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Mississippi's Tort King

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Mississippi's Tort King

December 15, 2007
Legal ReformOther

"It just boggles the mind," said one Mississippi trial lawyer quoted in the Los Angeles Times about the indictment of tort lawyer Richard "Dickie" Scruggs last week on charges of backing the attempted bribery of a state judge. "Here is a man who has had an enormous amount of success, who reached a level very few attorneys, if any, have reached. Why would he risk everything over a legal dispute over attorneys' fees?"

Why indeed? Mr. Scruggs, a prime mover in the $246 billion tobacco settlement with the states, is arguably the most formidable plaintiffs lawyer in history. Why risk a long prison term just to add more millions to a fortune already too vast to spend in one lifetime? While it is too early to tell—and Mr. Scruggs deserves a presumption of innocence—hints at possible motives are by no means lacking.

The extraordinary affair began this past spring when Mississippi Circuit Judge Henry Lackey was approached by local attorney Timothy Balducci. Mr. Balducci was helping Mr. Scruggs fight a lawsuit pending before the judge charging that he, Mr. Scruggs, had unfairly split up attorneys fees from a previous settlement. Judge Lackey says Mr. Balducci offered him a bribe in exchange for a favorable ruling. No one would have to find out. "It ain't but three people in the world that know anything about this," Mr. Balducci allegedly said. The third person, we are to believe, is Mr. Scruggs.

Judge Lackey went to the feds, who placed listening devices in the judge's chambers. At some point, federal investigators confronted and "flipped" Mr. Balducci, who began cooperating. Wiretaps were obtained. The 13-page federal indictment charges Messrs. Balducci and Scruggs and three others (including Mr. Scruggs's lawyer son Zach) with conspiracy and other crimes. It alleges that Mr. Scruggs made out $50,000 in checks to cover payments made to Judge Lackey and earmarked them for nonexistent services by Mr. Balducci that he knew to be fictitious, such as jury consulting in an unrelated case.

The underlying lawsuit against Mr. Scruggs arises from the division of $26.5 million (so far) in fees from lawsuits against insurance companies following Hurricane Katrina two years ago, through a group of law firms that until recently called itself the Scruggs Katrina Group (SKG). One of the five firms, Jones, Funderburg & Sessums, apparently expected close to an even split of the attorneys fees. But "when the money hit the table," attorney John Griffin Jones has said, his firm was "frozen out" by the other four and given only token fees.

Mr. Jones' resulting lawsuit in state circuit court in Lafayette County potentially posed large problems for Mr. Scruggs. It asked for a 20% share of future as well as past SKG earnings, for an accounting of Mr. Scruggs's Katrina finances, and for punitive damages against him individually, which demand might lay open his personal balance sheet to the world. As a basis for punitive damages, the Jones complaint cites Mr. Scruggs's longstanding reputation for fancy footwork in the fee department, saying that on "repeated occasions" he squeezed collaborating lawyers out of fees.

A trial, therefore, could have led to an airing of financial details Mr. Scruggs might rather not see out in public. One that has already stirred interest: Mr. Scruggs's 2005 admission, in an otherwise low-profile asbestos fee dispute, that he gave $10 million to a political operative for vaguely described consulting services to influence opinion-makers during the tobacco affair.

This gets us back to Mr. Balducci. The ruling he allegedly sought from Judge Lackey was not to dismiss the case, opening the door to an appeal, but rather to shunt it into private arbitration. Regardless of whether Mr. Jones's firm collected its fee claim, arbitration would likely have kept the whole affair out of the public record.

There is much irony in prosecutors having "flipped" Mr. Balducci to secure his cooperation in going after the others. Mr. Scruggs has made a living from confidential informants, as in the tobacco escapade portrayed in Hollywood's 1999 thriller "The Insider." The probe is ongoing: Days ago the feds raided the offices of a major law firm which represents Mr. Scruggs and of which Mr. Balducci was formerly a principal. Agents are said to be quizzing others around the state, perhaps on matters alluded to in Mr. Balducci's alleged boast to Judge Lackey of knowing where "there are bodies buried."

We haven't yet seen all the cards the prosecutors have to play, nor have we yet heard Mr. Scruggs's side of the matter, which will be offered by top-ranked criminal lawyer John Keker. Mr. Scruggs's chums are already portraying Mr. Balducci as off on his own, a clueless wannabe trying to impress the boss. Yet Mr. Scruggs and other highly placed Mississippians have for years entrusted Mr. Balducci with a series of sensitive matters.

Novelist John Grisham, a friend of Mr. Scruggs, doubts he'd touch "a boneheaded bribery scam that is not in the least bit sophisticated." But then Gulf Coast attorney Paul Minor was found guilty earlier this year of funneling loans (later silently forgiven) to judges' families and the like. Mr. Scruggs took part in some of those transactions, and gave testimony at trial, though he was never charged.

If Mr. Scruggs has felt invincible, it might be because of the way he's been lionized in the press. The New York Times two years ago reported with epic credulity about how Mr. Scruggs "did not see the insurance battle as a personal gold mine. He said he was prepared to take as little as 1% of any settlement or jury award—far less than the typical contingency fee of one-third or more."

David Rossmiller, a Portland, Ore., lawyer who's reported intensively on Mr. Scruggs's legal troubles at his Insurance Coverage Blog, had a less starstruck view when interviewed by the Los Angeles Times. He said the indictment may prompt admirers to begin re-evaluating "how this amazingly successful man got to be so amazingly successful."