Last Week, US Sen. Arlen Specter (R-PA) predicted that Gonzales would resign soon as a result of the US Attorney firings, and said over the weekend that he believed the resignation would come before the no-confidence vote. Sen. Chuck Hagel (R-NE) has also called for Gonzales' resignation after hearing testimony from former US Deputy Attorney General James Comey regarding an attempt by Gonzales to persuade former Attorney General John Ashcroft to authorize the warrantless domestic surveillance program while he was incapacitated in the hospital, critically ill with pancreatitis. Although the event did not relate to the US Attorney firings, Hagel said that it showed Gonzales lacked the "moral authority to lead" the DOJ.

Coleman and Rhoades admitted that from early September through Nov. 17, 2006, they had participated in a conspiracy to defraud Fieldstone Mortgage Corp., according to a release from John Wood, U.S. Attorney for the Western District of Missouri. Coleman also pleaded guilty to four counts of wire fraud.

On May 14, co-defendant Jeremy A. Plagman, 29, of Lee's Summit, pleaded guilty to his role in the conspiracy. Plagman, an appraiser doing business as JET Appraisals in Lee's Summit, provided an inflated appraisal of $1.2 million for property at 5034 Sunset Drive in Kansas City.

Coleman's role in the conspiracy was to prepare and provide a number of fraudulent letters for co-conspirators attesting to their creditworthiness, Wood said in the release. These letters and the inflated appraisal were submitted to Fieldstone Mortgage as part of the loan application to buy the property. Rhoades' role in the conspiracy was to assist a co-defendant in obtaining documents needed for the transaction, to prepare and submit false documents as needed and to contact co-conspirators as needed, Wood said.

Co-conspirators hoped to obtain loan proceeds in excess of the property's actual sale price by falsely representing to the mortgage lender that the stated sale price was greater than the actual sale price, Wood said.

Coleman also admitted that on three separate occasions in October and November 2006, he had committed wire fraud by transmitting faxes of fraudulent documents in furtherance of the conspiracy. He also admitted to wire fraud by acknowledging his responsibility for a fax transmission to Fieldstone Mortgage of signed closing documents related to the sale and purchase of the property, Wood said.

Each co-defendant could be subject to a sentence of as long as five years in federal prison without parole, plus a fine of as much as $250,000 and an order of restitution on the conspiracy charge. Coleman also could be subject to a sentence of as long as 20 years in federal prison without parole, plus a fine of as much as $250,000 on each wire fraud charge.

Sentencing hearings will be scheduled after the completion of presentence investigations by the U.S. Probation Office. Assistant U.S. Attorney Linda Parker Marshall and Senior Litigation Counsel Gene Porter are prosecuting the case, which the FBI investigated.

Gibson, Dunn & Crutcher LLP is pleased to announce that Heiko Kai Schultz has joined the Los Angeles office as of counsel.  Previously a partner with Kirkland & Ellis LLP, Schultz practices commercial litigation.

Schultz's practice covers a wide range of disputes, including commercial, intellectual property, bankruptcy, securities, accounting malpractice and environmental litigation.  He has experience representing companies and individuals in the medical, financial, accounting, aircraft and electronic industries.

Recent matters include his representation of the debtors in 1,600 adversarial cases arising out of the In re Fleming Companies bankruptcy; a surgeon and inventor in a patent and contract dispute case with a medical device firm; and Arthur Andersen in an accounting malpractice case brought by Frederick's of Hollywood.

Schultz received his law degree from the University of Virginia in 1997 and a degree in history from the University of California in 1994.

The combination won't affect Stinson's Kansas City office, a spokeswoman said. That office has 197 attorneys and 276 staff members. The combination will be effective July 1, subject to due diligence and a review of potential client conflicts.

"We are always looking for what is best for our clients and providing them with the best service and expertise possible," Mark Foster, Stinson's managing partner, said in a release. "Blumenfeld Kaplan & Sandweiss is an excellent law firm with a top-notch team of lawyers. Our clients will benefit from the synergies created as a result this combination."

Stinson traces its heritage to 1878. The firm opened its St. Louis office in 1994. The firm's lawyers have extensive experience in real estate law, mergers and acquisitions, labor and employment, business litigation, financial services, health care, sports law and product liability.

Blumenfeld was established in St. Louis in 1950 by John Blumenfeld, a prominent real estate lawyer who continues to be active with the firm. Today, it ranks among the 15 largest law firms in St. Louis. Its main areas of practice include real estate, tax, estate planning, succession planning, mergers and acquisitions, immigration, labor and employment, intellectual property and litigation.

"The potential benefits for our clients created by this combination with Stinson Morrison Hecker are significant," Philip Kaplan, president of Blumenfeld, said in the release. "Our practice has continued to grow on the local, national and international stages, and this combination will allow us to provide additional talent that will expand and enhance the efficient delivery of legal services."

Stinson ranks No. 2 on the Kansas City Business Journal's list of area law firms. Blumenfeld is tied at No. 15 with Lashly and Baer PC on the St. Louis Business Journal's list of area law firms.

Kentucky's lawyers appealed to the Supreme Court. "The outcome ... has broad implications for the municipal bond market at large, far beyond Kentucky's borders," John R. Farris, Kentucky's secretary of finance, said in a written statement.

