Destroying Documents: Fen-Phen Lawyers On Trial
8 CommentsBy Ed Silverman // June 2nd, 2008 // 7:05 am
One of three lawyers charged with plundering Kentucky’s $200 million fen-phen settlement for 440 people told a legal assistant to destroy documents showing how the clients were paid, the aide told a federal jury late last week, according to The Louisville Courier-Journal.
Rebecca Phipps testified that she instead locked the records in a cabinet and hid the key after attorney William Gallion told her “to get rid of the documents,” the paper writes. Phipps, who worked for another defendant, attorney Melbourne Mills Jr., but later turned government witness, offered the most dramatic testimony yet in the trial of Gallion, Mills and Shirley Cunningham Jr., who are charged with conspiracy to commit fraud.
The government is calling the case one of the biggest legal frauds in US history, and will present as many as 40 witnesses to show how the lawyers moved money between bank accounts, allegedly violating four laws and 13 ethics rules. Some of the money, went to buy cars, such as a Porsche.
The indictment also seeks damages of $45 million and the return of more than $20 million that the lawyers placed in a charitable fund that they paid themselves $149,800 each to manage. If convicted, the lawyers, who have pleaded not guilty, could receive up to 20 years in prison. The three lawyers have already been suspended from practice and slapped with a $42 million civil judgment.
Phipps, who was spared prosecution in exchange for her testimony, testified that Mills “laughed” when she told him about a plan Gallion came up with to pay the lawyers based on the maximum each client could have received, rather than the much smaller amounts they were actually paid.
“He was very pleased,” she said. But Mills was furious, Phipps continued, when he found out in January 2002 that the settlement had been for $50 million more than the $150 million that Gallion had told him. “He was upset, and I was scared,” she added. And then Phipps testified that a week later, Mills, at a celebration of his birthday, called Gallion “a liar and a thief” and asked him to leave the party.
Questioned by the defense, Phipps acknowledged she was promised immunity from prosecution by the government and was not required to return $1.4 million in fees she was paid by the lawyers. She also acknowledged that she 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, Hale Almand, suggested 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.
Phipps conceded on cross-examination by Mills’ counsel, James Shuffett, that Mills was drunk when he laughed at Gallion’s plan for increasing attorney fees. Asked by Almand, she also acknowledged that Gallion told Mills the $150 million was a preliminary offer, and that Gallion might have told Mills later, when he was drunk, that the final figure was $200 million.
Phipps said Mills was drinking “around the clock” about the time the case was settled in May 2001 and only later was hospitalized and treated for alcoholism. Mills, 77, was hospitalized this week for a possible heart condition but returned to the courtroom yesterday.
Phipps testifie that one of the defendant lawyers told her to settle cases with clients “for as low as possible” and that those with the most minor injuries, who could have gotten up to $95,000 each, instead were offered $15,000.
She said the lawyers told her they needed to preserve the $200 million settlement in case a national class action over the diet drug broke down and thousands of additional claims emerged. Lawyers for Wyeth, which sold the diet pills, have previously testified that wasn’t true.
Phipps’ testimony, portions of which emerged previously in a lawsuit filed against the lawyers by their former clients, further undercut the defendants’ claims that they paid out the additional money when various “contingent liabilities” failed to arise.
Paul
For the last few years whenever I heard a presentation about compliance or regulations the presenters would show a long list of the companies that have settled with the government for millions of dollars. The list includes the usual culprits, Tap, Lilly, BMS, Pfizer, etc.
Now we need a list of the plaintiff lawyers who have been found to “Cheatem, Dewit and Howe”. Either blatant cases like this one, or chest-pounding cases like some Vioxx cases where they had no good evidence but hoping to extort.
Justice in Michigan
Paul - This time we agree. There are plenty of scuz artists in both professions. And let’s not forget the trial lawyers who defend drug and device companies as well.
Re: Vioxx, I refer you again to the McDarby appeals decision that Ed recently posted here. I would be genuinely interested to hear whether you believe the appeals judges were wrong to uphold compensatory damages in that case. This goes for anyone else too who would like to comment.
It’s easy to wave flags - harder to wrestle with documented history (although I don’t suggest it is simple).
Paul
Thanks Paul, appreciate your agreement, especially coming from a law practitioner.
In response to your question, I don’t believe compensatory or punitive damages are warranted in any case where the plaintiffs cannot demonstrate cause and effect. I believe the laws permit them to claim damages even if the drug was only “contributory” in causing the damage, but where this was not proven, it doesn’t make sense to award anything.
I would go as far as demanding compensatory and punitive damages the other way. In other words, if a plaintiff brings a case that is clearly flawed and has non-existent or made up evidence (as in some phen-phen cases), or if jurors are paid off by plaintiffs, the they should pay not only for all of the defense costs, but also damages for loss of reputation, etc.
I am OK in bringing cases that have merit, but not OK in non-meritous cases that are brought for the sole purpose of extorting settlements. Not only bacause of the damage that they caus to the defending companies, but because they have indirect impacts on thousands of other patients who are denied valuable therapies.
Paul
Of course, I meant to say “Thanks Justice”
pg
“Either blatant cases like this one, or chest-pounding cases like some Vioxx cases where they had no good evidence but hoping to extort.”
Not perhaps the MOST diplomatic of phrases to use under the circumstances?
pg
What Vioxx cases involved ‘hoping to extort’?
Paul
pg,
Thousands of cases that were originally filed with no evidence of either harm (no MI’s or strokes) and/or no evidence of the patients having ever taken Vioxx.
Those were filed very quickly as part of the thousands of other cases hoping to be part of settlements.
Now that the big settlement was agreed to between the parties, with certain conditions requiring proof of damage and proof of Vioxx prescription…thousands of cases have magically disappeared.
pg
Well Paul, thanks for that. Could you give some examples of those cases which were proven to be attempts at extortion?
Asking because so often drug companies pay out using their ENORMOUS profits to ensure they win regardless of their having hidden data, that legitimate litigants (or their surviving relatives) have no chance even when they’re suffered harm - or death.
I understand that Murk made Vioxx look safer by “manipulating data” and feel that perhaps that it is they who should be considered as being the bad guys for doing so, but also understand that this way of thinking isn’t popular with Pharma guys. and that critisizing patients is a better game.