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• Citigroup Sued by Brokers It Fired Over Tobacco-Settlement Fund  

Citigroup Inc. was sued by two former brokers who invested billions of dollars in tobacco- settlement money and who claim they were fired to protect the bank when it charged the fund excessive fees.

The brokers, Peter Dunn and Alan Kirman, claim that Citigroup, the biggest U.S. bank by assets, wrongly blamed them for overcharging the tobacco-settlement trust, which holds money paid by the major U.S. tobacco companies as part of a $206 billion settlement with 46 states in 1998.

Dunn and Kirman, in a suit filed July 17 in state court in Florida, claim they were unaware of any fee limits on the settlement money. They claim senior executives, who also were unaware of the limits, blamed them to avoid losing the account when the excessive fees were discovered. . . .

The case is Dunn v. Citigroup Global Markets Inc., 08-CV-80926, U.S. District Court, Southern District of Florida (West Palm Beach).

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Scruggs' downfall remains baffling  

Hollywood director Michael Mann, in his letter to U.S. District Judge Neal Biggers, said Scruggs "is simply not a boastful man."

Mann directed the 1999 movie, The Insider, about the secrets of the tobacco industry that led to the record $206 billion nationwide settlements Scruggs helped negotiate. Scruggs was a consultant.

"Dick never talked himself up to be more than a hero than was accurate," Mann wrote. . . .

So how did Scruggs, who made up to $800 million in legal fees on tobacco litigation, get involved in a scheme to pay a seemingly paltry $40,000 bribe to a judge?

Scruggs' friends say they're baffled. Scruggs' attorney, John Keker of San Francisco, suggested it might take an author along the lines of a William Faulkner or Walker Percy to explain it all. . . .

Like Jones, two former law partners, Alwyn Luckey and Bob Wilson, sued Scruggs, in 1994, saying he never paid them their share from asbestos and tobacco litigation. Convinced Scruggs was being "shaken down" by others, Jones said he poured all his might into defending Scruggs.

The case bounced from court to court until both sides agreed to let U.S. Magistrate Judge Jerry Davis arbitrate the case involving Luckey in 2005. Davis ordered Scruggs to pay Luckey $17 million.

"The irony is the bulk of the majority of the award was interest because Dickie had litigated it for 12 years," Jones said.

Jones viewed the ruling as a victory since he had successfully protected Scruggs' interests with regard to any legal fees earned from the tobacco litigation.

But Scruggs saw it as an unacceptable defeat, Jones said.

From that point on, Scruggs decided to stop trusting the system that had made him a multimillionaire, Jones said. "I was dealing with a different man emotionally and psychologically."

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Transcript: Dickie Scruggs sentencing transcript  

JUDGE NEAL B. BIGGERS : All right. (Pause. ) Well, Mr. Scruggs, you'll receive a transcript of this sentencing hearing. And I 'll tell you now that, you know, there might be some things that you can do to help yourself in the future; and you can read about it. You may not remember what I ' m saying, but there' s some people who you're involved with who I have become intrigued in this situation of what' s going on.

When I see, from this case and others, that people who are not lawyers are getting considerable amounts of money from a legal settlement and - - you know, it intrigues me as to how - - what they're doing to earn it, if anything. They're not lawyers, so they're not receiving any settlements. If you come - - you know, Balducci said that you know where a lot of bodies are buried. If you want to uncover some of those bodies, it might help you in the future in this case and this sentencing.

But based on these considerations, Mr. Scruggs, and pursuant to the Sentencing Reform Act of 1984, it is the judgment of the Court that you be committed to the custody of the Bureau of Prisons to be imprisoned for a term of 60 months on Count 1 of this indictment. And the Court will recommend to the Bureau of Prisons that you be housed in a facility that can afford you the opportunity to participate in both mental health and drug treatment programs.

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'REPREHENSIBLE' 

The gravity of his crime visibly settled on attorney Dickie Scruggs' shoulders Friday as he stood before the sentencing judge.

The attorney was composed until U.S. District Judge Neal B. Biggers Jr. mentioned Scruggs' concern for the wife and daughter he will leave behind for prison. . . .

