Monthly Archives: November 2007

And yet still more on the Scruggs indictment

A few observations and follow-ups on this immensely strange, sad spectacle.  Once again, I’m going to break this post up into sections so you can get where you want to go more quickly.

Scruggs Katrina Group internal warfare: an Al Haig moment?

As the entity formerly known as the Scruggs Katrina Group dissolves into a Mississippi version of the War of the Roses, an e-mailer in the state writes to compare attorney Don Barrett’s letter to the courts yesterday to Al Haig’s infamous "I’m in control here" speech after President Reagen was shot in 1981.  Barrett is one of the lead lawyers of the entity formerly known as the Scruggs Katrina Group, which kicked out the Scruggs Law Firm on the basis of disreputability in light of Wednesday’s judicial bribery indictments.  Barrett sent a letter to courts where SKG Katrina cases were filed saying the Scruggs firm would be withdrawing from representation of Katrina policyholders.  Click here to see his letter, as well as Scruggs’ — I have to hand it to him — rather simple and elegant reply saying that he’s not going away.  The problem remains, however, whose clients the clients are. 

Here’s a link to an AP story on the controversy, including some quotes from Joey Langston, Dickie Scruggs’ attorney.

Who was the "insider" in the FBI’s investigation of the alleged Scruggs bribery conspiracy?

I think I’ve got the question right: who, rather than if.  If you read the indictment and see the verbatim quotes of statements made to Judge Lackey, you have to conclude he was wired.  [UPDATE: the Wall Street Journal interview with Judge Lackey referred to below, by Ashby Jones and Peter Lattman, says that the judge’s office was wired by prosecutors with audio and video recording devices]. Also, the frequency in the indictment of references to the content of specific telephone conversations as overt acts in support of the alleged conspiracy forces the rather obvious conclusion that the FBI had tapped one or more telephones at the Scruggs firm.

But certain paragraphs in the indictment aren’t easy to explain unless one of the alleged co-conspirators was cooperating with the FBI, either by being wired or by reporting back to agents and prosecutors what had happened.  Here’s a copy of the indictment so you can follow along if you care to.

As you read through the indictment, you might note that there is no mention of a specific overt act by Dickie Scruggs until paragraph 16.  Then, on October 18, Scruggs allegedly called Steven Patterson and discussed Timothy Balducci coming by the firm to drop off an order obtained by a purported bribe, and pick up a "package" consisting of $40,000 and false documentation providing Balducci with a cover story for the payment — it was supposedly for legal services rendered to the firm.  That paragraph can be explained by a phone tap.  But paragraph 17 can’t — it alleges Scruggs prepared a $40,000 check and the fake documents.  OK, you say, the check had his signature on it, maybe, and the FBI search of the firm’s hard drives showed who created or ordered the creation of the fake documents.  Perhaps.  But paragraphs 21 and 22 recount conversations between, first, Balducci and Zach Scruggs and Sidney Backstrom, and second, between Balducci and Dickie Scruggs.  Moreover, paragraph 21 contains a direct quote.  Unlike other portions of the indictment, no mention is made that the conversations occurred over the phone, and we should therefore conclude this omission is significant.  So was Balducci himself wired at this point, or otherwise cooperating with prosecutors? A logical possibility.  It would be too difficult to wire the offices of the Scruggs firm — how could you know where any conversation might take place? 

Likewise, although it is certainly possible that an employee of the law firm (Balducci was not a member of the firm but rather an attorney with his own firm) was working as a confidential informant for the FBI, this would seem to be perhaps unnecessarily risky.  First, it would be difficult for a staffer to insert themselves into these sensitive conversations, decreasing the value of such an insider.  Second, why risk tipping off the alleged conspirators through an insider’s mistake, when prosecutors had an obvious choice of an insider — Balducci — and substantial leverage to force him to cooperate? Third, the FBI already would have had plans to raid the firm’s hard drives where it could nail down what documentation it lacked.  Still, while a second insider would seem to be unnecessary, one cannot rule this out.  Time, as always, will tell. 

A couple links you should follow.

Here is an excellent post by Walter Olson at Overlawyered with a ton of interesting and vital links — some of which come back to Insurance Coverage Law Blog — thanks for the shout out, Walter. 

Check out this story in the Oxford (Mississippi) Eagle. [This link went bad rather quickly, after one day, and I couldn’t find the story back. Ce’st la vie.]  I was really impressed by this story.  Not only does it give some great details on the debate over the size of Scruggs’ bail, it gives a pretty good perspective on the irony of Scruggs’ current predicament.  It also mentions that Balducci, as of the writing of the story, was the last co-conspirator remaining in lock-up.  Maybe that means something, maybe it doesn’t.

As I write this post, I’m at home and don’t have my subscription information to the Wall Street Journal online, so I can’t tell you all that this story says.  But from the two paragraphs I can tell you it is a must-read interview with Judge Lackey, the man who the conspirators allegedly tried to bribe.  An excerpt: 

The Mississippi state court judge who prosecutors say was offered a bribe in a case involving high-profile plaintiffs’ attorney Richard "Dickie" Scruggs said he experienced a "shock that I can’t put into words" when first approached.

