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The Associated Press

01-23-2007

One of three lawyers accused of plundering Kentucky's $200 million fen-phen settlement said he and his colleagues "tore up or burned" notes showing how much they paid themselves and their clients.

Depositions obtained by The Courier-Journal include Lexington attorney Melbourne Mills Jr.'s description of a 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.

"Did Mr. Gallion or anyone else talk about discussing that information with anybody else?" Mills was asked by attorney Angela Ford, who now represents the three lawyers' former clients.

"We all agreed to keep it a secret," Mills said. "I think we either tore up or burned the pages it was written on." 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 as well as $59.5 million they paid themselves in fees.

"Given the damage that these attorneys have done to the profession, allowing them to keep any portion of their fees would be truly unconscionable," she said in a motion to be heard Feb. 12 in Boone Circuit Court.

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.

The initial fen-phen lawsuit was filed in 1998 in Boone County, shortly after one of the drugs in the diet medication was withdrawn from the market when it was shown to cause heart disease. By the time it was settled in May 2001, 440 people had joined the litigation.

In January 2005, after questions surfaced about the settlement, about three dozen of the former plaintiffs sued their former lawyers, demanding an accounting.

More than 400 plaintiffs eventually joined that suit, filed by Ford.

In court papers, the lawyers and Mills have denied any wrongdoing, although all but Chesley were temporarily suspended from practice in August. And in March, the three Lexington lawyers were found to have breached their duty to their clients by paying themselves far more than set out in their contracts with clients and "passing out money to themselves and others like it was theirs to do with as they wish."

Asked about Mills' contention that documents were destroyed, William Johnson, who represents the Lexington lawyers, said: "I don't know that it was done. I just know that he said it."

Jacquelyn McMurtry, the lone plaintiff from Louisville, said she was "flabbergasted" by the disclosure, although "this just confirms what we thought all along."

Plaintiff W.L. Carter, 51, of Lawrenceburg, said he wasn't surprised by the disclosure, but he added: "The very confidence I have in our justice system has been shaken. You should be able to trust your attorney to do the right thing."

Mills said that Gallion and Cunningham wanted to keep the distributions secret. Mills also said -- as he did in his deposition -- that those two lawyers told him the case had been settled for $150 million, not $200 million. Johnson said the lawyers had called Mills on the night the settlement was negotiated and mentioned the lower figure before the final deal was struck for the larger amount.

Recently filed depositions shed additional light on the case:

Boone County Judge Joseph Bamberger, who approved the $200 million settlement, said in his deposition that the lawyers never told him how much they were paying themselves and that he approved the settlement without reading it.

Bamberger was forced to resign last February and publicly admonished for his handling of the case -- conduct that the Judicial Conduct Commission said "shocked the conscience."

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.

No charges have been filed against any of the attorneys. But Ford said she has provided information to the FBI and U.S. attorney's office in Lexington.

The civil case is set for trial in September.