Bribing Judges a National Problem (MORE, CLICK HERE)

Court Intrigue for the King of Torts

By NELSON D. SCHWARTZ
Clarksdale, Miss.
The New York Times
December 9, 2007

EVER since Richard Scruggs was indicted on federal conspiracy and bribery charges about two weeks ago, legal eagles have asked whether a renowned lawyer who earned a reputation as the “King of Torts” would really risk his reputation, his freedom, his wealth and, of course, his career, by offering $50,000 to sway a judge in a relatively small squabble over fees.

One clue may be found in this town, nestled amid cotton fields and country crossroads made famous in the music of the legendary blues singer Robert Johnson A Clarksdale lawyer, Charles M. Merkel Jr., spent more than a decade battling Mr. Scruggs in two fee disputes and says he still bears scars from the fight.

“It’s scorched earth with Dickie Scruggs,” says Mr. Merkel, sitting in a wood-paneled office featuring duck-hunting memorabilia and two framed checks representing about $17 million in payments that Mr. Scruggs had to disgorge to Mr. Merkel’s client — a lawyer named Alwyn Luckey who argued that Mr. Scruggs shortchanged him for work he performed on asbestos cases that made Mr. Scruggs rich.

Mr. Merkel and prosecutors say that the Luckey case foreshadowed some of Mr. Scruggs’ woes in the current bribery case. “As far as whether he’s guilty, I can’t say,” Mr. Merkel concedes. “But I’m not surprised, because he’s willing to use any means to an end. And it irks the hell out of me when Scruggs skates on the edge and makes the profession look bad.”

According to an official investigating the Scruggs case who asked not to be identified because he was not authorized to discuss it publicly, federal prosecutors have asked the Justice Department’s Public Integrity Section to examine whether Mr. Scruggs has engaged in multiple bribery attempts of local judges. A spokeswoman for the Justice Department declined to comment publicly on the case. The case is also likely to fuel further debate over the merits of lucrative class-action lawsuits.

Even if Mr. Merkel turns out to be wrong, the indictment casts a different kind of spotlight on Mr. Scruggs, who cultivated the image of a smooth Southern lawyer capable of winning huge verdicts on behalf of smokers and, most recently, victims of Hurricane Katrina. Indeed, Mr. Scruggs was a key character in “The Insider,” the 1999 film that detailed how he helped win a $248 billion settlement from the tobacco industry.

Estimates of how much Mr. Scruggs and his partners stand to eventually collect from the tobacco settlement reach north of $1 billion. He is one of Mississippi’s richest men, with a black Porsche Cayenne that is a familiar sight in Courthouse Square in nearby Oxford, where his firm is located.

But Mr. Scruggs still fought hard this year against the accusations of John Griffin Jones, a Jackson, Miss., lawyer who worked alongside Mr. Scruggs in his suit against State Farm Insurance after Katrina. Mr. Jones, saying he was cheated out of his fair share of a $26.5 million settlement, sued in state court. Then, on Nov. 28, Mr. Scruggs was indicted with four other men, including his son Zachary Scruggs, who is a lawyer in his firm. They are accused of attempting to bribe Judge Henry L. Lackey, who was overseeing Mr. Jones’s suit.

To make matters worse for Mr. Scruggs, one of the four, Timothy R. Balducci, on Tuesday pleaded guilty to a bribery charge in the case and has agreed to cooperate with federal prosecutors investigating Mr. Scruggs. Mr. Balducci’s conversations were taped, and he is expected to testify when the case goes to trial next year. Judge Lackey informed the United States attorney’s office about Mr. Balducci’s offer shortly after he was approached last spring.

Mr. Scruggs and others indicted in the case each face up to 75 years in jail and $1.5 million in fines if convicted. Mr. Scruggs’s lead lawyer, John Keker, says his client is innocent. “We’re looking forward to a fight,” he says. “Dick Scruggs is a fine man, and he doesn’t deserve this.” Through Mr. Keker, Mr. Scruggs declined to comment.

Zachary Scruggs referred questions to his lawyer, Anthony L. Farese. “He’s certainly innocent of these charges,” Mr. Farese said of his client. “We look forward to receiving discovery from the government and proceeding to trial.”

NORMALLY, Mr. Merkel’s criticism of his longtime adversary might be considered trash talk between members of the famously incestuous Mississippi bar. After all, both men graduated from college and law school at Ole Miss within a few years of each other, and have often engaged in legal battles.

