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 REVIEW & OUTLOOK The barons of the tort bar must have thought 2007 would be a very good year: Some of their biggest cases (Katrina, Enron) were set to pay out, and a Democratic Congress meant no more worries about legal reform. Talk about reversal of fortune: As the year ends, we are witnessing nothing short of the dismantling of what are alleged to be major tort criminal enterprises. Bill Lerach, the king of class actions, stands disgraced as an admitted felon. His former partners at Milberg Weiss face trial for being part of the same kickback scheme as Lerach. Federal prosecutors continue to pursue a criminal probe into asbestos and silicosis litigation fraud. And now comes the indictment of Mississippi tort legend Richard "Dickie" Scruggs, who is trying to soak insurance companies the way he once did Big Tobacco.
On Wednesday, Mr. Scruggs and four cohorts were indicted for trying to bribe a state judge in exchange for favorable rulings. The indictment reads like something out of a bad John Grisham novel, complete with piles of cash delivered secretly and wiretapped conversations featuring phrases like "bodies buried." The accused claim to be innocent, but our reading of the indictment is that they are going to need very good defense counsel. The alleged conspiracy flows from litigation after Hurricane Katrina. The Scruggs Law Firm established a tort consortium called the Scruggs Katrina Group to shake down the insurance industry for not paying enough in claims, even though most homeowner policies excluded flood damage. Not atypically, a dispute emerged between Mr. Scruggs and one of the group's attorneys, John Griffin Jones, over how to divide the $26.5 million in attorneys' loot from a mass settlement with State Farm Insurance Co. According to the indictment, after Jones v. Scruggs moved to court, Mr. Scruggs attempted to buy off presiding circuit court Judge Henry Lackey. Judge Lackey reported the bribery overture and assisted with an FBI investigation. Presumably the Judge wore a wire, since the U.S. Attorney's case so far seems based largely on evidence gathered from secret conversations. In March of this year, the complaint says, two meetings took place at Mr. Scruggs's offices in Oxford, Mississippi to discuss "how to influence the outcome" of the Jones suit. The alleged conspirators include his son, Zachary, a partner in the Scruggs firm, and another partner, Sidney Backstrom; as well as an outside attorney, Timothy Balducci, and former state auditor Steven Patterson, who resigned his office in 1996 amid malfeasance allegations. Later that month, Mr. Balducci, acting as the intermediary, first approached Judge Lackey. In May, Mr. Backstrom emailed Mr. Balducci an order they wanted the Judge to sign, which is not specified in the indictment other than that it was favorable to Mr. Scruggs. In a conversation with Judge Lackey listed in the indictment, Mr. Balducci describes their relationship: "he and I can talk very private [sic] about these kinds of matters and I have the fullest confidence that if the court, you know, is inclined to rule . . . in favor . . . everything will be good . . . The only person in the world outside of me and you that has discussed this is me and Dick [Scruggs]." (The ellipses in the quotes are from the indictment itself.) Mr. Balducci continued: "We, uh, like I say, it ain't but three people in the world that know anything about this . . . and two of them are sitting here and the other one . . . the other one, uh, being Scruggs . . . he and I, um, how shall I say, for over the last five or six years there, there are bodies buried that, that you know, that he and I know where . . . where are, and, and, my, my trust in his, mine in him and his in mine, in me, I am sure are the same." The indictment says that in September Judge Lackey, working undercover, agreed to a $40,000 bribe from Mr. Balducci, to be delivered in installments. After discussing the matter with Messrs. Patterson and Backstrom, Mr. Balducci allegedly delivered $20,000 in cash to the Judge's chambers. Mr. Balducci told Mr. Patterson, "All is done, all is handled and all is well." The government claims he later made two more $10,000 payments, with plans for a third after talking to Mr. Scruggs.
If convicted, the Scruggs Five could each face up to 75 years in prison. Keep in mind that these aren't street toughs but officers of the court, men who are supposed to uphold the law and who daily claim to be agents of justice against fraudulent business. If guilty, they are the pin-striped version of crooked cops--traitors to the public.
By the way, in addition to this
indictment, Mr. Scruggs is also facing criminal contempt charges for
flagrantly violating a judge's order in a different State Farm matter.
He says he's innocent of that charge, too.
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