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• 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]

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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.

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Gallion alleged that Chesley forced his way in by using his influence with the fen-phen maker’s counsel to stifle proposed settlements that Gallion, Mills and Cunningham had on the table with the drug maker.

“We knew that if we were ever to get our cases settled, we’d have to come to an agreement with Stan Chesley,” Gallion said.

Chesley isn’t charged in the case but is a defendant in a civil suit filed by more than 400 of the former clients against their ex-lawyers. The other lawyers lost a $42 million judgment in that case; a jury will decide how much of Chesley’s $20.5 million fee he must return.

Chesley’s counsel has indicated he will refuse to testify in the criminal trial, citing his right not to incriminate himself.

Yesterday’s most explosive testimony came from a former lawyer for Gallion and [Shirley] Cunningham who said his clients approved a filing with the Kentucky Bar Association that grossly exaggerated the amount of money they had paid to their clients in the fen-phen case.

Lawyer Whitney Wallingford said he made a calculation error in 2002 that led him to tell the bar association that the clients had been paid more than $116 million of the $200 million settlement. In fact, they got only about $73 million.

Wallingford said in a letter to the bar association that Cunningham and Gallion had “approved” the filing.

In court, Wallingford said he had sent a copy of it to both of them and heard nothing back from either. He said Chesley eventually called him and told him to file it.

(Andrew Wolfson, “Gallion doesn’t address charges”, Louisville Courier-Journal, Jun. 7). Gallion will return to the stand Monday; defendant Melbourne Mills is expected to testify, and Cunningham has not yet decided whether to testify. (Beth Musgrave, “Fen-phen lawyer testifies”, Lexington Herald-Leader, Jun. 7). The attorneys continue to blame everything on Chesley and Judge Joseph Bamberger.

Attorney Whitney Wallingford testified there was nothing unethical about having the Kentucky Fund for Healthy Living–created by a court order by Judge Bamberger–pay Bamberger $5,000/month to sit on its board. (Andrew Wolfson, “Witness praises lawyers’ managing of nonprofit fund”, Louisville Courier-Journal, Jun. 6). Which says something either about Wallingford or about Kentucky legal ethics.

Meanwhile in the civil case, one is inclined to call shenanigans on the attorneys’ lease of a million-dollar racehorse to one’s wife and another’s girlfriend. (Andrew Wolfson, “Horse pulled from stakes race”, Cincinnati Enquirer, Jun. 6) (h/t R.U.).

The court is struggling to maintain control over the trial; the first prosecution witness was cross-examined for a full week when the judge started putting time limits on the parties. (Jim Hannah, “I had to include Chesley”, Cincinnati Enquirer, Jun. 7).

And the question remains: why hasn’t Stan Chesley been indicted?

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Little noted: while the attorneys stole at least $65 million from their clients, it’s very likely that they stole at least that much from Wyeth in getting a class certification in a personal injury case:

On the stand, [Bamberger] played the country judge who was in over his head in his first class-action lawsuit. But the evidence painted a shabbier picture.

It showed a judge who boasted about having the heaviest caseload in the state – perhaps because he was a plaintiffs’ judge, hand-picked by the fen-phen lawyers to take their side. On tape in his courtroom, Bamberger ranted about being “embarrassed” by low jury awards in Northern Kentucky.

At another taped hearing, Bamberger badgered the drug company’s attorney and pushed the plaintiffs’ case. He gave his local lawyer friends the class-action status they wanted, multiplying the liability jackpot.

Bamberger admitted that top class-action judges “said I shouldn’t be doing this, that it was not a class action.”

(Peter Bronson, “Even fen-phen horse has its own lawyer”, Cincinnati Enquirer, Jun. 1). Bronson also has more details on the bullying and buyout of an objecting plaintiff and appears to be the first print media to note that Bamberger has fingered Stan Chesley as being just as involved in the scam as the three Kentucky lawyers in the dock.

The WSJ Law Blog reports that the trial was delayed for a day due to health problems with defendant Melbourne Mills, who claims that the entire scam happened while he was hospitalized for alcoholism.

Separately, on Friday, legal assistant Rebecca Phipps testified that William Gallion told her to destroy documents; she denies claims that she threatened plaintiffs with jail for disclosing settlement terms. (Andrew Wolfson, “Diet-drug case witness says lawyer wanted documents destroyed”, Louisville Courier-Journal, May 31).

Two American Home Products defense attorneys refuted the plaintiffs’ attorneys claims that they were saving money in the $200 million settlement to handle future claims; AHP paid additional moneys to new claimants. One of the plaintiffs has testified that the firm told her to lie about where she got her settlement money from. (Andrew Wolfson, “Key diet-drug witness expected,” Louisville Courier-Journal, May 31).

What sort of straws are the criminal defense attorneys clutching at? “Phipps also acknowledged that she had exaggerated her role in the case when she asked the presiding judge to put her on the board of a charitable fund to which $20 million in settlement funds were transferred. [Gallion's lawyer, O. Hale] Almand suggested that she lied so she could get $5,000 a month in director’s fees, as the lawyers were getting, but she said it was not about the money.” Aside from the humor of the “not about the money” claim, it’s interesting that the criminal defense attorneys are trying to discredit witnesses by indicating that they also wanted to steal money from clients for themselves.

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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.”

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