Posts tagged as:

Kentucky fen-phen settlement fraud

September 3 roundup

by Walter Olson on September 3, 2008

{ 2 comments }

August 7 roundup

by Walter Olson on August 7, 2008

{ 1 comment }

July 20 roundup

by Walter Olson on July 20, 2008

  • Judge Henry Lackey, who went to feds to report bribe attempt by Dickie Scruggs associate, gets award and standing ovations at Mississippi bar convention, says he was just doing a judge’s job [NMC/Folo]
  • Related: should Ole Miss Chancellor Robert Khayat have used official university stationery for his letter pleading leniency for chum/ benefactor Scruggs? [Daily Mississippian and editorial via YallPolitics, continuing coverage at Folo; earlier]
  • Stephen Dubner: if lawyer/subscriber can sue Raleigh News & Observer over perceived decline in its quality, who’s next? [NYT/Freakonomics blog, earlier]
  • Maneuvering over retrial of Kentucky fen-phen defendants Gallion and Cunningham [Lexington Herald-Leader]
  • A Fieger sideshow: though acquitted in recent campaign laundering prosecution, controversial lawyer fared less well in lawsuit against Michigan AG Michael Cox; Sixth Circuit tossed that suit and upheld order that Fieger fork over attorney fees to Michigan Supreme Court Justice Stephen Markman over subjecting the justice to unfounded vilification [ABA Journal; fixed typo on Circuit]
  • Citing long history of frivolous litigation, federal judge in central Texas fines disbarred lawyer Charles Edward Lincoln and his client and bans Lincoln from bringing any more federal suits [SE Texas Record]
  • Faced with $18 million legal-malpractice jury verdict, Indiana labor law firm stays in business by agreeing to make token payment, then gang up on its liability insurer for the rest [Indianapolis Business Journal, Ketzenberger/Indy Star via ABA Journal]

{ 6 comments }

I was quoted at length about the Kentucky fen-phen settlement fraud scandal; the article mentions our coverage, which we’ve been engaged in since the story broke years ago.

{ 2 comments }

Louisville Courier-Journal:

After 52 hours of deliberation over eight days, a federal jury yesterday declared it was hopelessly deadlocked in deciding whether attorneys William Gallion and Shirley Cunningham Jr. defrauded clients of $65 million in Kentucky’s 2001 fen-phen settlement.

After the judge declared a mistrial, the jury foreman, Donald Rainone of Erlanger, said jurors were stuck at 10-2 to acquit the defendants, and had been at that vote for much of their deliberations.

“We felt the prosecution just didn’t have a strong enough case,” Rainone said in a phone interview in which he strongly criticized the prosecution for being unprepared and focusing its case on only Gallion, Cunningham and a third lawyer, Melbourne Mills Jr.

“There’s a lot of people that had their hand in this,” he said. “There’s a lot of people that should have been on trial that weren’t.”

Rainone declined to say who else should have been on trial, saying he didn’t want to “get sued.”

Of course, that the prosecution failed to indict participants in the fen-phen scam who also stole from tens of thousands to tens of millions doesn’t explain why one votes to acquit the criminal defendant attorneys who stole millions–except for the fact that the defendants were able to blame the empty chair for their actions. If the defendants’ allegations about Stan Chesley’s role are half true, the question remains why Ohio disciplinary authorities have not so much as opened an investigation, much less failed to disbar him. But we will perhaps learn more as the civil trial progresses. Meanwhile, as Peter Bronson writes, “giving immunity to someone so powerful, wealthy and politically wired was everything that destroys public trust in the justice system.”

Judge William O. Bertelsman, who has taken senior status, has recused himself from the retrial; the new judge, Danny Reeves, will likely be requested to lower the eight-digit bond for Gallion and Cunningham, who remain in jail. Melbourne Mills, who was acquitted, says he has already spent the $20 million he was paid for his role in the case–a case his lawyer told a jury that he was too drunk to work on and didn’t understand the underlying law. Nice work if you can get it.

