Posts Tagged ‘Kentucky fen-phen settlement fraud’

Liability roundup

Sixth Circuit: Stan Chesley played “shell game,” court did not err in freezing his assets

Onetime “king of torts” under siege: “Stan Chesley has defrauded hundreds of former clients through a ‘high-stakes shell game’ apparently orchestrated to avoid paying them a multimillion-dollar judgment, a federal appeals court said.” Following the settlement of a class action over diet drugs for $200 million, lawyers connived with a state judge, who has since been disbarred, to steer most of the proceeds into their own pockets. Clients have been pursuing recovery against Chesley for years, but he has dodged paying the resulting $42 million judgment. Thus far, five lawyers have been disbarred and two jailed in the saga. The Sixth Circuit has now ruled that a district court acted properly in freezing his assets. [Kevin Grasha, Cincinnati Enquirer; Daniel Gill, Bloomberg Law; McGirr v. Rehme] “All told, between his personal assets and the firm’s assets (of which he was sole owner), Chesley managed to lose over $90 million in assets over the course of a single year,” the court said. Of transfers raising “red flags,” some were made to Chesley’s wife, a federal judge; Judge Richard Suhrheinrich cited these in a footnote but said the court was not relying on them as a basis for its decision.

A “pattern of misuse of the judicial process…to obstruct collection efforts.”

Update on the long-running Kentucky fen-phen fee scandal: one-time “King of Torts” Stan Chesley has maneuvered for years “to avoid paying a multimillion-dollar judgment to hundreds of former clients. The Enquirer has found that Chesley’s legal maneuverings have led to more than $162,000 in sanctions against Chesley and his attorneys….The Ohio Supreme Court in an October ruling – one of two during the prolonged legal battle – said Chesley has engaged in a ‘pattern of misuse of the judicial process…to obstruct collection efforts.'” [Kevin Grasha, Cincinnati Enquirer, more]

Liability roundup

“Federal judge: Stan Chesley’s attorneys tricked me”

Deeper and deeper for the onetime Master of Disaster: “U.S. District Judge James G. Carr ordered Chesley and his attorneys to appear next month and explain why he shouldn’t find they committed fraud on the court. Carr says in court documents that Chesley and his attorneys designed a scheme to avoid paying former clients who successfully sued him because he took far too much compensation in attorney’s fees.” [Joe Rosemeyer, WCPO, Debra Cassens Weiss, ABA Journal; earlier]

Judge: Chesley on hook for damages to fen-phen clients

Former mass tort star Stanley Chesley “escaped criminal sanctions and so far has paid nothing for taking $7.55 million more than he was owed in Kentucky’s scandalous fen-phen case. But a Boone Circuit Court judge ruled this week that Chesley is liable for the uncollected portion of a $42 million judgment that former clients won in the diet drug case against three Lexington lawyers who defrauded them.” [Louisville Courier-Journal] Chesley “was disbarred in Kentucky but allowed to retire in Ohio.” [ABA Journal]

Ethics roundup

  • Eliciting false testimony among sins: “Ninth Circuit finds ‘textbook prosecutorial misconduct'” [Legal Ethics Forum]
  • Syracuse: jurors say insurance company lawyer observing trial got uncomfortably close [Above the Law]
  • South Carolina: “Prosecuting attorney is accused of dismissing charges in exchange for sexual favors” [ABA Journal]
  • Judge, handing down six-year sentence, calls defense lawyer’s briefing of witness a “playbook on how to lie without getting caught” [Providence Journal]
  • Kentucky high court reinstates $42 M verdict against lawyers for fleecing fen-phen clients [Point of Law] Accused of bilking clients, prominent S.C. lawyer surrenders license, pleads to mail fraud [ABA Journal]
  • Former Kansas attorney general accused of multiple professional violations: “Phill Kline is indefinitely suspended from practicing law” [Kansas City Star]
  • “Nonrefundable ‘Minimum Fee’ Is Unethical When Fired Lawyer Will Not Refund Any of It” [BNA]

“Stan Chesley: How a Single Case Dethroned the ‘King of Torts'”

Four-part series on rise and fall of front-rank mass tort lawyer Stan Chesley [WCPO]

Part one: How Chesley, born in modest circumstances in Cincinnati, helped pave the way for modern mass tort law by suing dozens upon dozens of defendants — in particular, makers of furnishings and furniture — over the Beverly Hills Supper Club nightclub fire (scroll for more). Advice from Robert Gettys, the only lawyer to hold out and beat Chesley in that case: “Don’t listen to his B.S.”

Part two: “in a 2004 interview, Chesley estimated his firm had recovered nearly $7 billion for clients since he began doing mass tort litigation in the 1970s.”

Part three: he dishes out generously to both Democratic and Republican parties in Ohio, as well as to philanthropies that subsequently undergo embarrassment when the Kentucky Supreme Court finds Chesley “engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation following the initial distribution of client funds and concealed unethical handling of client funds by others.”

Part four: “Chesley’s friends call his professional demise a ‘personal tragedy.’ But his detractors call him a bully who manipulates the media to help his causes. Plenty of local lawyers dislike him. Most, however, declined to be quoted. That’s partly because, although he’s no longer practicing law, Chesley still is married to a federal judge.” Also: why Jacquelyn McMurtry, a fen-phen claimant who attended the civil trial over fee finagling in the Kentucky case, doesn’t share the opinion of settlement guru Kenneth Feinberg that Chesley was somehow the victim of others’ fraud.

Kentucky disbars Stan Chesley

We told you the Kentucky fen-phen scandal — which we’ve been covering since 2005 — was serious. Now it’s resulted in the permanent revocation of the Kentucky license to practice of famed “Master of Disaster” tort specialist Stanley Chesley, whose office is across the river in Cincinnati, Ohio. Two lawyers who directly represented fen-phen clients in Kentucky, “Shirley Cunningham Jr. and William Gallion, are serving prison sentences for bilking clients out of $94 million in settlement money.” While Chesley did not represent Cunningham’s or Gallion’s clients, and denied holding any legal responsibility toward them, he accepted a $20 million fee, far in excess of negotiated sums, for representing the lawyers themselves in the settlement that brought in the cash, a sum that “was unreasonable, especially in light of his professed ignorance and lack of responsibility for any aspect of the litigation except showing up at the mediation and going through the motions of announcing the agreement,” the Kentucky Supreme Court concluded. Chesley participated in the diversion of the pilfered funds into a trust (pleasantly named “Kentucky Fund for Healthy Living“) intended to conceal the skimming, and helped orchestrate the lawyers’ cover-up. Wrote the court: “The vast amount of evidence compiled and presented in this matter demonstrates convincingly that respondent knowingly participated in a scheme to skim millions of dollars in excess attorney’s fees from unknowing clients.” [ABA Journal; court order, PDF; Louisville Courier-Journal; Daniel Fisher, Forbes; David Lat, Above the Law]