NEW YORK (Legal Newsline) - A pair of admitted felons who once represented the State of Mississippi in court will again argue on Friday that their fight to preserve $14 million from a state settlement belongs in federal court.
Former attorneys Joey Langston and Timothy Balducci, who have both pleaded guilty to participating in attempted judicial bribery schemes, say disputes arising from the federal bankruptcy proceedings of Worldcom, which became MCI, should stay in federal court.
The two also say the State, which filed suit on behalf of the Auditor's office last year, should have complained during the 2005 settlement proceedings. The settlement, reached over allegedly owed back taxes, was worth $100 million.
"The State's objection to the payment of legal fees to the Langston Law Firm, whether based on state law or anything else, was required, as a matter of federal law, to be raised in opposition to the 2005 Settlement Motion in the Bankruptcy Court," a reply brief filed Aug. 8 says.
"Our legal system should not tolerate a state (or anyone else) sitting on its rights, failing to object or appeal, allowing a settlement order to become final, and then some two years later instituting litigation to undo the payment allowed by the Bankruptcy Court by making an end run around the finality of the Bankruptcy Court Order in a home court under state law."
Second Circuit Court of Appeals Judge William Pauley will hear arguments Friday at 12:30 p.m. State Auditor Stacey Pickering maintains his position that his dispute is based in state law, with two federal judges having agreed with him so far.
Pickering says all of the settlement funds -- including the Langston firm's fees -- should have been given to the state Legislature for appropriation. U.S. District Judge Arthur Gonzalez agreed it was a state issue, granting Pickering's motion for abstention.
Pickering has filed his complaint in Hinds County Circuit Court.
"If the court rules in the position I think it will, then ultimately this case will go before the Mississippi Supreme Court when Hinds County does rule," Pickering said Wednesday.
"We have to get a definitive answer as to the authority of elected officials outside the Legislature appropriating public funds. Do Langston and Balducci deserve compensation for the work they performed for the State? You betcha.
"My opposition is to the way they went about it. It was outside the parameters of Mississippi law."
Balducci was charged last year with conspiring with famed plaintiffs attorney Richard "Dickie" Scruggs to bribe state judge in a dispute over at least $26.5 million in attorneys fees earned in Hurricane Katrina settlements with insurance companies and began cooperating with federal investigators.
He wore a wire to several meetings with members of the Scruggs Law Firm and gathered the evidence that led to guilty pleas from Scruggs and associate Sidney Backstrom. Scruggs is currently serving a five-year prison sentence in Ashland, Ky.
Scruggs' son and law partner Zach pleaded guilty to knowing about the scheme but not participating in or reporting it.
Langston faces a maximum prison sentence of five years after pleading guilty in January to a charge that he attempted to bribe Hinds County Circuit Judge Bobby Delaughter with consideration for a job as a federal judge.
The attempt, Langston says, happened when he represented Scruggs in a dispute over attorneys fees earned in asbestos settlements. Balducci also represented Scruggs in the case. DeLaughter eventually did not agree with a special master's recommendation that Scruggs pay his former partner $15 million and ruled Scruggs only owed $1.5 million.
Pickering says Balducci and Langston should have been paid with funds from the state general fund or by Attorney General Jim Hood's contingency fee fund. Payments from both would have had to have been approved the Legislature.
"These are strictly delay tactics," Pickering said. "Everyone knows what the ultimate outcome will be, we'll be in state court.
"If they could get a federal judge to rule in their favor and take them out of Mississippi court, I guess they think they'd stand a better chance, but everyone sees the writing on the wall that we are correct in our position."
Langston said the suit against him was politically motivated. Lt. Gov. Phil Bryant publicized the issue last year while he was still Auditor but campaigning for his current position.
A federal judge in Mississippi has also sided with the Auditor's office.
Pickering points to a June 2007 decision by the state's Supreme Court affirming a lower court's ruling that $20 million steered annually from the Tobacco Master Settlement Agreement to the Partnership for a Healthy Mississippi was unconstitutional.
The Court said only the Legislature could appropriate the settlement funds.
"The Court already ruled in a similar case that a judge does not have the authority to appropriate public funds," Pickering said. "The difference is that money was taken out of a settlement and given to a smoking cessation program.
"This $14 million was given in a lump sum from a judge in (New York) to attorneys in Mississippi. Public funds must go through the legislative process."
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.