U.S. Magistrate Brooke Wells made her decision after hearing arguments on a prosecution motion to remove Gotay, then advised defendants Susan G. Ross and John D. Ross to each hire a new attorney.

Wells named three conflicts under Utah and American Bar Association codes of ethics that she said called for disqualification:

* The Rosses need separate attorneys to represent their individual interests.

* Gotay gave advice to witnesses who testified before a grand jury that indicted the couple.

* Gotay himself could be called as a witness because he was involved in a financial transaction with the Rosses. Prosecutor Barbara Bearnson alleged during the hearing that the pair had transferred $381,000 to Gotay and that the lawyer had not followed the standard practice of putting the money into a trust account.

The Rosses are each charged with 47 counts of fraud, theft, money laundering and copyright infringement. Their assets were frozen when they were indicted last month by a federal grand jury, and the government is seeking a forfeiture order for at least $4.3 million and property allegedly purchased with ill-gotten gains.

Based on their payment of a fixed fee to Gotay, who has been their attorney since spring 2005, the government also froze the lawyer's assets.

Outside court, Gotay said the $381,000 is retirement money legitimately earned by his clients during their years of working. He said the money was transferred to a "catchall" account to cover litigation costs and their expenses. He acknowledged that the account is not a trust.

''It's a cheap shot to say an attorney can't get paid after a year and a half,'' Gotay said. ''This is dastardly.''

He added that Wells' decision was ''premeditated'' and that his interpretation that the law allows him to continue as the Rosses' attorney is correct. His clients agreed and both said they believe they are being denied adequate counsel in the case.

Gotay has 10 days to appeal the ruling to U.S. District Judge Dee Benson, who is assigned to the fraud case.

He said he and the Rosses will discuss the situation before deciding whether to appeal.

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, Research and Development. R&D, which allegedly received 8 percent of the money, was run by two associates of the Rosses, according to the U.S. Attorney's Office.

Prosecutors say those two associates, Keith Evans and Terry Applegate, both received legal advice from Gotay and both testified to the grand jury. That set up a legal conflict of interest that made Gotay ineligible to continue representing the Rosses, according to their disqualification motion.

In addition, because he took money from the pair, Gotay could be called as a witness on the money laundering charges, the prosecutors says.

Susan Ross, 62, is the Davis district's former director of federal programs. Her husband, 64, 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 indictment alleges the scheme began as early as 1985 and that the Rosses stole $4.3 million in the past five years alone. Authorities said they limited their case to the five-year period because of the statute of limitation and the age of some of the evidence.

In another indictment, Susan Ross' former secretary, Stella Smith, is accused of taking $338,000 by creating phony invoices for books that were never ordered and never delivered. Prosecutors said the alleged scam also involved Title I money, which is designed to help disadvantaged students. That case is being prosecuted separately.

pmanson@sltrib.com