In a motion filed late Friday, the U.S. Attorney's Office said that as early as May 2005, Salt Lake City attorney Paul Gotay appeared with Susan G. Ross and John D. Ross at the office of the FBI, the agency investigating the alleged fraud that drained the district of millions in Title I money meant to help disadvantaged students.
Then, when agents attempted to interview two witnesses they believed had knowledge of the scheme - Keith Evans and Terry Applegate - both men said Gotay was their attorney, the motion said.
In addition, Gotay himself, by engaging in "multiple financial transactions with the defendants," has personal knowledge relevant to the case, and is likely to be a witness in the prosecution, according to the motion.
Gotay said last week the attempt to disqualify him stems from the fact that the Rosses paid him a fixed fee for his representation after they came under investigation. The couple's assets were frozen when they were indicted last week by a federal grand jury.
Gotay has defended his representation of the couple, and pledged to represent them even if he is not paid.
"I don't give a hoot or damn what they think of me," Gotay said last week as he stood on the steps of the downtown Salt Lake City courthouse. "All they're trying to do is inflict fear and pain."
The Rosses have pleaded not guilty to 47 counts of theft, fraud, copyright infringement and money laundering against them. Stella V. Smith - Susan Ross' former secretary at the district - has also pleaded not guilty after being charged in a separate indictment with 37 counts of mail fraud for allegedly taking more than $300,000 in payment on fake invoices.
Prosecutors did not seek to keep any of the three behind bars in the months leading up to their trials, scheduled in February. But all three were required to surrender their passports and keep in contact with the court's pretrial services officers.
A review hearing on those terms is scheduled Monday morning.
The indictment accuses the couple of selling photocopies of books to schools that receive federal Title I funding at vastly inflated prices through an intermediary company, which kept a small percentage of the profit and paid the rest to a company allegedly owned by Susan and John Ross.
Money allegedly taken from 2000 to 2005 amounts to $4.3 million, but officials say the scam may have begun as early as 1985.
Smith is accused of creating phony invoices for books that were never ordered and never delivered. She allegedly collected $338,000 from 1999 to 2005.
Gotay has alleged that Bearnson has a conflict of interest in the case because Smith approached the prosecutor's husband, who is a lawyer, for legal advice in the matter. It appears the husband had information about a secret grand jury investigation because he did not take Smith's case, Gotay said.
Todd Utzinger, a Bountiful defense attorney and Bearnson's husband, said there is no conflict and he has done nothing inappropriate.
He did meet with Smith months ago, but refunded her money and terminated any representation after learning that an FBI agent had consulted with Bearnson on the case, Utzinger said. As soon as he heard his wife might be involved, he never talked about the case with her or the FBI, he added.
The Davis district first detected something was amiss with its Title I programs in spring 2005 after implementing a new review system. Authorities were contacted immediately, said Timothy Fuhrman, special agent in charge of the FBI's Salt Lake City office, which investigated the matter along with the U.S. Attorney's Office, the U.S. Department of Education Office of Inspector General, the IRS and the Farmington Police Department.
Susan Ross, who was employed by the district beginning in the 1970s, was director of federal programs before she retired in spring 2005. John Ross is the former Title I specialist for the Utah Office of Education and worked as a grant specialist for the Davis district from March 2000 to February 2005.
The maximum penalty for mail fraud and money laundering is 20 years in prison; for theft, 10 years; and for copyright violations, five years.