If the justices uphold the Kentucky court's ruling, states that exempt their bonds while taxing those from other states would either have to tax municipal bonds from all states equally or exempt all bonds in order to come into compliance, several legal experts said.

But based on a separate Supreme Court decision last month involving interstate commerce, which ruled in favor of local governments in New York, many observers think the Court is likely to overrule the Kentucky decision and maintain the status quo.

By exempting municipal bonds from state taxes, governments can offer in-state investors lower interest rates and as a result lower their cost of borrowing. Muni bonds, which are used to fund roads, schools and other public projects, are also exempt from federal taxes.

The bonds can be particularly appealing to investors from high-tax states such as California, New York and Massachusetts. There are hundreds of mutual funds comprised of muni bonds from single states, with over $160 billion in assets, bond analysts said.

State and local governments issued approximately $400 billion in municipal bonds in 2006, one bond analyst said.

Like Kentucky, more than 40 states exempt at least some of their in-state bonds from taxation, the National Association of State Treasurers said in a friend-of-the-court brief.

Kentucky's policy was challenged by George and Catherine Davis, who argued it is unconstitutional and requested a refund of the taxes they paid on out-of-state muni bonds.

If the Davises prevail at the high court, Kentucky and the other states could be forced to pay those refunds, said Alan Viard, a resident scholar at the American Enterprise Institute.

The case could also impact the Section 529 college savings plans offered by many states, said Leonard Weiser-Varon, a public finance expert at the Mintz Levin law firm in Boston.

Bond fund managers downplayed the issue. Tom Metzold, a vice president and portfolio manager at Eaton Vance Corp., said that a ruling against the states could result in a one-time reduction in the value of muni bonds. Otherwise, "it will be much ado about nothing," he said.

Ronald Fielding, who manages the municipal bond funds group at Oppenheimer Funds, estimated that investors who own bonds from high-tax states could see the value of their portfolios decline by 1.5 percent to 2 percent if the Supreme Court rules in favor of the Davises.

But many legal experts think the justices are likely to rule in favor of Kentucky instead. Last month, the justices found that local governments in New York could compel private trash haulers to use government-owned facilities, even if it would be cheaper to dispose of it at out-of-state dumps.

Gregory Germain, an associate professor at the Syracuse University College of Law, said that ruling carved out "a very broad exemption" to the commerce clause for laws that may discriminate against interstate commerce but favor a government entity.

The case is Kentucky v. Davis, 06-666. It won't be argued until the Court's next term, which begins in October.

California will resume sending an estimated 8,000 prisoners to other states next month after an appeals court ruled that Gov. Arnold Schwarzenegger can do so while he challenges a prior ruling that halted the transfers.

Schwarzenegger praised the decision by the Third District Appellate Court, which was filed late last week and announced Monday, saying it would let the state take a critical step toward reducing prison overcrowding. Critics, however, warned that shipping inmates against their will could be dangerous for guards, prisoners and the public.

For the governor, the decision couldn't have come soon enough. Three judges have scheduled separate hearings next month to consider appointing a panel that could cap the state's inmate population—which could potentially order the release of thousands of prisoners. The state now has 172,000 prisoners living in space designed for fewer than 100,000.

Schwarzenegger issued a statement saying the transfers will help California avoid the court-ordered release of dangerous felons and even increase safety for overburdened guards.

"Out of state transfers will improve the safety of California's institutions for our correctional officers and staff as well as the inmates, and will provide much needed space for rehabilitation programs," Schwarzenegger said. "Transferring of inmates out of state is a critical component of the state's overall plan to relieve overcrowding."

The decision follows the Legislature's approval in April of a $7.8 billion plan also designed to help stave off a federal takeover. The plan calls for heavy state borrowing to pay for adding 53,000 new beds, as well as boosting education, job training and other rehabilitation programs. The plan also authorizes the governor to continue transferring inmates out of state until 2011 to relieve overcrowding.

Lance Corcoran, spokesman for the California Correctional Peace Officers Association, which sued the state over the transfers and prevailed in a Sacramento County Superior Court in February, said the transfers will expose guards to serious dangers.

He pointed to a riot in an Indiana prison last month as evidence. That riot, involving about 500 inmates, apparently began after prisoners recently transferred from Arizona refused to return to their living quarters.

"Inmates who are forced to leave the jurisdictions in which their families have the opportunity to visit them creates a very volatile situation that's unsafe for the inmates, unsafe for the guards, and unsafe for the public," Corcoran said.

California transferred 353 inmates out of state before Sacramento County Superior Court Judge Gail Ohanesian ruled in February that the transfers appeared to violate the state's emergency act and a provision in the state constitution.

Those inmates are in Tennessee and Arizona.

According to the Department of Corrections and Rehabilitation, inmates sent in June could go to facilities in Tallahatchie, Mississippi or near Oklahoma City.

Corrections plans to send 300 in June and ramp up shipments of 400 to 500 inmates a month by the fall.

Assemblyman Todd Spitzer, R-Orange, chairman of the Assembly Select Committee on Prison Construction and Operations, said he plans to hold hearings next month on the safety of the transfers.

"I have some concerns about Corrections being able to do this without officer injuries."

But Spitzer said Monday's ruling was great news because out-of-state transfers are the only way to prevent early releases.