Scruggs
Editor's note: This story is the second of two featuring the thoughts of David Rossmiller, an insurance attorney and partner at Dunn Carney in Portland, Ore., on the Wednesday indictment of trial lawyer Richard Scruggs.
JACKSON, Miss. - When the FBI raided Richard "Dickie" Scruggs' office Wednesday, it was safe to assume it had something to do with the federal criminal contempt charges he is facing in Alabama.
Instead, the search produced allegations of attempted bribery, and apparently an even stronger case than the one already filed against him.
The 13-page indictment against Scruggs and four others makes a very strong case against them, said David Rossmiller, an insurance attorney and partner at Dunn Carney in Portland, Ore., who has been analyzing the Gulf Coast's insurance situation for Legal Newsline.
And the charge itself is sure to make many more headlines than criminal contempt, he said.
"Even after I heard about the FBI raid, I didn't want to speculate about it," Rossmiller said. "In part, because it's not fair to Scruggs, but also because I couldn't imagine what it could be about. I thought it was along the lines of the documents with the prosecutions in Alabama."
In Alabama, special prosecutors appointed by U.S. District Judge William Acker hit Scruggs with the contempt charges, claiming he defied an order when he refused to return documents to a claims-handling company working with State Farm Insurance Cos., instead handing them over to Mississippi Attorney General Jim Hood. Hood has a class action suit against five insurance companies over their claims-handling practices after Hurricane Katrina.
The recent indictment, though, struck a nerve. Scruggs is alleged to have offered a state judge $40,000 to enter a favorable order in a lawsuit between his firm and another as they dispute how $26.5 million in attorneys fees from one of Hood's settlements should be divided.
"You have some question whether you think defying a judge's injunction is a big deal," Rossmiller said. "I've seen lots of people say it's not a big deal, but I think it is a big deal to defy a judge's order because that's the bargain you make to keep your license -- obeying and respecting the judge's wishes.
"But nobody is going to say bribery is not a big deal. That's more to the heart of undermining the justice system."
According to the indictment:
-Scruggs and four co-conspirators (son Zack Scruggs and Sidney Backstrom of the Scruggs Katrina Group and Timothy Balducci and Steven Patterson of Balducci and Peterson) decided to attempt to influence the outcome of the suit.
-Balducci received an e-mail with a proposed order asking Lafayette County Circuit Judge Henry Lackey to compel arbitration from Backstrom, and Balducci faxed it to Lackey. On May 9, Balducci had a recorded conversation with Lackey where he said:
"(M)y 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."
-After that conversation, Balducci continued to talk with Lackey. In September, he agreed to pay Lackey $40,000 cash. Patterson talked it over with Balducci, who then delivered half of it to Lackey. The feds heard Balducci tell Patterson, "All is done, all is handled and all is well," over the phone.
-Patterson told Balducci to call Scruggs on Oct. 18 after asking what was happening with the order, and Balducci, on the same day, delivered another $10,000 to Lackey. Later that day, Scruggs called Patterson and told him to bring the signed order to his office and cut a $40,000 check for Balducci. To cover it up, Scruggs classified the payment as compensation for jury consulting work.
-On Nov. 1, Balducci, gave another $10,000 to Lackey, who eventually turned everyone in to the FBI.
"It looks solid," Rossmiller said of the indictment. "Sometimes you look at a criminal complaint of indictment and say it looks thin, but in this case they have some really solid stuff. They have things on tape, they have the telephones tapped. It looks like the only thing they apparently don't have is Scruggs voice on tape."
Rossmiller added that Scruggs will be the main target the rest of the way.
"The way the feds work is they put the squeeze on smaller people to get the big ones," he said. "They can get whatever they lack in evidence now, but it already looks strong.
"This is a real tough one. This one's nasty."
Scruggs gained fame by representing the State of Mississippi in its lawsuit against tobacco manufacturers. His firm earned $1.4 billion in fees, and the movie "The Insider" (starring Russell Crowe and Al Pacino) depicted Scruggs' role.
He continued to stay in the spotlight, most recently as one of the loudest voices in Katrina litigation. He claims insurance companies misrepresented to policyholders the amount of damage done by wind (covered by the policies) and flood (covered by a national flood insurance program).
If convicted of the bribery charge, he will be disbarred, Rossmiller said. He also faces up to 75 years in prison and $1.5 million in fines, the Jackson Clarion-Ledger reported.
"Everything that he has done is going to be examined here with a stronger eye, asking did he cut corners here, does it look like he cut corners there," Rossmiller said. "There were already people questioning his message and legacy, and this questions his whole body of work even more.
"It's really shocking to me and quite sad, because I like the guy. I don't know him, but there any many things to admire. He's a terrific advocate and creative lawyer, very smart, hard-working and dedicated.
"Fortunately I have not (known anyone charged with bribing a judge). Some of this nature, I'm not familiar with. I've heard things in far-off places like Illinois or something. Fortunately, this is kind of a rare thing."