burstein, did not return a call Friday.

With respect to Smith Barney and Prudential, Laff said:

"What [they] have done is to smear George Taus, Murphy, and a whole bunch of people in order to intimidate them to get back the money they wrongly gave away."

Animosity is evident among the defendants in the case, as well. Murphy has sued Ottosi, accusing the attorney of dragging him into the case by secretly recording phone calls. Laff said Thursday he would be representing the judge in that suit.

Seone said Friday Taus just wants to put the matter behind him even though he believes the other defendants stole his money and were refusing to give any back in the settlement deal. He contended that some of the other defendants had immunity agreements from the U.S. attorney.

"My client is paying by far, by far the lion's share," Seone said, adding that he was ready to finalize the deal even though Taus was angry that the other defendants were putting up little or no money.

"$1.825 million has gone into the pockets of those people, and they're keeping that money and pleading poverty," he charged.

Asked Friday if she was contributing to the settlement, Baumgarten would only say, "I'm not saying I am and I'm not saying I'm not."