In an interview recounting the episode, Judge Henry Lackey said the overture came from another lawyer he knew, Timothy Balducci of New Albany, Miss. "My first thought was: What kind of character flaw has he discovered in me that would lead him to think that I would do something like this?" said Judge Lackey, 73 years old. "I was furious. I mean, this strikes …

I mean, come on, you’ve gotta find a way to read the rest of that, don’t you?  I know I will as soon as I get to work.

UPDATE: The story gives a great account of Judge Lackey’s thinking, including a delay of several days in contacting authorities because, he said, he struggled with the implications of this on Balducci’s career and his wife and family.  One of the most fascinating parts of the story is an attack on Lackey by Scruggs’ attorney, John Keker, who is also representing him against criminal contempt of court charges brought by special prosecutors in an unrelated proceeding in Alabama.  Here’s how the story quotes Keker:

"I find it remarkable that this high-minded government witness is talking to the national media, and it makes me wonder if he is interested in notoriety rather than seeing that justice is done.  I’ll say this — he sure as hell didn’t get bribed by Dick Scruggs or anyone else in his law firm."

Keker may want to re-think this kind of attack on Lackey.  Keker is representing Scruggs, a man known for his flamboyant use of media to pursue his own ends in litigation, and there is nothing inherently wrong with Lackey talking to the Wall Street Journal or anyone else. What is wrong is the alleged bribes offered to the judge, not the judge speaking out about it.  Also, it appears that later in the story Scruggs himself spoke to the WSJ — note the words "In an interview, Mr. Scruggs said" followed by a quote from Scruggs about the controversy with Don Barrett about who represents the Scruggs Katrina Group clients.  What is Scruggs doing talking to the national media about some family feud with Barrett at a time like this?   

Lastly, for this post anyway, I know I promised yesterday to link to some Trent Lott-related material that, to me, casts doubt on theories of his nefarious involvement in Katrina-related matters and therefore on theories that his resignation announcement has some unstated premise or motive.  I don’t mean to be coy about this, but it will take some time to present this information at the level of quality I expect from myself, and I am a practicing lawyer with finite time.  So that will have to wait until next week. 

UPDATE: You know that dumb feature on the Today show, Where In The World Is Matt Lauer?  Maybe someone needs to have a feature called Where In The World Is Mississippi AG Jim Hood.  For a man who loves his media time, he’s been awfully quiet this week — all this sensational stuff going on, and Hood hasn’t said peep about his "confidential informant" Dickie Scruggs.

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Scruggs former colleagues say he’s out; Scruggs says he’s in

Dickie Scruggs’ list of adversaries, including insurance companies generally and two sets of federal prosecutors, just got a little longer and now includes his ex-partners in the former Scruggs Katrina Group.  You may remember that in a post from this morning I mentioned that the other firms in the group were kicking the Scruggs Law Firm out due to fear of being tarnished with the now unsavory Scruggs brand name. 

Accordingly, Don Barrett, of the Barrett Law Office, sent a letter today to the courts in which the group’s Katrina cases were located, saying "In light of what happened in Oxford, the Scruggs Law Firm will be withdrawing from all Katrina-related litigation." The letter also said what used to be the Scruggs Katrina Group would re-form, sans the Scruggs, to handle the cases.  Click here for a copy of the letter.  

But Dickie Scruggs says no. He sent his own letter to the same judges: "I am afraid there is a misunderstanding.  My firm and I do not intend to let down or hinder any of the families, many of whom we have known all or our lives.  Obviously, anyone who wishes other counsel may simply ask, and we will honor their agreement..  I am sorry of the miscommunication." Click here to see a copy.

You know, I don’t know what kind of contract or agreement the members of the former Scruggs Katrina Group had between them, so I’m not in a position to say what is going to happen here.  The other firms are surely able to leave the Scruggs Katrina Group and do their own thing, but the basic rule is that clients are always free to pick their own lawyers, and client choice is paramount. That’s why non-compete agreements are not enforceable against lawyers.  However, the question is who are the clients’ lawyers before the break-up, and what type of written or oral agreements the group had in place to handle contingencies such as one firm leaving, voluntarily or otherwise. Could yet more litigation be on its way, this time between the policyholder lawyers? 

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More on indictment of Dickie Scruggs, four others

Because I want to talk about several things here, it will be best if I break this post up with some headlines, so you can jump to what interests you the most.  So here goes.

[UPDATE: Thanks to Timothy Noah for the shout out on Slate.]

[SECOND UPDATE: So many people have been asking for it, and here it is: click here for a pdf of the Jones v. Scruggs case that led to the alleged bribery conspiracy — sorry, I didn’t have it myself until graciously provided by one of my fine friends in Mississippi.]

