Feds: Scruggs, AG Hood worked closely on whistleblower controversy

John O'Brien Oct. 15, 2007, 12:34pm



BIRMINGHAM - Federal prosecutors say trial lawyer Richard Scruggs, currently the target of criminal contempt charges, was offered advice by Mississippi Attorney General Jim Hood before violating a judge's order.

The order told Scruggs to return insurance documents related to victims of Hurricane Katrina to the attorneys of E.A. Renfroe, a claims-handling company working with State Farm. Instead, Scruggs gave them to Hood, who had sued five insurance companies -- including State Farm -- over their handling of Katrina claims.

"Scruggs did not seek a clarification (of the order) or permission from the court," special prosecutors Charles Sharp, Joel Williams and Michael Vail Rasmussen wrote Friday in their response to a motion to show cause.

"The evidence will show that he was advised to do so by the Attorney General's office. This constitutes willful ignorance and conscious assumption of the risk, which is further grounds for criminal liability."

Federal judge William Acker appointed the special prosecutors to indict Scruggs for not complying with the injunction in December. He had advised U.S. Attorney Alice Martin that she pursue criminal contempt charges, but she declined.

"(T)he defendants, Richard F. Scruggs and The Scruggs Law Firm P.A., after receiving actual notice of the aforesaid order, committed acts constituting a criminal contempt of this Court, that is, each willfully violated and disobeyed said order by causing materials subject to the order and in their possession to be delivered to a third party with the specific intent of preventing said materials from being delivered to counsel for the plaintiff," the indictment says.

Scruggs received the documents from former employees at E.A. Renfroe, Kerri Rigsby and Cori Rigsby Moran. They said they had uncovered evidence that the company was unfairly handling post-Katrina claims.

After the Dec. 8 injunction, Scruggs delivered those documents to Hood instead of to the attorneys of E.A. Renfroe. Hood had sued five insurance companies over their handling of Katrina claims just weeks after the storm hit the state. Scruggs' firm made $26 million when 640 lawsuits against State Farm that made up part of Hood's class action suit were settled.

The prosecutors say they plan to show evidence of the "remarkably close relationship" between Scruggs and Hood at trial, including a letter from Hood to Martin that urged her not to pursue the charges because Scruggs was a confidential informant.

They also say Scruggs has donated $44,000 to Hood's campaigns.

A report from The Associated Press said Scruggs stood to make another $20 million if the second part of that settlement had been approved. It grouped together 35,000 policyholders who had not sued yet but still could. Hood is now moving to force State Farm to settle.

E.A. Renfroe, meanwhile, is suing the former employees, who now each make $150,000 a year from Scruggs as consultants for insurance litigation. Acker wrote that the two sisters and Scruggs' firm were "now engaged in a cooperative effort" to sue State Farm.

"While engaged in work on Katrina as Renfroe employees on behalf of State Farm, Moran and Rigsby learned of acts and practices of State Farm that the two defendants concluded were inappropriate and/or illegal," Acker wrote.

"Instead of sharing their concerns with Renfroe, Moran and Rigsby clandestinely copied approximately 15,000 confidential documents off of State Farm's computer and turned them over to The Scruggs Law Firm."

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Mississippi Attorney General
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Jackson, MS 39201

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