But with Mr. Scruggs under indictment, it is likely that federal prosecutors will closely watch his earlier fee disputes with Mr. Merkel’s clients. That’s because Mr. Balducci served as one of Mr. Scruggs’s lawyers in those battles, representing him when Mr. Merkel deposed Mr. Scruggs in the matter three years ago.

Mr. Keker is already trying to distance his client from Mr. Balducci. “I don’t think they’re close at all — he’s a wannabe,” Mr. Keker said of Mr. Balducci.

Mr. Farese toes a similar line. “It’s a situation Tim Balducci did alone,” he said. “After he got apprehended, he decided to twist and turn things around and implicate others that were not involved.”

But the indictment indicates that federal prosecutors reject those points of view. And local lawyers like Mr. Merkel loudly dispute Mr. Keker’s contention that his client was not on familiar terms with Mr. Balducci. “He’s a lot closer to Scruggs than Scruggs would like to portray now,” Mr. Merkel says. “Balducci made part of the closing arguments in one of my cases, and they sat at the same table. When I was negotiating with them, it was generally with Balducci.”

According to the local official investigating the Scruggs case who requested anonymity, federal prosecutors plan to look at the long legal battle between Mr. Scruggs and Mr. Merkel for other evidence of wrongdoing. And the Justice Department’s Public Integrity unit, which investigates corruption of public officials at the local, state and federal levels, has sent lawyers from Washington to Mississippi to check out additional leads.

“There are widespread investigations in progress,” the local official added. “You need additional resources to fan out and cover these investigations that may be spinoffs, with the potential of other bribes being paid.”

Local prosecutors say they are aware of Mr. Merkel’s criticisms of Mr. Scruggs and say they take his account of Mr. Scruggs’s “scorched-earth” tactics seriously. At the same time, they are studying the implications of one of Mr. Balducci’s boasts that was recorded during his conversations with Judge Lackey.

“The only person in the world outside of me and you that has discussed this is me and Dick,” Mr. Balducci told Judge Lackey, according to the indictment. “We, uh, like I say, it ain’t but three people in this world that know anything about this ... and two of them are sitting here, and 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.”

WITH its Southern-fried dialogue, country lawyers and charges of small-town malfeasance, the indictment of Dickie Scruggs has all the trappings of a pulp fiction novel. Yet the case has ramifications far beyond Mississippi. It comes at a crucial time in the long-running clash between trial lawyers and corporate America over class-action lawsuits. Corporations have long sought to limit such cases and, at a minimum, put a cap on the settlements, which can be billions of dollars.

Tort reform is likely to be an issue in the coming presidential election; the Democratic presidential candidate John Edwards has been criticized over his record as a trial lawyer before entering politics.

Supporters of tort reform, like Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, a nonprofit advocacy group, are crowing that Mr. Scruggs’s indictment proves what she and other critics of trial lawyers have been arguing all along. She says she plans to use the case as an example of “plaintiffs’ lawyers gone wild,” adding that “where there is smoke, there is most often fire.”

In October, another top trial lawyer, William S. Lerach, pleaded guilty to a federal conspiracy charge, and his former firm, Millberg Weiss, has been charged with paying witnesses to join their class-action lawsuits. And on the same day last week that Mr. Balducci was pleading guilty in Oxford, a Miami trial lawyer named Louis Robles was sentenced to 15 years in prison for stealing more than $13 million from clients he had represented in asbestos cases.

Other observers, like Joseph A. Grundfest, a professor at Stanford Law School, agree that the high-profile prosecutions come at a bad time for trial lawyers, especially with companies like Merck taking a harder line in recent suits over deaths linked to its drug Vioxx and with judges insisting that liability cases be tried individually, rather than as easier-to-negotiate mass claims.

“Ironically, it’s very similar to allegations they make against C.E.O.’s and corporate chieftains trying to squeeze an extra nickel out of the process,” Professor Grundfest said of the Scruggs case. “Isn’t that what these guys have done, too?”

Advocates for trial lawyers argue that the plaintiffs’ bar helps keep corporations honest. “Americans know that insurance companies, drug makers, banks and other powerful corporations should treat them fairly — and they know they don’t,” said Kathleen Flynn Peterson, president of the American Association for Justice, which represents trial lawyers. “No amount of slick talk from those that want to brand trial attorneys as villains in the effort to take away people’s rights is going to be successful.”

