After 52 hours of deliberation over eight days, a federal jury yesterday declared it was hopelessly deadlocked in deciding whether attorneys William Gallion and Shirley Cunningham Jr. defrauded clients of $65 million in Kentucky’s 2001 fen-phen settlement.

After the judge declared a mistrial, the jury foreman, Donald Rainone of Erlanger, said jurors were stuck at 10-2 to acquit the defendants, and had been at that vote for much of their deliberations.

“We felt the prosecution just didn’t have a strong enough case,” Rainone said in a phone interview in which he strongly criticized the prosecution for being unprepared and focusing its case on only Gallion, Cunningham and a third lawyer, Melbourne Mills Jr.

“There’s a lot of people that had their hand in this,” he said. “There’s a lot of people that should have been on trial that weren’t.”

Rainone declined to say who else should have been on trial, saying he didn’t want to “get sued.”

Of course, that the prosecution failed to indict participants in the fen-phen scam who also stole from tens of thousands to tens of millions doesn’t explain why one votes to acquit the criminal defendant attorneys who stole millions–except for the fact that the defendants were able to blame the empty chair for their actions. If the defendants’ allegations about Stan Chesley’s role are half true, the question remains why Ohio disciplinary authorities have not so much as opened an investigation, much less failed to disbar him. But we will perhaps learn more as the civil trial progresses. Meanwhile, as Peter Bronson writes, “giving immunity to someone so powerful, wealthy and politically wired was everything that destroys public trust in the justice system.”

Judge William O. Bertelsman, who has taken senior status, has recused himself from the retrial; the new judge, Danny Reeves, will likely be requested to lower the eight-digit bond for Gallion and Cunningham, who remain in jail. Melbourne Mills, who was acquitted, says he has already spent the $20 million he was paid for his role in the case–a case his lawyer told a jury that he was too drunk to work on and didn’t understand the underlying law. Nice work if you can get it.

Off-the-record reports I am receiving about the trial blame prosecutors’ performance (such as failing to object to defendant expert opinion that contradicted the facts) and Judge Bertelsman’s instructions to the jury; it also seems to me that the defendants were given far too much leeway to argue the law before the jurors when the judge should have given a straightforward instruction that the underlying case was or was not a class action covering all future Kentucky claimants rather than allow argument over that simple legal question. (Answer: it wasn’t. The settlement with AHP explicitly says it’s a lump-sum settlement for existing plaintiffs requiring the attorneys to comply with Rule 1.8, and there is no indemnification provision contrary to defense testimony arguing otherwise.)

Ky. fen-phen foreman: “There’s a lot of people that should have been on trial that weren’t.” is a post from Overlawyered - Chronicling the high cost of our legal system

We hadn’t previously mentioned the testimony of American Home Products defense attorney Jack Vardaman that Stan Chesley tried to induce him to provide false testimony in the civil case, something else Chesley has suffered no consequences for.  (Jim Warren, “Witnesses detail fen-phen settlement”, Lexington Herald-Leader, June).  And we missed this fascinating negative pregnant exchange in Chesley’s cross-examination:

Gallion’s attorney, O. Hale Almand, asked Chesley if he believed he broke any law or rule of ethics.

Chesley said, “I certainly don’t know of any criminal law of the United States that I violated or that I’m guilty of.”

Nice dodge of the question about legal ethics, though the press doesn’t indicate if there was a follow-up question.  (Brett Barrouquere, AP/Lexington Herald-Leader, Jun. 18).  Chesley was given immunity to testify and promptly told the jury that it was appropriate for the defendants to withhold money from their clients in case new claimants came forward.  He also apparently lied in claiming not to be present at a settlement conference before Judge Bamberger where the fees were discussed.

