William Terry, Rick Tabish's new attorney, and the rest of the defense team have encountered several stumbling blocks in proving Tabish and Murphy deserve a retrial. (Court TV)

LAS VEGAS (Court TV) —With half its initial case for a new trial demolished, the defense in the millionaire murder trial suffered another blow Tuesday when the state attacked one of its strongest remaining pieces of evidence as worthless.

Prosecutor David Roger denied claims that his office kept an FBI report on possible mob involvement in the killing of casino mogul Ted Binion from attorneys for Sandy Murphy and Rick Tabish and ridiculed the suggestion the document could have aided the defense.

"I'm dying to know how Mr. Momot could have used this information for trial strategy," said Roger, referring to Murphy's lawyer John Momot. "The fact that some mobsters were sitting around talking about murdering Ted Binion back in 1997 is not exculpatory to Ms. Murphy and Mr. Tabish."

Read judge's order for evidentiary hearing

On Tuesday, the third day of the hearing to determine whether Murphy and Tabish will be retried or sentenced as planned to at least 20 years in prison, the defense was supposed to question several high-profile witnesses. Tabish's former attorney Louis Palazzo, Las Vegas mayor Oscar Goodman, and his aide, William Cassidy, were to testify as part of the defense's contention that Palazzo failed to give Tabish an adequate defense. But that plan collapsed after the defense deemed Palazzo's testimony too risky.

Judge Joseph Bonaventure, who presided at the duo's spring trial, ruled last week that Palazzo could testify with a full waiver of the attorney-client privilege. Tabish's current attorney, William Terry, appealed Bonaventure's decision to the Nevada Supreme Court, but the justices rejected Terry's writ Monday.

With prosecutor Roger already advertising Palazzo's testimony as a chance to bring all of Tabish's "skeletons" out of the closet, the defense dropped its ineffective assistance of counsel claim. That decision came just a day after another part of the defense's case, allegations of Massiah violations by the state, unravelled when a jailhouse snitch refused to testify.

The defense team was left to focus on a mob hitman's statement to the FBI. In the April 1999 report, Antone Davi, incarcerated for a Mafia-ordered killing, told agents that mobsters discussed robbing and killing Binion to steal his money. The mobsters, according to Davi, were planning to stage Binion's murder to look like a heroin overdose, the same method the state maintains Murphy and Tabish used.

The defense said the report pointed to other suspects and should have been made available to the defense by the prosecution.

"This information would have been most enlightening," said Momot.

The state, however, said it never had the federal report and suggested that the defense had failed in its duties by not subpoenaing the report from the FBI.

Momot argued that he did not know the report existed, but prosecutor Roger noted that the defense had included Davi on the witness list weeks before the trial started.

Momot conceded that the defense had notes from a newspaper report indicating Davi's claims of a one-time mob plan to kill Binion, but he said he knew nothing of the actual report.

The state disputed the value of Davi's report, arguing that the defense claimed at trial that Binion had not been murdered, but instead had overdosed accidentally or committed suicide. How could any "alternative suspects" help advance that defense, Roger asked.

He went on to tell Bonaventure that the defense never would have introduced any mob-related evidence, because doing so would have opened Tabish up to questions about his reputed mob connections.

But Momot said Murphy's case could have been aided by alternative suspects if, as Davi's report indicated, those suspects planned to stage the murder to look like an overdose.

"It would have been possible to fit (the document) into the defense theory in the case," said Momot.

Bonaventure tried to question Palazzo in chambers about his knowledge prior to trial of the Davi statement, but Palazzo cited attorney-client privilege.

The defense called three witnesses in pressing the FBI report issue, but they added little. Binion family private investigator Tom Dillard, who uncovered much of the evidence pointing to Tabish and Murphy and subsequently turned it over to police, testified that he never saw the Davi report.

FBI Special Agent Charles Maurer, who took Davi's statement, said no member of the defense ever requested the documents. Under state questioning, he said that to his knowledge the FBI had no role in the Binion murder investigation. He also noted that in Sept. 1998 when Binion was killed, everyone Davi alleged was involved in the plot was in jail on unrelated charges.

Maurer was followed on the stand by retired FBI agent John R. Plunkett III, who said another informant told federal agents in 1997 that there was a mob plan to rob Binion. Plunkett recalled passing this information to Las Vegas homicide detective Mike Franks, who was to warn Binion.

As court drew to a close Tuesday, the defense said it planned to subpoena Franks and a third FBI agent to testify Wednesday morning.

Closing arguments are scheduled after those witnesses. Bonaventure will issue a written ruling on the motion for a new trial within a couple weeks, his clerk said Tuesday.