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.