The Scruggs Katrina Group is legal toast.  Other law firms pursuing Katrina policyholder  litigation are shocked and outraged at the allegations, and are reforming their group without the Scruggs Law Firm.

This comes from an authorative source that I trust.  In a phone conversation yesterday I could hear real pain in this person’s voice, real outrage. As you may know, the Scruggs Katrina Group was the name applied to what was actually several law firms working together to pursue Katrina litigation against insurers — the Scruggs Law Firm itself was just one, albeit an important one.  The Scruggs Katrina Group originally consisted of Mississippi attorneys from these other firms as well: the Barrett Law Office; Jones, Funderburg, Peterson, Sessums, and Lee; the Lovelace Law Firm; and Nutt & McAllister, PLLC.  For reasons that will become clear if you read the second item in this post, the Jones, Funderburg firm left SKG in March. (Click here to see the SKG website). 

The remaining SKG firms have many Katrina cases pending still and don’t want their names and their cases tarnished with the Scruggs name.  My source made a good point, one that I didn’t take enough care to make myself in my initial posts — this alleged bribery by Dickie Scruggs and others came in what my source calls a "cracker ass attorney fee dispute," not in the real Katrina insurance litigation with insurers.  You know, I have come to know many lawyers in Mississippi during the past year of blogging about events there. These are fine lawyers, and they take pride in their work and their reputations.  I enjoy talking to and e-mailing with these folks about coverage law and current events.  So when policyholder lawyers in general tell me they are seething over Scruggs — and I heard an earful from multiple people yesterday — I believe them. Specifically relating to the other members of the SKG, however, the Scruggs brand overnight went from prestigious to contagious.  And the only prescription is to walk away.   

I always thought Dickie Scruggs was pretty smart, but this alleged scheme was stupid, petty and cheap. 

This alleged scheme came in a case called Jones v. Scruggs, in Lafayette County Circuit Court.  The plaintiff is the Jones, Funderburg firm identified above as formerly part of the Scruggs Katrina Group.  That firm sued Scruggs and other members of the Scruggs Katrina Group in March over how to divide the $26.5 million in attorney fees that came from a January 2007 settlement with State Farm of 640 policyholder claims where homes were eradicated by Katrina.  Here’s a news story from earlier this year on the lawsuit. 

One of the amazing things about yesterday’s indictment (click here to read a pdf of it) is that it says the alleged bribes weren’t even offered to obtain a favorable final decision in the Jones case.  Instead, the bribes were only to get the judge, Henry Lackey, to issue an order forcing the Jones firm to arbitrate its claims rather than have them decided in court (and presumably before a jury).  Perhaps the alleged conspiracy also included a Phase II, where the arbitrators would have been bribed as well, I don’t know. 

I also thought the amount of the bribe, $50,000, was pretty small considering there was a lot of money at stake in the lawsuit — perhaps since the order compelling arbitration would merely be an intermediate step, it was evaluated as only worth $50,000. Maybe the big money had to be saved to bribe the arbitrators, and care had to be taken so that bribes didn’t eat up all the profit and thus defeat the reason for the bribes.  Some quick calculations on future bribery costs: one might suppose some savings could be obtained if a single arbitrator were used rather than a panel, but as we will see, this is not necessarily so.  Even if a three-person arbitration panel were used, only two of the arbitrators would need to be bribed, amounting to a 33 percent off sales price on bribes.   Realistically, on many three-person panels, you select one, the opponent selects another, and those two select the third.  So you figure your arbitrator will vote for you, theirs will vote against you, and when this is understood, all you really need to do is bribe the third, for a 67 percent off savings.  Of course, some care must be taken so your arbitrator doesn’t learn of the bribe, or he will want to be cut in as well.  But my point is that bribing a three-person panel could be as cost-effective as bribing a single arbitrator. So in light of this, one might expect more alleged bribe money would have available to be offered to Judge Lackey.

Economists will no doubt point out that because Judge Lackey reported the alleged conspiracy to the FBI right away and cooperated with what became a sting operation, there was no true bribe market here, so we don’t know the real price.  For example, did the FBI tell him to accept whatever money was offered? Or was he rehearsed in haggling?  Did the FBI employ economists to debate what number would be a plausible bribe for a Mississippi state court judge, so that Lackey did not tip off the sting by doing something suspicious like, say, accepting a bribe of $52, a box of imitation Rolexes and a Celine Dion CD?

Here’s a quick recap of the allegations of the indictment for those who are walking into the second act.

These are the folks indicted — Dickie Scruggs; his son and law partner Zach; Sidney Backstrom, another attorney at the Scruggs Law Firm; Steven Patterson, a former State Auditor of Mississippi and a non-attorney member of the firm; and Timothy Balducci, a trial attorney in the Patterson and Balducci firm.  Before going on, it is worth noting a recurrent pattern in these events of the last few days.  Dickie Scruggs, as everyone knows, is a good friend of Mississippi AG Jim Hood.  Why, Hood even told U.S. Attorney Alice Martin this summer that Scruggs was his "confidential informant" (right about the time Scruggs contributed $34,000 to Hood’s re-election) in an effort to protect him from a criminal contempt of court charge that federal Judge William Acker wanted to slap on Scruggs.

