Lawyers for three former bankers convicted of fraud and conspiracy for bid-rigging of municipal bond investment contracts have asked for a new trial because Adrian Scott-Jones, a cooperating witness for the government, abruptly left the court during a day of testimony and never returned.

In documents filed late last week with the Court of Appeals for the Second Circuit in Manhattan, lawyers for Dominick Carollo, Steven Goldberg and Peter Grimm, former bankers at GE Funding Capital Market Services, Inc., also requested that the judgments against them be reversed on grounds that the alleged fraud occurred outside the statute of limitations.

The men were found guilty of fraud and conspiracy by a jury in May for allegedly collaborating with brokers to manipulate guaranteed investment contracts between 1999 and 2006, and for receiving kickbacks through swap transactions. They defrauded the Internal Revenue Services and issuers out of millions of dollars, prosecutors said.

Goldberg was sentenced to four years in prison and fined $90,000, and Grimm and Carollo were each sentenced to three years in prison and fined $50,000.

In appeals documents, their attorneys argued that British citizen Scott-Jones unfairly incriminated the defendants, lied to the court, and disappeared, leaving jurors with false impressions and lawyers unable to finish questioning him.

“With a distinctive British accent, he put a decidedly inculpatory spin on all these tapes and argued that even the exculpatory sounding tapes should be disregarded as nothing more than ‘smoke and mirrors’ or a ‘ruse,’” wrote Carollo’s lawyers. The attorneys did not respond to requests for comment.

Scott-Jones, who worked as a consultant to Tradition (North America) and EuroBrokers, pleaded guilty in 2010 over his role in the conspiracy and was sentenced to 18 months in prison in early January.

In April, during the trial against the three, Scott-Jones elicited laughter from the courtroom when testifying about a dinner he had with Goldberg in a Japanese restaurant in Manhattan in 1999. He said the meeting was to finalize swap agreements, but fondly recalled the sake served with dinner.

“The conversation wasn’t especially good, but the sake was exceptionally good. I do specifically remember the alcohol content,” said Scott-Jones, who said he had since enrolled in a alcohol treatment program.

But Goldberg’s lawyer, John Siffert of Lankler Siffert & Wohl LLP, played tapes in which an associate told Goldberg that Scott-Jones never attended the dinner because he was drinking.

Scott-Jones also admitted committing perjury by lying about preparation for his testimony, court papers say.

On April 27, Scott-Jones left the courthouse during a break and never returned. Defense lawyers said he tried to commit suicide and ended up in the hospital.

In appeals documents, lawyers argued that Scott-Jones disappearance left them unable to contest some of his testimony.

Carollo’s lawyers said Scott-Jones’ “inflammatory and one-side testimony was ingrained in the jurors’ minds.”

“Particularly given the memorable nature of Scott-Jones’s testimony, perjury, and disappearance, there is no basis to conclude that the jury could have put the testimony out of its mind.  A new trial is required,” wrote Grimm’s attorney.

Lawyers also criticized the court’s instructions to jury members, who were told on April 30 to consider Scott-Jones’ testimony “with a lot of cautions,” but then advised on May 1 to disregard the testimony, attorneys noted.

Also, the court never told jurors to disregard recordings and exhibits on which Scott-Jones testified, lawyers said.

“The government’s conduct led the court to allow the jury to believe, for days after the testimony and the witness’s disappearance, that the testimony would be considered,” wrote Goldberg’s attorneys. The court’s “belated and inadequate” response did not address the damage done, Carollo’s lawyers added.

Defense lawyers also said the alleged conspiracy occurred outside the statute of limitations. They claimed that interest payments made on the bonds did not further the conspiracy, as argued by prosecutors.

In earlier court papers, lawyers said the five-year limitation for wire fraud expired in July 2005 and the six-year limitation for conspiracy expired in July 2004. The men were indicted in July 2006.

“If there was a conspiracy, it ended when the last fraudulent GIC was awarded, which was outside the limitation period,” wrote Grimm’s attorney.

Carollo, Goldberg and Grimm are also contesting a request by the Justice Department that they pay $6.9 million in restitution for their role in the scheme.

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