And welcome readers of the Lexington Herald-Leader, which says, “Legal blogs and Web sites such as www.overlawyered.com have used the case to attack the legal profession as a whole.”  (Brandon Ortiz and Art Jester, “Jury still out on legal profession”, Jul.2). Of course, the Kentucky bar has done a perfectly good job of demonstrating itself worthy of attack for simply suspending attorneys that stole tens of millions of dollars from clients.  And Stan Chesley has faced no disciplinary consequences, much less criminal ones, for his role in the fraud, demonstrating the failure of legal disciplinary authorities to address the systematic problem of fraud in the plaintiffs’ bar.  When crime pays, one is justified in noting the problem of criminal behavior.

Melbourne Mills acquitted; jury deadlocked is a post from Overlawyered - Chronicling the high cost of our legal system

Little noted: while the attorneys stole at least $65 million from their clients, it’s very likely that they stole at least that much from Wyeth in getting a class certification in a personal injury case:

On the stand, [Bamberger] played the country judge who was in over his head in his first class-action lawsuit. But the evidence painted a shabbier picture.

It showed a judge who boasted about having the heaviest caseload in the state – perhaps because he was a plaintiffs’ judge, hand-picked by the fen-phen lawyers to take their side. On tape in his courtroom, Bamberger ranted about being “embarrassed” by low jury awards in Northern Kentucky.

At another taped hearing, Bamberger badgered the drug company’s attorney and pushed the plaintiffs’ case. He gave his local lawyer friends the class-action status they wanted, multiplying the liability jackpot.

Bamberger admitted that top class-action judges “said I shouldn’t be doing this, that it was not a class action.”

(Peter Bronson, “Even fen-phen horse has its own lawyer”, Cincinnati Enquirer, Jun. 1). Bronson also has more details on the bullying and buyout of an objecting plaintiff and appears to be the first print media to note that Bamberger has fingered Stan Chesley as being just as involved in the scam as the three Kentucky lawyers in the dock.

The WSJ Law Blog reports that the trial was delayed for a day due to health problems with defendant Melbourne Mills, who claims that the entire scam happened while he was hospitalized for alcoholism.

Separately, on Friday, legal assistant Rebecca Phipps testified that William Gallion told her to destroy documents; she denies claims that she threatened plaintiffs with jail for disclosing settlement terms. (Andrew Wolfson, “Diet-drug case witness says lawyer wanted documents destroyed”, Louisville Courier-Journal, May 31).

Two American Home Products defense attorneys refuted the plaintiffs’ attorneys claims that they were saving money in the $200 million settlement to handle future claims; AHP paid additional moneys to new claimants. One of the plaintiffs has testified that the firm told her to lie about where she got her settlement money from. (Andrew Wolfson, “Key diet-drug witness expected,” Louisville Courier-Journal, May 31).

What sort of straws are the criminal defense attorneys clutching at? “Phipps also acknowledged that she had exaggerated her role in the case when she asked the presiding judge to put her on the board of a charitable fund to which $20 million in settlement funds were transferred. [Gallion’s lawyer, O. Hale] Almand suggested that she lied so she could get $5,000 a month in director’s fees, as the lawyers were getting, but she said it was not about the money.” Aside from the humor of the “not about the money” claim, it’s interesting that the criminal defense attorneys are trying to discredit witnesses by indicating that they also wanted to steal money from clients for themselves.

Another victim in the Kentucky fen-phen settlement fraud is a post from Overlawyered - Chronicling the high cost of our legal system

Kentucky Fund for Healthy Living is a post from Overlawyered - Chronicling the high cost of our legal system

More from WSJ law blog: Mills’ lawyer tells jury his client “was hospitalized for an ‘alcoholic seizure’ a month after the case was settled, didn’t take part in any court hearings and was too drunk at the time to be responsible,” while prosecutor says “that Mills ‘sat back and laughed’ when the other two described a plan to overcharge the clients.”

Kentucky fen-phen trial opens is a post from Overlawyered - Chronicling the high cost of our legal system

Kentucky fen-phen lawyers are jailed is a post from Overlawyered - Chronicling the high cost of our legal system

Kentucky fen-phen court: “Chesley was paid more than he should have been” is a post from Overlawyered - Chronicling the high cost of our legal system

The attorneys accused of misappropriating more than $64 million from Kentucky’s fen-phen settlement initially withheld another $27.7 million, which they turned over to their clients only after the Kentucky Bar Association began investigating the case, newly filed court records show.

