EX-PROSECUTOR DECLINES TO TESTIFY; CIVIL CO-DEFENDANT CLAIMS PRIVILEGE IN STOCK-FRAUD TRIAL.

Byline: David Houston City News Service

The Securities and Exchange Commission hit a roadblock Tuesday in a civil stock fraud case when an accused former federal prosecutor and Palmdale business owner refused to answer any questions, citing privilege.

Former U.S. Attorney Drew Pitt refused to say whether co-defendant Michael Zaman was being investigated by federal authorities for stock manipulation. He said that was privileged information he could not divulge.

``I am aware of certain things. But I am not certain that I can divulge them under the rules of the federal guidelines,'' Pitt told SEC Assistant Chief Litigation Counsel Stephen Korotash.

Pitt recently resigned from the U.S. Attorney's strike force unit that investigates organized crime and pleaded guilty to criminal conflict-of-interest charges. He is being sued along with others by the SEC.

Korotash pleaded with U.S. District Judge Mariana Pfaelzer to force Pitt to answer the question.

``Your honor, this is a very crucial part of our case,'' he said.

The judge said it should be no surprise that Pitt invoked his privilege as a federal prosecutor.

``He's going to tell you that is something he is obliged not to talk about under the federal rules,'' the judge said.

``Your honor, it comes as a total surprise,'' Korotash said.

Pfaelzer broke for lunch and told the lawyers to ``work it out among yourselves.''

The trial began quickly. Traditional opening statements in the nonjury proceeding were waived, and Pitt was the first witness.

The SEC alleges he drafted business plans for Conectisys Corp. containing false and misleading statements used to sell shares of the company to the public.

Pitt said his company, Black Dog Ranch of Palmdale, bought the environmentally sound pesticide manufacturer ``because I liked what it did.'' He said Conectisys was in the red when Black Dog bought it.

Regulators also claim Pitt manipulated the stock by selling 64,000 shares of Conectisys unregistered common stock to another company under his control, which then sold the shares to Zaman. Zaman owns the Los Angeles brokerage firm Smith, Benton & Hughes.

The SEC previously sued Zaman and his brokerage house, claiming they manipulated the stock price of Conectisys, causing it to go from $6.25 a share to $22 a share in less than three months last year.

In that time, the stock's trading volume was about 2,200 percent higher than in the previous months, regulators contend, misleading investors about genuine market interest.

The Wall Street Journal reported that Pitt enlisted Zaman's help to investigate the stock sale of Irvine pasta maker Nona Morelli's II Inc. In return for Zaman's help, Pitt agree to protect him from legal or regulatory problems related to his stock dealings, according to the newspaper.

Last month, Pitt pleaded guilty to criminal charges that he used his power as a federal prosecutor to enrich himself and protect those who helped him. He is due to be sentenced in September.