One of Scruggs' co-conspirators in the bribery said Delta businessman P.L. Blake ensured Scruggs would pay Circuit Judge Henry Lackey $50,000 for an order that would send a legal-fee dispute to an arbitration panel rather than a jury.

Blake has testified - in yet another fee dispute between Scruggs and a fellow attorney - that Scruggs is supposed to pay him $50 million over 20 years from tobacco-settlement fees for monitoring news reports and public sentiment during the politically charged negotiations Scruggs led in the late 1990s.

Biggers also referred to judicial bribery co-conspirator Timothy Balducci, who agreed to cooperate with the investigation after he learned his conversations with Judge Lackey had been taped.

"When I see, from this case and others, that people who are not lawyers are getting considerable amounts of money from a legal settlement and - you know, it intrigues me as to how - what they're doing to earn it, if anything," Biggers said.

"Balducci said that you know where a lot of bodies are buried. If you want to uncover some of those bodies, it might help you in the future in this case and this sentencing."

Biggers said Scruggs so readily and easily agreed to the bribe that he seemed to have done this before. Scruggs remains under investigation for alleged bribery of Hinds County Circuit Court Judge Bobby DeLaughter.

"You found out that Judge Lackey is not a man to bribe," Biggers said. "You picked the wrong man to try to bribe."

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• Scruggs Gets Maximum 5 Years for Judge Bribe Attempt (Update3) 

Richard ``Dickie'' Scruggs, the Mississippi lawyer who spearheaded legal settlements with tobacco firms that provided $206 billion to 46 U.S. states, was sentenced to the maximum five years in prison for trying to bribe a judge.

Scruggs, 62, whose firm made hundreds of millions of dollars on the tobacco cases, pleaded guilty in March to conspiring to pay a $40,000 bribe to a state judge. That judge handled a lawsuit on how to divide $26.5 million in legal fees from an $89 million settlement with State Farm Mutual Automobile Insurance Co. over claims from Hurricane Katrina in 2005.

``You committed a reprehensible crime in my opinion, the most reprehensible crime a lawyer can commit, which is the corruption of a judge,'' said U.S. District Judge Neal Biggers today at a hearing in federal court in Oxford, Mississippi. ``The justice system made you a rich man, and yet you attempted to corrupt it.'' . . .

Biggers suggested Scruggs might reduce his term if he cooperates with prosecutors probing payments to non-lawyers in tobacco-fee litigation.

Scruggs may know ``where a lot of bodies are buried,'' Biggers said. ``If you uncover some of those bodies, it might help you in the future.''

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• Anti-tobacco lawyers awarded $218 million fee  

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They took us into their office and made us part of their family. God has truly given the sick Florida smokers two angels.
Diana Duyser, whose husband, Gregg, has emphysema and was part of the original Engle suit, on the Rosenblatts.

• Tobacco Litigation Court awards Rosenblatts $218M for work in overturned smokers' class action 

Miami-Dade Circuit Judge David C. Miller awarded $218 million in legal fees Tuesday to Stanley and Susan Rosenblatt for years of work they put into now-defunct class action litigation against the nation's biggest cigarette markers.

"I find it very reasonable," Miller said from the bench, referring to fee calculations estimating they worked for 77 hours a week on average at an hourly rate of $274. "These are reasonable and conservative hours."

"In fact, in some firms that would not have been acceptable billing," he joked before a courtroom packed with at least 200 people.

Tobacco attorney Robert Heim, a partner with Dechert in Philadelphia, told Miller "it would be wrong under common fund law" to award fees to the Rosenblatts, saying a guardian ad litem should be appointed to administer a fund "to protect the interests of the class."

The fees would come out of a common "guaranteed fund" of about $800 million that Big Tobacco put up as collateral in 2001 to appeal the record $145 billion punitive verdict the Rosenblatt's won against cigarette makers. The verdict was later thrown out by the Florida Supreme Court along with a class certification order uniting sick smokers in a single lawsuit.

Miller still must determine how to distribute the rest of the $800 million fund. . . .

