By Brendan Pierson
NEW YORK (Reuters) - Lawyers defending Platinum Partners founder Mark Nordlicht in a $1 billion fraud case have asked a U.S. appeals court to allow them to communicate with potential government witnesses, calling a judge's order blocking them from doing so unconstitutional.
In a brief filed on Wednesday in the 2nd U.S. Circuit Court of Appeals, Nordlicht's lawyer said U.S. District Judge Dora Irizarry's ban on communicating with potential government witnesses was "unprecedented" and "inconsistent with the most basic principles of impartiality and fairness."
Without being allowed to contact potential witnesses or their lawyers, the brief said, Nordlicht's lawyers could not prepare an adequate defense for him.
Prosecutors in December charged Nordlicht and six other executives at the hedge fund firm with running a $1 billion "Ponzi-like" fraud in which they overvalued assets and selectively paid some investors ahead of others. All pleaded not guilty.
The company's funds have been placed under the control of a court-appointed receiver. Platinum was known for producing exceptionally high returns - about 17 percent annually in its largest fund.
Irizarry ordered the ban on witness contact at a hearing in Brooklyn federal court last Friday, saying she believed Nordlicht's lawyers had tried to intimidate a potential witness. William Burck, a lawyer for Nordlicht, denied that.
A spokesman for U.S. prosecutors in Brooklyn declined to comment on Friday.
Irizarry's order stemmed from a letter in which Nordlicht's lawyers expressed their understanding that a former Platinum employee was a key government witness, identified in other court papers only as "CW-1."
In the letter, addressed to the former employee's lawyer, Nordlicht's lawyers said they doubted an FBI agent's claim that the witness told him Platinum was engaged in fraud. The agent relied on that statement in seeking a warrant to search Platinum's office last year.
Nordlicht's lawyers said if the employee really made such a self-incriminating statement, he must have reached a deal with prosecutors. His new employer would have been required to disclose such a deal to investors but never did, Nordlicht's lawyers said.
In an Aug. 9 court filing, prosecutors called the letter an attempt to confirm that the former Platinum employee was CW-1, and a "veiled threat" to contact his subsequent employer.
In a filing the following day, Nordlicht's lawyers said they wanted only to find out what CW-1 really told the FBI agent, so they could move to suppress evidence from the search if the agent's account was wrong.
