Suspects Spurn U.S. Gambit in Insider Trial : Will Insist Prosecution Try Case Now or Drop It

NEW YORK — Lawyers for three accused Wall Street insider-traders will have until Monday to respond to the federal government’s motion to dismiss the case against their clients, it developed Thursday.

In an extraordinary move designed to buy time for a further grand jury investigation, prosecutors on Wednesday had asked a federal judge here to dismiss a 5-week-old indictment against the traders. The case was due to come to trial next Wednesday, and the prosecutors had conceded that they risked losing it.

The defendants are Robert M. Freeman, a top securities trader for Goldman, Sachs; Richard B. Wigton, a senior trader for Kidder, Peabody, and Timothy L. Tabor, a former trader for Kidder.

The three had been accused of insider dealings as part of the government’s yearlong investigation of Wall Street abuses. Unlike all other securities professionals publicly charged in the probe, however, they have maintained their innocence and insisted on a trial.

Ready for Trial

Defense lawyers said Thursday that in briefs to be filed Monday morning with U.S. District Judge Louis Stanton they will oppose the prosecution’s motion to dismiss “without prejudice” the April 9 indictment of the traders. The motion would allow the government to bring a new indictment later.

Instead, the defense will ask either that the indictment be dismissed “with prejudice,” meaning that the government would be barred from bringing a new indictment, or will insist on going to trial.

“We were prepared to go to trial, and we are prepared,” said Andrew L. Lawler, the attorney for Tabor.

Prosecutors will have until noon Tuesday to respond to the defense, and both sides will convene in Stanton’s courtroom Tuesday afternoon. If a trial does take place, Stanton said Thursday, it will begin May 26 rather than on May 20, the originally scheduled date.

Defense lawyers contend that the prosecution moved for dismissal because its case is fatally weak and would rely excessively on the testimony of Martin A. Siegel, a former Kidder, Peabody investment banker who has pleaded guilty to trading on inside information with former stock speculator Ivan F. Boesky.

In reaching a plea bargain with the government, Siegel told authorities that he and Freeman swapped confidential information about takeover deals being handled by each other’s firm, and that he passed on the illicit tips to Wigton and Tabor.