(Martin is the U.S. Attorney for Northern Alabama, and for whatever reason, did decline to prosecute, but Acker, a judge one would do well not to anger, appointed special prosecutors in Alabama who are going after Scruggs on that charge — if you need more background, I’ve written a ton of posts on it, just type "Acker" in my blog’s search bar to the right.  I mention Alice Martin’s name not only because this confidential informant tale is hilarious to me and I like to repeat it as often as I can, but to make sure that readers understand the difference between the old and the new charges — this indictment is in the Northern District of Mississippi, and was issued by U.S. Attorney Jim Greenlee [originally I said Dunn Lampton, who is the U.S. Attorney for Southern Mississippi, thanks to Wolf in the comments]). 

But it may be lesser known that both Timothy Balducci, one of the alleged conspirators, and Joey Langston, the attorney who represents Scruggs in this matter, are also close to Hood and are also big campaign contributors of his.  Hood selected Balducci and Langston to represent Mississippi in an effort to recover $100 million in back taxes from telecommunications giant MCI.  The two split a $14 million legal fee, which then-State Auditor Phil Bryant demanded they return as state property.

Steven Patterson, another of the alleged conspirators, wrote this letter to the editor of the Clarion Ledger defending Hood’s decision in the MCI case and the attorney fee award.

Now that we know who everyone is and what the whole thing is about, here’s a recap of what the indictment says happened.  My own comments are listed in brackets and italics:

  • All five alleged conspirators met at the Scruggs Law Firm in March 2007 to discuss "how to influence the outcome" of the Jones lawsuit.   [Could the feds be a little more specific?  I strive to influence the outcome of litigation all the time — but through lawful, ethical means, such as writing good briefs.  What is being alleged here, that someone sat down and said, "I’m kind of worried about this Jones case.  Hey, I know, let’s bribe the judge"? Or did the conversation take some twists and turns to get to that point?]
  • On March 28, 2007, Balducci called Judge Lackey "and made an overture on behalf of" Dickie Scruggs to resolve the litigation favorably to Scruggs.   [What do you mean, he made an overture? What did he do, play the judge some Bach?]
  • On May 3, Balducci called Lackey and said the Scruggs Firm had changed its strategy and was going to seek a motion to compel arbitration instead of a summary judgment motion. [You know, in addition to the fact that I wouldn’t think of trying to bribe a judge, before I didn’t think of that I wouldn’t think of making improper ex parte contact with a judge to discuss my case strategy.]
  • On May 4, Backstrom e-mailed a proposed order to compel arbitration to Balducci. The same day Balducci faxed it to Lackey. [At least they should get some credit here for efficient legal services — that’s good turnaround time!]
  • On May 9, Balducci had an apparently recorded conversation with the judge where Balducci allegedly said as follows: "my relationship with Dick is such that he and I can talk very private 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 . . .  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."  [Holy Cow, Cicero the Golden-Throated this guy is not. If I’m the judge, I’m saying, are you trying to bribe me or are you telling me you’ve got an eight-beer headstart on happy hour?]
  • Between May 9 and September 21, Balducci has several discussions and conversations with Judge Lackey. [Might have to take away that credit for efficient legal services, if I’m in charge of this bribe scheme, I say this is taking too long.  Three months?  What’s the big deal, it’s only a little bribe over a little order.  This is like waiting in line for six hours to buy a pack of gum. Maybe this is where the FBI was coaching Lackey on how to haggle so he didn’t look suspiciously too eager and compliant]. 
  • On September 21, "Balducci agreed to pay Circuit Judge Henry Lackey $40,000 cash."  [You can never trust the phrasing of governmentese, but it makes it sound like Balducci had to be talked up to 40 grand. Again, sounds chintzy to me.]
  • On September 27, Patterson discussed the bribe with Balducci. The same day, Balducci delivered $20,000 in cash to Lackey, then Balducci told Patterson, "All is done, all is handled and all is well." [And all is completely hosed, because the FBI is tapping your dang telephone!] 
  • On October 18, Patterson called Balducci and asks what is going on with the "order." Patterson says he has talked to Dickie Scruggs about 15 times and Balducci needs to call Scruggs. The same day, Balducci delivers another $10,000 to Lackey. [Sounds like someone is getting a little lazy here.  If I’m the bribee, I’m saying, what is this, payment on the installment plan?]
  • On the same day, Scruggs called Patterson and they discussed Balducci coming to the law firm to bring the signed order and put it on Scruggs’ desk and pick up a package from the desk. Scruggs then cut a $40,000 check for Balducci and made fake documents that would indicate Baluducci got the money for jury consulting work. On November 1, Balducci delivered another $10,000 to the judge. On November 5, Scruggs gave a $10,000 check to Balducci. [Now the way I add this up, that’s $50,000 paid to Balducci, but only $40,000 given to the judge.  What happened to the rest, shrinkage?]