Off-the-record reports I am receiving about the trial blame prosecutors’ performance (such as failing to object to defendant expert opinion that contradicted the facts) and Judge Bertelsman’s instructions to the jury; it also seems to me that the defendants were given far too much leeway to argue the law before the jurors when the judge should have given a straightforward instruction that the underlying case was or was not a class action covering all future Kentucky claimants rather than allow argument over that simple legal question. (Answer: it wasn’t. The settlement with AHP explicitly says it’s a lump-sum settlement for existing plaintiffs requiring the attorneys to comply with Rule 1.8, and there is no indemnification provision contrary to defense testimony arguing otherwise.)

{ 14 comments }

Melbourne Mills’s defense that he was too drunk to know what was going on when he and two other attorneys stole tens of millions of dollars appears to have created reasonable doubt in the mind of a Kentucky jury.  Mills may have been helped by the revelation that his two co-counsel tried to hide $50 million from him, too, permitting his attorney to more plausibly blame the scheme on others.   Or the jury may have believed the argument of Mills’s attorney that the three attorneys were too stupid to understand the settlement agreement and didn’t intend to steal any money (though they transferred a lot of money from their personal account to their clients when they learned the bar was investigating, and lied to the bar about how much money their clients received).  (Jim Hannah, “One cleared in diet drug case”, Cincinnati Enquirer, Jul. 2; Beth Musgrave, “Fen-phen lawyer Mills is found not guilty”, Lexington Herald-Leader, Jul. 2; Beth Musgrave, “Jury hears closing arguments in fen-phen trial”, Lexington Herald-Leader, Jun. 24; AP/Kentucky Post, Jun. 23).  The jury, today in its seventh day of deliberations, claims a deadlock on the other two attorneys, no doubt confused by why Judge Jay Bamberger and co-counsel and Democratic bigwig Stanley Chesley have not also been indicted. Defendants Cunningham and Gallion have sought to blame the tens of millions they stole on the fact that Bamberger (who was indirectly paid millions) judicially approved the settlement and Chesley (who was directly paid tens of millions) was allegedly the architect of the settlement that ensured lawyers would get far more than their contracts with their clients provided. Since there is no dispute that those two were indeed intimately involved in the scheme, the jury isn’t the only one confused why the Kentucky fen-phen three are being treated differently than the judge, the judge’s former law partner, and Stan Chesley, who all profited mightily.

[click to continue…]

{ 2 comments }

From the Cincinnati Enquirer columnist, a refreshingly acerbic account of the erstwhile Master of Disaster’s time on the stand in the Kentucky fen-phen trial, during which he compared himself to Tiger Woods in explaining why he should not be asked to stoop to taking an hourly fee:

Jurors have been anesthetized by six weeks of watching witnesses avoid the truth the way cats avoid a bath. …

…when [defense attorney O. Hale] Almand tried to make Chesley admit – yes or no – that he knew his own lawyer told prosecutors he would take the Fifth unless he got immunity, Chesley’s serial evasions made the courtroom squirm.

I counted at least nine tries. After the seventh, the judge twice ordered Chesley to answer yes or no.

He would not. He wheedled, ducked, swerved and danced. He blustered about attorney-client privilege, corrected the grammar of the question, and griped about how he has been mistreated by the press. …

If you’re hoping to hit a slip-and-fall lotto jackpot by suing Amalgamated Banana Peel Inc., Chesley is just the guy to take on herds of high-paid lawyers. But if you’re looking for a straight answer under oath, look somewhere else.

(“Tiger Woods of Torts”, Cincinnati Enquirer, Jun. 19).

{ 13 comments }

Perfectly jaw-dropping testimony at the ongoing Covington, Ky. trial:

Attorney William Gallion testified yesterday that he and his co-defendants would have been “legally justified” in taking as much as $170 million from Kentucky’s $200 million fen-phen settlement — because, he said, their clients’ cases were worth only $30 million.

“We were like an insurance company where the hurricane didn’t strike, so we got to keep the premium,” the suspended Lexington lawyer testified in his diet-drug fraud trial in U.S. District Court.

The lawyers, it seemed, had structured the settlement so as to reserve the gigantic helping of gravy in question for the supposed disposition of certain contingencies which then conveniently failed to materialize. Judge William Bertelsman immediately told the jury that Gallion’s interpretation of the law was wrong. (Andrew Wolfson, “Judge, lawyer clash at fen-phen trial”, Louisville Courier Journal, Jun. 14).

