The defense attorney, Paul Gotay, denies that his actions have caused a legal conflict that would require him to step down and is fighting to continue his representation of Susan G. Ross and John D. Ross.

"My head was put in the vise, and they tried to squeeze it," Gotay said Monday after a hearing in U.S. District Court in Salt Lake City, where the disqualification motion was discussed. "It's a good thing I have a hard head."

Magistrate Brooke Wells has set a hearing for Monday to hear arguments on the disqualification motion and Gotay's request for transcripts of grand jury testimony by the witnesses.

In the disqualification motion, filed late Friday, the U.S. Attorney's Office said that as early as May 2005, Gotay appeared with the Rosses 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 has said 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 in the spring of 2005. The couple's assets were frozen when they were indicted Nov. 21 by a federal grand jury.

On Monday, Gotay repeated his assertion that he will represent the Rosses no matter what. Because they have paid him, the government has also frozen his assets, he said.

"The government deems it necessary to have me removed because I was willing to represent them free of charge as needed," he said. "When all legal avenues fail . . . personal attack is the name of the game."

Gotay also said he will file a motion asking that Wells be removed from the case because she appears to have decided already to disqualify him. The magistrate said during the hearing she has no opinion yet on the matter and declined to recuse herself.

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 - also has 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.

Wells ruled at Monday's hearing to leave the same release conditions in place.

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.

The intermediary company is Research and Development (R&D), which is run by Evans and Applegate, according to court records. The records say the two men, who are not charged in the case, are prosecution witnesses.

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.

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 FuhrÂman, special agent in charge of the FBI's Salt Lake City office, which investigated the matter along with the U.S. Department of Education Office of Inspector General, the IRS and Farmington police.

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.

The U.S. Department of Education is working on its own Office of Inspector General and the Justice Department to determine whether officials at the district or state level might also be held liable, spokesman Jim Bradshaw said.

Generally in such cases, prosecutors request restitution, which the judge determines at sentencing. The Ross charges include a "notice of intent to seek criminal forfeiture" for the nearly $4.3 million and all ill-gotten assets.

Rather than waiting for the trial's conclusion, possible "administrative steps" are being discussed now, Bradshaw said, although he declined to elaborate on whether those actions might target state or district overseers.

Davis district spokesman Chris Williams said "it would be really tough" for the district to come up with the money to repay what allegedly was stolen. The district currently has less than $3.5 million in reserves, he said.

Among schemes to defraud the department, the Davis charges aren't unique. In its latest semiannual report to Congress, three of five cases reported by the U.S. Department of Education's Office of Inspector General echoed aspects of the Davis fiasco.

In West Virginia, a former financial manager embezzled more than $1.3 million in state Title I funds. The official was sentenced to more than five years in prison and ordered to pay $1.5 million in restitution.

Investigations in Georgia and Minnesota also uncovered scams to funnel federal money to front companies. The conspirators were sentenced to serve up to eight years in prison and pay back most of the money.

pmanson@sltrib.com

nstricker@sltrib.com