I’ve talked with several Mississippi lawyers this year who know Dickie Scruggs well and they all said he was headed for a fall. 

I doubt anyone was speaking of this specific thing, but I don’t think any of these people are all that surprised it is something dramatic like this. I heard talk about how Scruggs has changed, full of hubris, thinks he can do anything and get away with it.  I didn’t seek these conversations out, people came to me because they thought I should know, thought I should keep digging, keep blogging.

I don’t think Trent Lott’s resignation announcement has a thing to do with all this FBI/indictment mess.

I’ve heard some speculation about this and I see no such evidence, and I think it is contrary to reason.  I think the best explanation is the one we’ve heard, which is that he wants to avoid the two-year wait before lobbying Congress.  And why would announcing his resignation make any difference?  If his voice was on any of the FBI tapes, he’d be going down, Senator or private citizen. Look, tomorrow I’ll show you a notebook from one of the Katrina would-be players with some stuff in it, captures Lott’s involvement in the whole Katrina controversy to a "T." To me, Lott is kind of like my cousin Marshall when we were kids.  Marshall was sitting at the front of this tour boat up on the Souris river in Saskatchewan — we were maybe 6 years old –and he was steering away on this big old white fake steering wheel, having the time of his life, thinking he was driving that boat, while everyone took pictures of him and the guy in the back with his hand on the tiller just stood and smiled. 

This is not the first federal bribery case Dickie Scruggs has been involved in. 

Paul Minor, a Mississippi trial lawyer, was prosecued by U.S. Attorney Lampton and convicted earlier this year of trying to influence judges with contributions and loans.  Scruggs was originally suspected of similar conduct, but wound up testifying as a government witness, and as I recall, Scruggs said it was without a grant of immunity.  There was a lot of complaining from some that Minor was being singled out and Scruggs let off easy because of Scruggs’ political connections, among these being that his brother-in-law is Trent Lott.  Look at this story as an example of such thinking.   Does the story make any sense at all in light of the events of the past few days?

Remember Balducci’s comment to Judge Lackey that he and Scruggs know where the bodies are buried over the last five, six years?

I’m sure curious what he was talking about, aren’t you?  Was it just the scotch moving his lips like a sock puppet, or did he mean what he said?

Question: What political figure in Mississippi just ordered a T-shirt that says "Dickie Who?"

Answer: Jim Hood. Look how bad this looks for Hood.  Scruggs, his cohort in the big battle against State Farm, is actually, at the very same time Hood sends his "confidential informant" letter to Alice Walker, being allegedly reeled in by a real confidential informant.  Hood is also on a losing streak — State Farm, the kid he used to beat up on and steal his lunch money, bulked up and lifted some weights over the summer and came back to school ready to put the teach on Jim.  State Farm filed a lawsuit against Hood that accused him of unethical conduct and sought to enjoin his further criminal investigation of the insurer, and what’s more, the company got a federal magistrate to sign the injunction.  How embarrassing for Hood.

Also, Balducci is one of Hood’s running mates, as is Langston, who could be the poster child for never believing the spin that comes out a lawyer’s mouth.  Remember two days ago, all that talk about how the FBI was looking for a specific document at the Scruggs Firm that they didn’t find?  What a bunch of malarkey. You think they didn’t have copies of the judge’s order, of the checks, taps on the phones, a wire up the judge’s robe?  Looking for one document, come on!  This indictment looks pretty solid.

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Dickie Scruggs indicted in alleged bribery case involving Katrina claims

SCROLL DOWN FOR THE LATEST AND NEWEST, I WILL UPDATE THIS POST THROUGH THE EVENING AND HAVE A FURTHER POST TOMORROW MORNING.

Incredible breaking news.  I guess that answers the questions about what the FBI was looking for. Here is the story from the Clarion Ledger:

Multimillionaire trial lawyer Dickie Scruggs has been indicted on charges of conspiring to bribe a judge in the case involving $26.5-million in attorney fees involving Katrina claims.

Others indicted in the alleged scheme include Scruggs’ son, Zach, former State Auditor Steve Patterson and attorneys, Sidney Backstrom and Timothy Balducci.

According to the indictment, Lafayette County Circuit Judge Henry Lackey cooperated with the FBI in the investigation after reporting a bribery overture to authorities.

According to the indictment, Scruggs and others tried to influence Lackey by giving him $40,000 in cash to resolve the attorney fees’ dispute in favor of Scruggs’ law firm.

Some of the conversations between Balducci and Lackey were captured on tape.

I note the headline on the Clarion Ledger story said Dickie Scruggs was arrested, but obviously they have not fleshed out the story yet and just have these few grafs up as of 3:15 p.m. Pacific Time.    

UPDATE: Here is a pdf of the indictment.