And on Monday, famed Cincinnati attorney Stan Chesley — who has been given immunity — testified, assailing the conduct of the three defendants and conveying his complete shock that they would structure the settlement so unfavorably to clients. (Jason Riley, “Chesley rakes diet-drug trio”, Courier-Journal, Jun. 17; Jim Hannah, “Chesley: Fen-phen role slim”, Cincinnati Enquirer, Jun. 17). For a different viewpoint, see Peter Bronson, “Where’s Chesley?”, Cincinnati Enquirer, Jun. 12. More: Herald-Leader.

{ 3 comments }

William Gallion takes the stand in the Kentucky fen-phen settlement criminal trial:

[click to continue…]

{ 2 comments }

The press is starting to catch on to the scandal of Judge Bamberger not being charged in the Kentucky fen-phen settlement scandal, and we have criminal trial updates after the jump.

[click to continue…]

{ 2 comments }

Judge Joseph Bamberger rubber-stamped a Kentucky fen-phen settlement agreement where plaintiffs’ attorneys cheated class members out of tens of millions of dollars. In the process, his former law partner was paid millions by the settlement, which he used to buy a Florida house with Bamberger, and Bamberger himself received a $5000/month sinecure. At trial of the three lead attorneys yesterday, jurors were shown a videotape where one of the plaintiffs questioned the judge on how low her settlement was and the validity of her release; the videotape shows Bamberger browbeating the plaintiff, but then awarding her an additional $100,000 and a $1200/month life annuity on the condition that she cease talking about the settlement and her objections to it. (Jim Hannah, “Judge dressed down victim”, Cincinnati Enquirer, May 24) (h/t R.U.). For some reason yet undisclosed by prosecutors, Bamberger is on the witness stand rather than in the dock with Gallion, Mills, and Cunningham.

{ 2 comments }

The name does have a clean, daisy-fresh smell to it, like a good laundry. In this case the laundering being done was of settlement money in the Kentucky fen-phen scandal. (WSJ law blog, Louisville Courier-Journal, Lexington Herald-Leader, Krauss @ PoL).

{ 2 comments }

Here’s your $3 million bonus, young man, and whatever you do, don’t tell the clients how much the case settled for (Jim Hannah, “Fen-phen lawyer details bonus”, Cincinnati Enquirer, May 15; earlier)(via Slater, WSJ law blog).

We’ve extensively covered the scandal over charges that attorneys William Gallion, Shirley Allen Cunningham Jr. and Melbourne Mills Jr. siphoned off $65 million or so in settlement money due claimants in the diet drug litigation, using the proceeds to buy, among other things, the Preakness-winning race horse Curlin. Ted notes the latest developments over at Point of Law, as does Carter Wood. (Wolfson/Courier-Journal, WSJ law blog).

More from WSJ law blog: Mills’ lawyer tells jury his client “was hospitalized for an ‘alcoholic seizure’ a month after the case was settled, didn’t take part in any court hearings and was too drunk at the time to be responsible,” while prosecutor says “that Mills ‘sat back and laughed’ when the other two described a plan to overcharge the clients.”

{ 1 comment }

April 5 roundup

by Walter Olson on April 5, 2008

  • Ninth Circuit, Kozinski, J., rules 8-3 that Roommates.com can be found to have violated fair housing law by asking users to sort themselves according to their wish to room with males or other protected groups; the court distinguished the Craigslist cases [L.A. Times, Volokh, Drum]
  • Class-action claim: Apple says its 20-inch iMac displays millions of colors but the true number is a mere 262,144, the others being simulated [WaPo]
  • U.K.: compulsive gambler loses $2 million suit against his bookmakers, who are awarded hefty costs under loser-pays rule [BBC first, second, third, fourth stories]
  • Pittsburgh couple sue Google saying its Street Views invades their privacy by including pics of their house [The Smoking Gun via WSJ law blog]
  • U.S. labor unions keep going to International Labour Organization trying to get current federal ground rules on union organizing declared in violation of international law [PoL]
  • Illinois Supreme Court reverses $2 million jury award to woman who sued her fiance’s parents for not warning her he had AIDS [Chicago Tribune]
  • Italian family “preparing to sue the previous owners of their house for not telling them it was haunted”; perhaps most famous such case was in Nyack, N.Y. [Ananova, Cleverly]
  • Per their hired expert, Kentucky lawyers charged with fen-phen settlement fraud “relied heavily on the advice of famed trial lawyer Stan Chesley in the handling of” the $200 million deal [Lexington Herald-Leader]
  • Actor Hal Holbrook of Mark Twain fame doesn’t think much of those local anti-tobacco ordinances that ban smoking on stage even when needed for dramatic effect [Bruce Ramsey, Seattle Times]
  • Six U.S. cities so far have been caught “shortening the amber cycles below what is allowed by law on intersections equipped with cameras meant to catch red-light runners.” [Left Lane via Virtuous Republic and Asymmetrical Information]