A line to speak in support of the Rosenblatts' fee request ran out of the room. Many people at the hearing were visibly ill or relatives of deceased smokers.

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• SALTER: Odd memories of a 1997 Ole Miss tobacco settlement seminar  

The seminar was entitled: "The Tobacco Settlement: Practical Implications and the Future of the Tort Law."

I moderated a panel discussion that included three of the major players in the national tobacco settlement - then national Big Tobacco lobbyist and former Republican National Committee chairman Haley Barbour of Yazoo City, then-Mississippi Attorney General Mike Moore and then-lead tobacco litigation negotiator "Dickie" Scruggs.

From my notes 11 years ago, a few random observations on the night's seminar discussion:

* Neither Moore nor Scruggs was at all forthcoming at the seminar when asked the total of the legal fees Scruggs would be receiving, how Moore determined the fee structure that would govern Scruggs' fees and expense reimbursements and how much the other 12 law firms involved in Mississippi's tobacco suit would get. . . .

Fordice died. Barbour's now governor. Moore's defending Scruggs' son, Zach, on the same charges to which his father pleaded guilty - and the same questions linger today that lingered in 1997 at the Ole Miss Law School about Mississippi's tobacco litigation, the legal fees and the political relationships and entanglements that perhaps forever changed Mississippi's legal landscape.

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• A LAWYER'S TRIALS / Tort King's Path to Bribery Charge 

Around this time, another law-school classmate, Michael T. Lewis, says he gave Mr. Scruggs the idea that ultimately made him rich and famous: demanding that tobacco companies repay states for their Medicaid costs in caring for people sickened by smoking.

Mr. Scruggs was intrigued, but had drawn criticism over his asbestos litigation for the state. Detractors called it a gravy train for the attorney general's favored lawyers, who repaid the favor with campaign donations.

So Mr. Scruggs turned to another political pal: Pete Johnson, who says Mr. Scruggs asked him to help push through legislation clearly authorizing the attorney general to farm out lawsuits to private lawyers. Mr. Johnson, a former state auditor, says that at an airport restaurant in March 1994, Mr. Scruggs promised him 10% of his legal fees from the tobacco case if the bill passed and the litigation was successful.

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Attorneys' Fees: The Source of Many Headaches for Dickie Scruggs 

This situation is this: Scruggs has been accused of conspiring to bribe a Mississippi judge in a lawsuit involving a fee-dispute with former cohorts. But it’s not the first fee-dispute of Scruggs’s career. Far from it. For years, he battled two former colleagues from his asbestos days, and after his mammoth tobacco wins of the late 1990s, he squabbled with a handful of folks over fees.

Some, like Alwyn Luckey and Roberts Wilson, fought him tooth-and-nail. Others, like Pete Johnson and Michael T. Lewis, opted for less litigious routes. I “decided I’d rather spend whatever time I have alive at peace and not in court fighting for money,” explained Johnson, who claims that Scruggs promised him 10% of the legal fees from big tobacco, then reneged.

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• The Legal Trail in a Delta Drama  

A former Mississippi state auditor, Steven A. Patterson, stood before a rapt courtroom and pleaded guilty to a charge of conspiracy. Prosecutors said he had worked with Richard Scruggs, arguably the country’s best-known plaintiff’s lawyer, to bribe a local judge to rule in Mr. Scruggs’s favor in a fee battle with another lawyer.

Mr. Patterson’s plea — and his agreement to cooperate with prosecutors — significantly ratchets up the pressure on Mr. Scruggs, who was indicted on federal conspiracy and bribery charges in November. . . .

Indeed, prosecutors plan to cite the political influence brought to bear by Mr. Scruggs, who once boasted that lawsuits are “won on the back roads long before the case goes to trial,” when his own trial begins on March 31.

Rather than courtroom victories against the tobacco makers, legal experts say, it was Mr. Scruggs’s ability to put together a coalition of state officials and Washington politicians, while adeptly courting the news media, that ultimately forced cigarette makers to pay up in the landmark $248 billion national settlement.