The indictment alleges that Dickie Scruggs; his son and law partner Zach; Sidney Backstrom, an old friend and associate of Scruggs; Timothy Balducci, a Mississippi trial lawyer; and Steven Patterson, a former Mississippi State Auditor, conspired to bribe state court Judge Henry L. Lackey with $40,000 to influence his decision in a lawsuit by attorney Johnny Jones against Scruggs.  The lawsuit was over how to divide $26.5 million in attorney fees received in the early 2007 settlement of some 640 Katrina cases against State Farm.  Jones sued Scruggs when Scruggs allegedly paid Jones, who had done substantial work on Katrina cases as part of the Scruggs Katrina Group, much less than the percentage that Jones said had been agreed upon.   Here’s a post I wrote earlier this year on the lawsuit.  

The indictment also claims that Dickie Scruggs tried to cover up the conspiracy by creating false documents to show that the hired Balducci to do jury selection and other legal work, when in fact he was reimbursing Balducci for the $40,000 he allegedly paid out in bribe money, along with another $10,000 for the same purpose.

I’ll be posting more later.  Day job calls.   

SECOND UPDATE:

I had a chance to read the grand jury’s indictment several times on the bus ride home tonight.  This scheme, if what is alleged is true, was incredibly lame and stupid.  Supposedly, Scruggs and a small group of colleagues decided to bribe a state court judge in the fee dispute case — not for a final disposition of the case in their favor, but to obtain an order compelling the plaintiff, Johnny Jones, to arbitrate rather than sue in court.  That may account for the miserly $50,000 total bribe offered.  Under a cold, hard calculus, that may have seemed like a reasonable sum to pay for an order that was just one step along the way. 

The judge, Henry L. Lackey, of the Third Circuit Court District in Mississippi, went to federal authorities when he was approached about the bribe, and one can see this case has been most of the year in the making. 

It isn’t clear when it became apparent to the judge that he was being offered a bribe — the indictment says he was approached by Balducci in March and that Balducci "made an overture . . . to resolve the . . . lawsuit favorably" to Scruggs.  On May 4, Balducci allegedly talked with Lackey by telephone and said the Scruggs Law Firm "had changed their strategy" and would rely on a motion to compel arbitration rather than a summary judgment motion.  All other things aside, let’s just stop a moment and note the complete unacceptability of a lawyer having ex parte contact with a judge about the merits or strategy of a case, and how brazen one would have to be to carry out such contact. 

That same day, Balducci faxed a proposed order to compel arbitration to Lackey.  Then on May 9 — and here the indictment contains a long, long quote, so Lackey was evidently wired — Balducci met with Lackey and allegedly said that "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 yers 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."  Bodies buried? Hmmmm. I wonder what else might come out during the prosecution of these fellows.

Balducci, according to the indictment, had several more discussions with Lackey between May 9 and September 21, when he allegedly agreed to pay Lackey $40,000 on behalf of Scruggs and his firm for the favorable order.  Balducci allegedly delivered cash — the indictment says $20,000, so I wonder if that is a typo or whether all of it was not really delivered — to the judge’s chambers.  He allegedly delivered another $10,o00 on October 18.  The indictment then alleges that Scruggs wrote him out a check for $40,000 as reimbursement and provided fake documentation to cover the payment to make it look like it was for legal work. In early November, Scruggs allegedly gave him a check to cover the extra $10,000 along with the same kind of documentation for fake legal services.

I have heard an earful from folks in Mississippi today, many on the policyholder side of these cases, who are shocked and steaming at Scruggs, and afraid these allegations will tarnish what they see as a righteous, honorable fight against insurance companies in the Katrina cases.  They point out this case was a mere fee dispute between lawyers, and has nothing to do with the actual Katrina insurance cases.

I’ll be writing another post for tomorrow that I will actually post tonight, if you’re up late. 

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Scruggs’ lawyer: FBI copied hard drives of Scruggs law firm, failed to find document

Check it out in this Associated Press story.  Seldom am I at a loss for words, but I don’t know what’s going on with this very strange new development, so until I know more, let’s just leave it at that. I do note, however, that the story says the FBI was at the Scruggs firm until 6:30 p.m., a full day of searching.

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More on FBI search of Scruggs’ law offices

The big news from yesterday, of course, was the FBI’s search of Dickie Scruggs’ law offices, and it remains today’s big news.  This AP story said at least seven FBI agents and federal prosecutors searched the offices.  This AP story in the Clarion Ledger said they began searching about 10:30 a.m. and were still there at 3 p.m. — they could have stayed longer, for all I know, but that is apparently about the time the story had to move across the wire.

[UPDATE: Welcome Michelle Malkin readers!]

What were they looking for? I don’t know, and no one else appears to know either, at least anyone outside the FBI and prosecutors, and they aren’t saying.  Seldom have I had so many e-mails in an afternoon from readers, and usually some one is able to tell me some inside dope, but not in this instance. So if you know the good stuff, don’t be shy about letting me know.