{ 7 comments }

February 23 roundup

by Ted Frank on February 23, 2008

  • Easterbrook: “One who misuses litigation to obtain money to which he is not entitled is hardly in a position to insist that the court now proceed to address his legitimate claims, if any there are…. Plaintiffs have behaved like a pack of weasels and can’t expect any part of their tale be believed.” [Ridge Chrysler v. Daimler Chrysler via Decision of the Day]
  • Retail stores and their lawyers find sending scare letters with implausible threats of litigation against accused shoplifters mildly profitable. [WSJ]
  • Kentucky exploring ways to reform mass-tort litigation in wake of fen-phen scandal. [Mass Tort Prof; Torts Prof; AP/Herald-Dispatch; earlier: Frank @ American]
  • After Posner opinion, expert should be looking for other lines of work. [Kirkendall; Emerald Investments v. Allmerica Financial Life Insurance & Annuity]
  • Judge reduces jury verdict in Premarin & Prempro case to “only” $58 million. And I still haven’t seen anyone explain why it makes sense for a judge to decide damages awards were “the result of passion and prejudice,” but uphold a liability finding from the same impassioned and prejudiced jury. Wyeth will appeal. [W$J via Burch; AP/Business Week]
  • Judge lets lawyers get to private MySpace and Facebook postings. [OnPoint; also Feb. 19]
  • Nanny staters’ implausible case for regulating salt. [Sara Wexler @ American; earlier: Nov. 2002]
  • Doctor: usually it’s cheaper to pay than to go to court. [GNIF BrainBlogger]
  • Trial lawyers in Colorado move to eviscerate non-economic damages cap in malpractice cases [Rocky Mountain News]
  • Bonin: don’t regulate free speech on the Internet in the name of “campaign finance” [Philadelphia Inquirer]
  • “Executives face greater risks—but investors are no safer.” [City Journal]
  • Professors discuss adverse ripple effects from law school affirmative action without mentioning affirmative action. Paging Richard Sander. Note also the absence of “disparate impact” from the discussion. [PrawfsBlawg; Blackprof]
  • ATL commenters debate my American piece on Edwards. [Above the Law]

{ 2 comments }

Yesterday’s guilty plea by Booneville, Miss. attorney Joseph (“Joey”) Langston in the attempted improper influencing of a Mississippi state judge would be major news even if it had nothing to do with the state’s most famous attorney, Richard (“Dickie”) Scruggs. That’s because Langston and his Langston Law Firm have themselves for years been important players on the national mass tort scene. The firm’s own website, along with search engines, can furnish some details:

  • Per the firm’s website, it has represented thousands of persons claiming injury from pharmaceuticals, including fen-phen (Pondimin/Redux), Baycol, Rezulin, Lotronex, Propulsid and Vioxx. It was heavily involved in the actions against Bausch & Lomb over ReNu contact lens solution (and its former #2 Timothy Balducci, the first to plead in the widening round of corruption scandals, won appointment to the steering committee of that litigation.)
  • The Langston firm has represented thousands of asbestos claimants and says it has “significant” experience in the emerging field of manganese welding-rod litigation, also a specialty of the Scruggs law firm. The website AsbestosCrisis.com includes the Langston law firm in its listing of about thirty law firms deemed notable players on the plaintiff’s side of asbestos litigation (“Tiny firm founded by Joe Ray Langston powerhouse in Mississippi with 50-year roots in state political circles.”)
  • Langston appeared to play a sensitive insider role for Scruggs in the largest and most lucrative legal settlement in history, the tobacco-Medicaid deal between state attorneys general and cigarette companies, the ethical squalor of which was a central topic of my 2003 book The Rule of Lawyers; as mentioned previously, when Dickie Scruggs routed mysterious and extremely large tobacco payments to P.L. Blake, he used attorney Langston as intermediary.
  • Langston has repeatedly taken a high profile in the same fields of litigation as has Scruggs, including not only suits over asbestos, tobacco and welding rods but also two of Scruggs’s “signature” campaigns, those against HMOs/managed care companies and not-for-profit hospitals.
  • Though the firm is better known for its plaintiff’s-side work, the Langston firm’s “national practice” page asserts: “The Langston Law Firm virtually defined the role of ‘Resolution Counsel’ in the modern era of jurisprudence. Prominent domestic and foreign companies facing massive litigation have turned to The Langston Law Firm to create winning strategies to save their companies.”

Many commenters (as at David Rossmiller’s) have noted that Langston appears to have drawn an unusually favorable plea deal from federal investigators, who are granting him remarkably broad immunity as to uncharged offenses, and not even stipulating that he give up all ill-gotten funds. Presumably this signals that they expect Langston’s cooperation to be unusually extensive and valuable. One hopes that this cooperation will include the full and frank disclosure of any earlier corruption and misconduct there may have been in all the past litigation in which Langston has been involved. In particular, tobacco, asbestos, and pharmaceutical litigation have all raised suspicions in the past because of instances in which forum-shopping lawyers took lawsuits of national significance to relatively obscure local courts — quite often in Mississippi — and proceeded to get unusually favorable results which paved the way for the changing hands of very large sums in settlement nationally. Were all these results achieved honestly?

Incidentally, and because it may confuse those researching the matter on the web, it should be noted that there is a second prominent Mississippi plaintiff’s lawyer who bears the same surname but has not been involved in the recent Scruggs scandals, that being Joey’s brother Shane Langston, formerly of Jackson-based Langston, Sweet & Freese. Shane Langston, whose name turned up often in connection with the “hot spots” of pharmaceutical litigation of Southwest Mississippi, has more recently been in the news over client complaints regarding alleged mishandling of expenses related to the Kentucky fen-phen litigation scandals. [Family relationship between the two confirmed 1/16 on the strength of emails from several readers.] (& welcome WSJ Law Blog readers)

[First of a two-part post. The second part is here.]

{ 3 comments }

November 2 roundup

by Ted Frank on November 2, 2007

  • Curlin gets 400 new owners, as the Kentucky fen-phen plaintiffs ripped off by their attorneys get the right to seize Shirley Cunningham Jr. and William Gallion’s 20% share of the Preakness Stakes winner. [AP/NYT; earlier]
  • As Lerach pleads guilty, LA Times editorial defends class action abuses, incorrectly says that the PSLRA fixed everything and that Lerach didn’t act illegally after it was passed. [LA Times]
  • That $10.9 million verdict against the Westboro Baptist Church was “not about the money.” [Reuters] Really, now, this case imposing bankrupting damages for a protest on a public sidewalk is appalling. Granted: Phelps is bigoted scum, and rude bigoted scum at that. But Albert Snyder’s claimed physical injury is that the protest exacerbated his diabetes: what sort of junk science is that? NB that Snyder was not even aware of the protest at the funeral until he watched it on television. Why not liability for the news program? Even those happy to see the anti-gay bigotry of the WBC punished should take pause: Snyder testified at length that the protest upset him particularly because his son was not gay.
  • Overlawyered favorite Willie Gary (Apr. 29, Oct. 2004), on the hook for $28,000/month in child support for love child. [Atlanta Journal-Constitution]
  • Deep-pocket search in Great White fire case. [Childs]
  • Lawsuit over which school 9-year-old can play football for. [Tulsa World (via TMQ G. Easterbrook)] Worse, the judge rewarded the plaintiff by second-guessing the league decision. [Tulsa World]
  • It only takes ten months of legal proceedings for Cal-Berkeley to evict trespassers squatting on university property. [SF Gate]
  • Don’t hold your breath: who’s watching the trial lawyers? [Examiner]

{ 9 comments }