District attorney bounced from case after victim funds probe.

In a rare decision by a state appellate panel, the Los Angeles County District Attorney's Office was disqualified from a counterfeiting case because prosecutors relied too much on the victim to gather evidence, issue search warrants and negotiate the unfreezing of bank accounts.

The case involved the indictment of 18 individuals and companies accused of manufacturing or selling counterfeit toner cartridges used in Xerox and Ricoh copiers. Before the indictments were brought in June 2001, a deputy district attorney in charge of the case relied on a private investigator and private attorney for Xerox Corp. to assist in the investigation.

On March 24, a three-judge panel of the 2nd Appellate District disqualified the District Attorney's Office because of Xerox's "pervasive involvement" in the case. The prosecution has been handed to the state Attorney General's Office.

"Substantial evidence supports the trial court's finding that Xerox did more than assist the D.A. in the preparation of the case against respondents; Xerox controlled traditional law enforcement and D.A. functions," wrote Associate Justice Judith Ashmann-Gerst.

The appellate ruling affirms a decision by an L.A. Superior Court judge who said "the victim should not be participating in the prosecution and preparation of a case to that extent. I have never, ever heard of a case like that."

District Attorney spokeswoman Sandi Gibbons declined to comment about the case, referring questions to the state Attorney General's Office, which represents the District Attorney. An AG spokesman declined to discuss legal details of the case.

According to the ruling, Deputy District Attorney William Clark and L.A. County Sheriffs Detective Richard Guy Hiles used a private investigator hired by Xerox to take photographs and videos; search trash; label and transport seized counterfeit products; and participate in witness interviews during search warrant executions. The investigator also prepared a $1,300 flow chart to be used in a grand jury presentation.

A year later, prosecutors relied on a restitution attorney, hired by Xerox, to identify the assets of the defendants and negotiate with them about unfreezing their bank accounts, the ruling says. Xerox spent $6,800 on asset searches.

Shepard Kopp, a partner at Geragos & Geragos representing Mary Cathleen Babajian, a former sales director at FKM Business Equipment Inc., an Irvine copier and fax machine business, said Xerox was hoping to save money by aiding the criminal prosecution. Both Babajian and FKM have been indicted as part of the probe.

"They spent money, but it pales in comparison to a civil lawsuit," he said. "Now Xerox doesn't have to spend a lot of money on legal fees because they can get the D.A. to convict someone and restitution will be ordered as a matter of course."

Harland Braun, a criminal defense attorney representing FKM, said the problem rests not in the companies but in the District Attorney's Office.

"Private companies like Xerox hire people to try to influence prosecutions and use them for business purposes," Braun said. "If you have a naive or under-funded DA, they succumb to this. It's done partly out of laziness, lack of resources and, sometimes, poor judgment."

David LaBahn, executive director of the California District Attorneys Association, said use of corporate investigators to prepare charts or, in some instances, draft search warrants is an important part of prosecuting financial crimes, he said.

"If you were to present the raw financial data to a deputy district attorney and tell him a crime occurred, I don't think many of our attorneys could find it," LaBahn said. "Nor is the jury going to find it. We don't know the internal operations of that corporation to be able to discern what is criminal or fraudulent."