One thing I noted in the media accounts I read was that Scruggs’ big time San Francisco criminal defense lawyer, John Keker, was not speaking for Scruggs on this matter.  Keker, as you recall, is defending Scruggs against a charge of criminal contempt of court instigated by federal Judge William Acker relating to the Renfroe v. Rigsby document case in Alabama.  This is smart — whether the search is related to that prosecution or not, why create the link in people’s minds?  Instead of Keker, Mississippi trial attorney Joey Langston spoke for Scruggs.  The story in the Clarion Ledger said that Langston is "representing the Scruggs firm but is not an employee there."  Ironically, the big Sun Herald story from yesterday, which contained extensive quotes from Langston, didn’t say anything about who he is.

Langston, according to his firm’s website, specializes in criminal defense, wrongful death and personal injury cases.  According to this press release by Mississippians for Economic Progress, a group that opposed AG Jim Hood’s re-election, Langston, like Scruggs, is a big campaign contributor to Hood. The press release says the following:

As past DAGA [Democratic Attorneys General Association] contributions have shown, these DAGA contributions could be an attempt to obscure the sources of the contributions.  For example, in 2003, trial lawyer Joey Langston gave $100,000 to DAGA; the next day, DAGA gave the $100,000 to the Hood campaign.  Langston, Hood’s largest campaign contributor at the time, was then hired by Hood to represent the state in the WorldCom case [also known as the MCI case] — and split $14 million in fees.

Since Langston had a lot to say to the Sun Herald, I thought it might be interesting to reproduce those quotes below and look at them more closely.  So here are all the direct and indirect quotes from Langston in the story, with ellipses marking where other material intervened. My comments are in brackets and italics.

"It is a search warrant for a thing, a document," Langston said. "I don’t think anyone has made an allegation that the Scruggs Law Firm has done anything improper or illegal. I think that the federal authorities will probably learn when they complete their investigation that whatever the allegation of wrongdoing is that the Scruggses were not involved in any wrongdoing." [He says he does not think anyone made an allegation of wrongdoing against the Scruggs firm, but then goes on to say that the feds will eventually learn the Scruggses were not involved in wrongdoing.  Is it just me, or does this quote seem to be in a boxing match with itself? If no one has made any allegation of wrongdoing against the Scruggses, why would the government have cause to find out it was wrong?]

Langston would not provide any further information about the document the FBI was seeking, other that it involves one case . . . .

Langston said the search warrant was served on the law firm, not on Scruggs or his son, Zach Scruggs, also an attorney with the firm. He said the warrant was unnecessary because the Scruggses would have cooperated with any request for records from the federal government. [If this is so, and I have no evidence to the contrary, I wonder why the FBI chose to serve the search warrant, which they surely knew would create an unholy spectacle?]

A search warrant must be based on evidence, but Langston said the sworn statement used to gain the warrant in this case is under seal, so nobody from the Scruggs Firm knows who made allegations or what they were specifically. [Wouldn’t it be ironic if the FBI’s source was an "insider" of the kind Scruggs has made such prolific use of?]

"This is a surprise to everybody connected to the Scruggs Firm," Langston said, "but I’ve got to tell you people who are very high profile and very successful have to contend with unpleasantries and this is unpleasant, but we’ll contend with it." [I like the touch of noblesse oblige here — as if the FBI descending on one’s place of business is the same as, say, getting heckled by drunken lumpenproletariat while showing up in top hat and tails to receive an award for charitable giving.]

He also said: "We just are hesitant to try to be more specific about it with the public or the media until we know more ourselves. We think we’ll learn that the information on which the federal authorities have acted will turn out not to be legitimate."

Langston did say the document sought is unrelated to an ongoing legal battle in Alabama over State Farm records Scruggs obtained from two whistle-blowers who adjusted Katrina claims for the company. State Farm has claimed the whistle-blowers pilfered records pertaining to Scruggs clients, then left to work for his firm. 

The search also is unrelated to a lawsuit State Farm has filed in federal court in Jackson to stop a criminal investigation by Attorney General Jim Hood . . . . [Since he’s willing to say what it’s not, I sure wish he was willing to say what it is.]

The AP story in the Clarion Ledger had some additional quotes from Langston:

Langston told The Associated Press that the agents were looking for a single document that "might be ancillary to something pertaining to Katrina litigation," but is not directly involved in any of those cases. [Check that out — "might be ancillary to something pertaining to" — Jeez, if it’s only ancillary and maybe pertaining to and a second-cousin twice-removed of a great aunt on your mother’s side, what in the world is going on such that folks at the Scruggs firm have to crawl over hordes of G-men to get a cup of lousy break room coffee?]

Langston declined to elaborate but said he is confident that authorities will not find the document in question at the office.