The additional payments also came after one of the lawyers — Melbourne Mills Jr. — discovered in January 2002 that the settlement was for $50 million more than the other two lawyers, William Gallion and Shirley Cunningham Jr., had told him, according to the records.

Mills was so angry that when Gallion showed up at his birthday party on Feb. 6, 2002, Mills called him “a thief” and insisted that more money be given to the clients, according to a deposition from Mills’ administrative assistant, Rebecca Phipps.

(Andrew Wolfson, “Lawyers held 2nd cache of diet drug settlement”, Louisville Courier-Journal, Feb. 11; Beth Musgrave, “Fen-phen ruling could come soon”, Lexington Herald-Leader, Feb. 13). Earlier coverage: Mar. 6 and Aug. 25, 2006, Jan. 24, 2007, etc.

Kentucky fen-phen scandal, cont’d is a post from Overlawyered - Chronicling the high cost of our legal system

The three lawyers accused of plundering Kentucky’s $200 million fen-phen settlement “tore up or burned” notes showing how much they paid themselves and their clients, according to one of the lawyers.

Depositions obtained by The Courier-Journal include Lexington attorney Melbourne Mills Jr.’s description of a secret meeting that he said he and lawyers William Gallion and Shirley Cunningham Jr., also of Lexington, held at Gallion’s house in 2001 to divvy up an extra $10 million beyond what they’d already paid themselves from the settlement. …

[Attorney Angela] Ford alleges that Mills’ description is a “dramatic indication of a cover-up.”

She has asked that those lawyers and another attorney, Stan Chesley of Cincinnati, who helped negotiate the settlement, be forced to surrender $62.6 million in funds they allegedly misappropriated — as well as $59.5 million they paid themselves in fees….

Kentucky courts have never required a lawyer to “disgorge” or return a fee for misconduct, but courts in other states have done so, according to Ford’s motion….

Chesley, who was hired by the Lexington lawyers to negotiate the settlement, said he had no reason to question why he was paid $20.5 million — $7 million more than his contract outlined — in part because he could not “believe that these good folks would have sent me more money than I was entitled to.”

In her motion to force the lawyers to give up their fees, Ford said the defendant lawyers, including Chesley, breached their duties in a “spectacular and unparalleled way” by giving only about one-third of the settlement to the clients.

“The facts of this case truly are as egregious as it gets,” she said in court papers. ..

Since the settlement, Gallion and Cunningham have both become permanent residents of Florida, a state that Ford notes allows debtors to keep their homes when they take bankruptcy.

Stanley Chesley was, and remains, one of the most famous plaintiff’s lawyers in the United States and a major powerbroker in national Democratic politics. The article also sheds further light on the close ties between now-disgraced Judge Joseph F. (“Jay”) Bamberger, who approved the Kentucky fen-phen settlement and has since resigned, and the plaintiff’s team in the litigation. (Andrew Wolfson, “Lawyer: Fen-phen notes destroyed”, Louisville Courier-Journal, Jan. 21).

More: a companion piece in the same paper profiles the Cincinnati-based Chesley (Andrew Wolfson, “A breach of duty; wealth mounts for ‘prince of torts'”, Louisville Courier-Journal, Jan. 21)(via Lattman).

Lawyer: guess maybe we burned that fee documentation is a post from Overlawyered - Chronicling the high cost of our legal system

Mills was recently in the news because he won a suit against a secretary who claimed (with the help of a recording) that he promised her an “Erin-Brockovich”-style payment for her help in the settlement. (Brandon Ortiz, “Ruling benefits Melbourne Mills Jr.”, Lexington Herald-Leader, Apr. 4). (cross-posted at Point of Law)

Kentucky fen-phen lawyers suspended is a post from Overlawyered - Chronicling the high cost of our legal system