These broader legal disputes are likely to echo loudly in Mississippi when the Scruggs case comes to trial. Already, Mr. Scruggs’s lawyers are privately suggesting he was singled out for prosecution because of his success suing big companies, while saying that with pro-business Republicans running the White House, the Justice Department and the local federal prosecutor’s office, trial lawyers like Mr. Scruggs are tempting targets.

Mr. Scruggs has been a major political donor, especially to the Democratic Party. Although he has given to some Republican candidates and is a brother-in-law of Senator Trent Lott, Republican of Mississippi, Mr. Scruggs recently contributed $300,000 to Democracy for America, an independent group that supports liberal political candidates.

He has also donated about $100,000 to the Democratic Party’s congressional re-election committees since 2000, according to CQ MoneyLine, which tracks political contributions. Mr. Scruggs had been scheduled to play host to a fund-raiser for Senator Hillary Rodham Clinton at his Oxford home next Saturday, but that was canceled after the indictment.

MR. SCRUGGS, 61, grew up in Mississippi. Before becoming a lawyer, he was a fighter pilot in the Navy. He initially practiced bankruptcy law in Pascagoula, but in the 1980s he began representing local shipyard workers suffering from the effects of asbestos.

In the mid-1990s, he helped create a novel legal strategy when he took on the tobacco industry with his friend Michael Moore, then the attorney general of Mississippi. Rather than suing on behalf of individual smokers, Mississippi and other states sued the tobacco industry to recover Medicaid payments for treating tobacco-related diseases. After obtaining internal industry documents, Mr. Scruggs helped force the industry to settle with the states for $248 billion.

He moved to Oxford from Pascagoula after his home on the Gulf Coast was destroyed by Hurricane Katrina, along with the nearby residence of Senator Lott.

Mr. Scruggs’s own boasting about his ability to win verdicts from sympathetic small-town juries and judges will offer plenty of fodder for critics when his case goes to trial. What tort reform supporters call “judicial hellholes” — venues considered perilous for corporate defendants — Mr. Scruggs calls “magic jurisdictions.”

These are places, he said at a Prudential Securities conference in 2002, “where the judiciary is elected with verdict money. The trial lawyers have established relationships with the judges that are elected.” In these places, he added, “the cases are not won in the courtroom. They’re won on the back roads long before the case goes to trial.”

That kind of talk enrages local lawyers like Grady F. Tollison Jr., who represents the plaintiff in the lawsuit against Mr. Scruggs that led to the bribery accusation. Mr. Tollison looks and acts every inch the dignified country lawyer with his white shirt, suspenders and gold-and-pearl cufflinks. But an edge creeps into his voice when he describes Mr. Scruggs.

“The word that jumps to my mind is ‘hubris,’” said Mr. Tollison, sitting in his office in Oxford, just across Courthouse Square from Mr. Scruggs’s firm. “He’s had a consistent pattern of violating his fiduciary duties to partners in these legal ventures,” Mr. Tollison said. “I know the lawyers in Oxford, Tupelo and Clarksdale, and most everybody is very congenial. But Dickey’s had difficulties with lawyers and fees in the past.”

Working the political and legal machinery in Mississippi isn’t new to Mr. Scruggs. In his deposition with Mr. Merkel in 2004, he discussed some $10 million in payments he made to P. L. Blake, a onetime college football star in Mississippi. After running into financial troubles, Mr. Blake became a political consultant for Mr. Scruggs, helping his boss navigate the back rooms of state politics and tobacco litigation.

In the deposition, where he was represented by Mr. Balducci, Mr. Scruggs praised Mr. Blake for keeping “his ear to the ground politically in this state and in the South generally, and he has been extremely helpful in keeping me apprised of that type activity.” Mr. Blake could not be reached for comment.

When Mr. Merkel further pressed Mr. Scruggs about Mr. Blake’s services, Mr. Scruggs elaborated: “He has numerous connections — in terms — when I say connections, I don’t mean that in a sinister way, I mean he just has a lot — he knows an awful lot of people in the political realm. And he — depending on the stage of tobacco litigation proceedings was keeping his ear to the ground, prying, checking. I mean, I never asked who or what or all that.”

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