"We’re as confident as we can be that this is nothing more than the federal authorities acting on information that will prove to be inaccurate and untrue," Langston said.  [The question just keeps going through my mind like seven FBI agents and federal prosecutors walking through a law firm’s front door: why didn’t the FBI just ask, or why didn’t prosecutors send a subpoena?  Whatever is in that sealed warrant, one would suspect, is pretty provocative.]

That’s it for this post.  Stay tuned for developments.

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FBI serves search warrant on Scruggs’ offices

According to this Anita Lee story on the website of the Sun Herald, the FBI today is searching the law offices of attorney Dickie Scruggs.  An excerpt: 

The FBI in Jackson has verified that the agency is executing a search warrant today at the law offices of Richard "Dickie" Scruggs in Oxford.

The FBI said the warrant was issued "in furtherance of an ongoing investigation."

No further information has been released. When contacted at the law office, Scruggs’ son, Zach Scruggs, said he could not comment and would have to return the Sun Herald’s telephone call later.

As the story says, it’s not clear what the FBI is looking for or what case the search warrant is in connection with.  Trent Lott resigning? Dickie Scruggs’ offices being searched? What on Earth is going on here, is Santa wearing a State Farm T-shirt under his red suit?  

UPDATE: Here’s the newest version of the story, as of 1:55 p.m. Pacific Time, from the Sun Herald. 

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Some server issues this morning

Several people reported problems accessing Insurance Coverage Law Blog this morning, and when I checked on this, there were indeed some server issues that now have been resolved.  Thanks for your patience and thanks for letting me know about the problems.  Funny thing about a blog, it’s not all that different from my time on the farm in NoDak as a kid: blogs, like farm animals, seem to require constant feeding and watering. 

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Disaster ‘wake up’ v. disaster ‘let down’

This is an interesting look by the National Science Foundation at what reactions to expect from homeowners in southern California.  Researchers say is a distinct difference in response to wildfires: people who narrowly avoided disaster while their neighbors were wiped out tend to underprepare for future disasters, while those who live elsewhere but face similar dangers prepare more thoroughly.   An excerpt:

They surveyed two sets of homeowners who survived a series of devastating wildfires in Kelowna, British Columbia. The fires caused the evacuation of more than 45,000 Kelowna residents, destroyed more than 300 homes and many businesses, and resulted in three deaths.

One group of surveyed homeowners from Kelowna did not lose their homes but were at risk of future wildfires because they lived in or near highly wooded areas similar to places where fires recently occurred. This group experienced what researchers call a post-exposure letdown.

These residents actually felt safer after the fires because they perceived themselves to have been the victims of an unfortunate low-probability event, and that the worst was over. As a result, people experiencing a letdown were unlikely to invest in costly and/or time-consuming measures to lower their future risks or to consider response strategies for future wildfires.

Contrasting sharply with the ‘post-exposure letdown’ was the feeling reported by the residents of Vernon, a community 32 miles north of Kelowna that was not affected by the fires but is situated in a similar urban-wildland interface area.

They reported what researchers call ‘post-exposure wake-up,’ characterized by greater risk awareness, heightened risk perception, and a strong desire to take action to better understand and lessen future exposure.

Individuals who experienced this were most likely to ensure that their homes had fire shelters and trimmed shrubs, bushes and trees to prevent encroachment upon homes. Members of this group also were likely to move to a different location.

‘There’s no doubt residents in California are experiencing the same reactions,’ said Louie Rivers, science assistant to NSF’s decision, risk and management program. ‘Some people will take appropriate action to protect against future wildfires and some will rebuild on the same spot and take no action.’

Perhaps not all that surprising.  One human tendency is to see the misfortunes of others as due to their unique foolishness or their unique bad luck.  At first, while danger is present, we may feel terror at uncertainty, but when the danger has passed and we are unhurt, this is often quickly replaced by a cockiness bred by the false doctrine that what did happen was bound to happen.  In other words, it was not mere good luck that we survived, but in fact it was inevitable in retrospect that we would survive, based on the evidence that we in fact did survive.  Those who are more removed from events do not experience the same initial terror nor the resulting need to concoct justifications that explain one’s survival while others similarly situated perished.

  

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Lott’s fanny-kicking odyssey apparently at an end

Other priorities have apparently overcome Sen. Trent Lott’s fanny-kicking reflex, as he has decided to resign from the U.S. Senate effective December 31

Remember Lott’s vow earlier this year?

"I’m like a woman scorned,” Lott says. "I’m prepared to continue to kick their [insurance companies’] fanny until the last day I’m alive on this Earth because they have mistreated too many people.”

In fairness, from the available evidence, we cannot decisively conclude that the fanny-kicking has ended.  Perhaps, in his new endeavors, Lott will have an even greater forum for this activity than was provided by his position as a U.S. Senator.  Who knows? An independent run for president under the auspices of a newly formed Posterior Punting Party? These and other great and perplexing questions of our time, such as Who Put the "Ram" in the Ramalama Ding Dong, remain to be answered.

Hat tip: Y’all Politics, among other sources.

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