BIRMINGHAM, Ala. - Special prosecutors appointed by a federal judge on Tuesday hit nationally known plaintiffs attorney Richard Scruggs and his law firm with criminal contempt charges over his handling of insurance documents related to Hurricane Katrina claims.
Prosecutors Joel Williams, Michael Rasmussen and Charles Sharp drew up the four-page indictment, having recently been appointed by federal judge William Acker of the Northern District of Alabama.
Acker feels Scruggs did not comply with an injunction in December, refusing to hand over documents from E.A. Renfroe, a claims-handling company working with State Farm, back to the company's attorneys.
Instead, Scruggs gave them to Mississippi Attorney General Jim Hood. Acker recommended to U.S. Attorney Alice Martin that she pursue criminal contempt charges, but she declined. That's when Acker enlisted the special prosecutors.
"(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 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.
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.
Scruggs is also a campaign contributor to Hood.
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."
Scruggs has long had ties to the Attorney General's Office in Mississippi. His firm earned $1.4 billion when it was hired by former Attorney General Mike Moore to negotiate the Tobacco Master Settlement Agreement in the late 1990s.