Mr. Scruggs declined to comment for this article. But his lead defense lawyer, John Keker, says Mr. Scruggs was unaware of any bribery attempts and is completely innocent.

Now, the fate of Mr. Scruggs is being watched closely by advocates of tort reform as well as lawyers and industry leaders, who have all found themselves in his cross hairs over the last two decades. “He stands for the proposition that the halls of justice can become the arena for pressing public policy goals,” says David M. Bernick, a partner at the firm Kirkland & Ellis, who has represented the tobacco industry. “People want to know the reality of how he came to be so influential.”

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EDITORIAL: Lawyers not content with 'legal bribery' 

In a separate case, another well-known trial lawyer, Paul Minor, is sitting in a federal prison after being convicted last year of bribing two state judges on the Coast. The judges, accused of rendering verdicts favorable to Minor's clients in return for financial favors from the attorney, are also serving prison sentences.

The bribery scandals have not only given a black eye to the plaintiffs' bar in Mississippi, but they are bringing collateral damage to current and former state officials who have been closely affiliated with the accused.

Former U.S. Sen. Trent Lott resigned from office a couple of days prior to the indictment of his brother-in-law, Scruggs. . . .

The question out there is how far and deep will this corruption investigation go. The Scruggs-related bribery charges have been over squabbles between attorneys about the divvying up of legal fees following settlements in mass lawsuits involving asbestos, tobacco and Hurricane Katrina. Although this attorney infighting involved about $40 million, that's a pittance compared to the money - better than a billion dollars - that these massive litigation cases have been pouring into the bank accounts of Scruggs and his associates. If trial attorneys resorted to bribery over the “small stuff,” were they also so inclined in the original tort cases that generated the huge payoffs?

That answer is yet to come.

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• Plaintiffs Lawyers Tangle Over Billions in Tobacco Fees 

On Nov. 2, 2007, Brent Coon, now a principal in Beaumont's Brent Coon & Associates, sued 10 defendants in U.S. District Court for the Western District in Austin. In his original complaint in Coon v. Umphrey, et al., he alleges he was a partner in Provost Umphrey in January 1998, when the state reached a settlement agreement with the tobacco companies, and he is entitled to a portion of the fees. The total amount of fees to be split among the lawyers who represented the state is $3.3 billion.

"Coon did not receive any of his scheduled attorney's fees payments despite Defendants obligation to pay those attorney's fees," Coon alleges in the complaint.

"This is a multimillion-dollar claim for back pay," Coon says in an interview.

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Beaumont attorneys squabble over big tobacco fees 

A financial squabble between prominent Beaumont plaintiffs' attorneys Walter Umphrey and Brent Coon has reached a Jefferson County civil court.

When Big Tobacco lost big in 1998, Beaumont law firm Provost Umphrey was awarded about $660 million in fees to be paid over 30 years.

Attorneys in the Beaumont firm entered a partnership for sharing the settlement payments.

Coon, who left Provost Umphrey in 2001, said he is not receiving his share of the take.

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• Coon, Umphrey in dispute over tobacco fees 

Two of the biggest names in civil litigation in Southeast Texas have filed suits against each other over the mega-billion dollar tobacco settlement.

Brent Coon, once a partner in the Provost Umphrey Law Firm, claims he has not received his share of the more than $3 billion in attorneys' fees from the $17.3 billion tobacco settlement with the State of Texas.

On Nov. 2, Coon filed a Complaint to Compel Arbitration in federal court in the Western District of Texas. As defendants, the complaint names the Provost Umphrey Tobacco (PUT) Partnership and the following individuals or their professional corporations: Umphrey, Bryan Blevins, Paul "Chip" Ferguson Jr., Keith Hyde, Greg Thompson, Mike Ramsay, Glenn Steele, Jr., Robert Giblin and David Brandon. . . .

Beaumont's own "King of Torts," Walter Umphrey, and his tobacco settlement partners have fired back at Coon, filing their own petition alleging that Coon is violating an arbitration agreement established in the event disputes arose over the settlement and Coon's withdrawal from the PUT partnership.

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