A federal judge on Monday jettisoned a prominent defense attorney and his law firm from the blockbuster fraud case against former First NBC Bank founder Ashton Ryan Jr. and four co-defendants, ruling they failed to reveal a conflict.
The decision by U.S. District Judge Eldon Fallon promises a months-long delay for a trial that was slated to start June 6.
The five defendants face a 49-count indictment charging them in a conspiracy to commit bank fraud and related charges in connection with the epic collapse of First NBC five years ago. The bank’s implosion cost the Federal Deposit Insurance Corp. almost $1 billion — the worst U.S. bank failure since the 2008 financial crisis.
Only last month, Fallon wrote in a 42-page ruling, did prosecutors learn that Michael Magner, who represents former bank executive Robert Calloway, had previously represented Gary Gibbs, a bank borrower who has since pleaded guilty and agreed to testify as a key witness in the case.
The order disqualifies Magner, a former federal prosecutor, and his law firm, Jones Walker, from representing Calloway. Magner declined to comment Monday after the ruling.
Fallon said he recognized the decision would prompt a delay, but that he had no choice: Ignoring the conflict “would risk exposing the proceeding to a germ that could infect the whole case,” he wrote in the order, making an eventual retrial “inevitable.”
He added that in addition to the delay, disqualifying Magner and Jones Walker also frustrates “the public’s interest in the speedy administration of justice.” However, he said the trial will “hopefully” still launch before the end of the year, after Calloway has the opportunity to secure a new attorney.
Defendants William Burnell, Frank Adolph, Fred Beebe, Ryan and Calloway were indicted in July 2020, and all face a maximum sentence of 30 years if convicted.
Magner and his firm represented Gibbs on multiple occasions, including during a federal probe into an affordable housing venture in Lake Charles, on which Gibbs had consulted. The firm also represented Gibbs as recently as 2017, while he sought to restructure loans with First NBC.
Fallon wrote that the government alerted him to the potential conflict on March 15, when Gibbs revealed it to prosecutors. In his ruling, Fallon found an “actual conflict” created by the law firm’s repeated representation of Gibbs.
Magner and Jones Walker downplayed the conflict as they sought to stay on the case. Calloway suggested that Magner could be barred from cross-examining Gibbs on the witness stand.
“The court does not believe this is a workable proposal,” Fallon wrote.
Fallon also said he recognized the burden his order places on Calloway, calling his need to hire a new lawyer “deeply regrettable.” Calloway has also testified that he has “limited financial resources” for a new attorney. If he can’t afford one, Fallon wrote, the court will appoint him a lawyer.
“The situation is, no doubt, doubly difficult for Mr. Calloway: Not only must he seek new representation but he is simultaneously losing excellent counsel whose judgment he has relied upon over years and with whom he has presumably shared many confidences,” Fallon wrote.
But, he added, “the court’s judicial hands are tied. Paramount to the court’s empathy to any particular party is its obligation to apply the law evenhandedly and enforce ethical lawyering.”