May 2008

US District Judge L.J.Senter on Wednesday issued an order disqualifying Lumpkin & Reeves, PLLC from representing Thomas and Pamela McIntosh in McIntosh v. State Farm. The order was the latest pursuant to his April 16 opinion and order disqualifying the SKG firms and “any other associated counsel.”. He acknowledged that he intentionally used broad language in his April 16 order because it was unclear at the time to what extent other lawyers were involved, and that he would consider requests for relief on a case-by-case basis. In this case, he made it quite clear that Lumpkin was involved, and he sharply criticized the firm for “two glaring omissions” which failed to honestly describe its previous role in the litigation. He concluded:

This Court is not going to turn what should be straightforward litigation into a continuing and time-consuming exercise of reviewing attorney conduct. There is sufficient involvement with the KLG-State Farm Katrina litigation cases to qualify Lumpkin as “other attorneys associated as counsel for the plaintiffs by these [disqualified] firms.”

Fomer Alaska Republican state Representative Vic Kohring was sentenced last week to 42 months in prison by US District Court Judge John Sedwick in Anchorage for taking bribes as part of a scheme to keep Alaska oil taxes down. In November 2007 a jury convicted Kohring of bribery, attempted extortion, and conspiracy for soliciting and receiving multiple cash payments from executives of VECO Corporation, the now-defunct oilfield services company that was once the state’s largest, in exchange for his vote on a key oil production tax proposal and his agreement to lobby other legislators. Kohring is the third state Republican legislator to be sentenced to prison in the ongoing corruption investigation. Two top VECO executives and one former
lobbyist have already pleaded guilty. The VECO executives, former CEO Bill Allen and VP Rick Smith, are also cooperating and have implicated US Sen. Ted Stevens and his son, former Alaska state Senate President Ben Stevens; they have denied wrongdoing. US Rep. Don Young is also under investigation.

Kohring’s defense strategy was to claim the money he accepted was just gifts from friends, not bribes. At the sentencing hearing, he was defiant in proclaiming his innocence. His attorney characterized him as being like Andy Griffith, to which AUSA Joe Bottini responded, “”I don’t remember any episode of that show where Andy Griffith took cash from anybody” (Anchorage Daily News, DOJ).

At the request of the US Attorney’s Office, on Monday in Los Angeles US District Judge Robert Takasugi dismissed all charges against Eutiquio Sauceda of Downey, California and Gabriel Camacho of El Monte, California. The two men had been indicted in 2003 on counts of conspiracy and making false statements to a US government agency for allegedly falsely certifying the quality of parts used by commercial aircraft, NASA and the Pentagon; the alleged incidents date back to 1999. They had been scheduled to go on trial next month. No reason was given for the dismissal, but Camacho had turned down a plea that would have involved no prison time. Both men were managers at Temperform USA, a subsidiary of Hydroform USA. The men had been accused of ordering their employees to falsely state that parts had been properly heat treated. Temperform and Hydroform were also indicted; Temperform pleaded guilty in September 2004, paid a fine and closed down, but all charges against Hydroform were later dropped (San Francisco Chronicle).

US District Judge Arthur Tarnow last Thursday denied the request of acquitted former federal prosecutor Richard Convertino to order the government to pay his legal fees and to sanction prosecutors for disclosing records Tarnow had ordered sealed. Convertino was indicted in 2006 on conspiracy, obstruction of justice and perjury counts in connection with his alleged presentation of false evidence and concealment of exculpatory evidence in the prosecution of two Detroit men accused of being terrorists. The men were convicted but the verdicts were thrown out by government request after the USAO investigated and determined that the terrorism charges were baseless.

After Convertino was acquitted on all counts by a jury last October, he moved in January to have his defense costs reimbursed on grounds that the DOJ’s decision to prosecute him was “vexatious, frivolous or in bad faith.” However, Tarnow ruled that Convertino had failed to meet “the defendant’s heavy burden” to show that the government acted in bad faith by indicting him. He also noted that his order sealing the records applied to the trial, and that the sealed records had been introduced after the trial in response to Convertino’s attorney fee request. The records allegedly showed that Convertino had repeatedly lied about his credentials (ABA Journal, Detroit News).

As expected (earlier), Emperor’s Club booking agent Temeka Lewis pleaded guilty on Wednesday to conspiracy relating to prostitution and money laundering, in connection with the prostitution ring operated out of the club which serviced Eliot “Client 9″ Spitzer. Her plea was entered in Manhattan before US Magistrate Judge Theodore Katz; she read a prepared statement admitting that prostitutes traveled across state lines to meet with clients. Her plea agreement calls for cooperation with prosecutors; her attorney said that she has not yet testified before a grand jury and is “ready to receive direction from the government.” She could be sentenced to as much as 25 years in prison but under sentencing guidelines she could serve 16 months or less depending on the level of her cooperation. It is still not known if Spitzer will be charged, but as the NYT notes, with her co-defendants apparently close to plea deals, Lewis’ cooperation could very well take the form of testimony against Spitzer or others not yet indicted. More here from Reuters.

“Few could run with him, and none were better.” — Dan Rather, who hired Stone at KHOU in 1961. The Houston Chronicle has the obituary here.

US District Judge Vanessa Gilmore on Monday scheduled retrials for former Enron Broadband Services executives Joseph Hirko, Rex Shelby and Scott Yeager. Hirko and Shelby will be retried on November 3, 2008, while Yeager’s retrial is set for January 12, 2009. In March, a three-judge panel of the Fifth Circuit ruled that Gilmore was correct in refusing to dismiss most of the remaining charges against Hirko and Shelby and all the remaining charges against Yeager (earlier) after jurors were hung on many counts; the three were acquitted on some counts. Attorneys for all three defendants indicated on Monday that they will appeal the Fifth Circuit ruling to the US Supreme Court and will ask Gilmore to delay the retrials if a hearing is granted (Houston Chronicle).

In an opinion published Monday, the US Court of Appeals for the Eleventh Circuit upheld the convictions and prison sentences of Joya Williams and Ibrahim Dimson for conspiracy to commit theft of trade secrets. Williams, an executive assistant at Coca-Cola in Atlanta, was convicted in February 2007 of taking confidential trade information from Coke and trying to sell it to Pepsi through her friend Edmund Duhaney and Dimson. Pepsi contacted the FBI after being contacted by Dimson. Williams was sentenced to eight years in prison; Dimson received a five year sentence. Duhaney, who pleaded guilty and cooperated with prosecutors, was sentenced to two years in prison.

The appellate court rejected Williams’ claims that the presiding judge violated her Sixth Amendment rights by limiting her cross-examination of Duhaney and improperly instructed the jury on the meaning of reasonable doubt. The court also rejected Williams’ and Dimson’s claim that their sentences were unreasonable compared to Duhaney’s two-year sentence (AP/Forbes).

Temeka Lewis, primary booking agent for the Emperor’s Club, reportedly will plead guilty in US District Court in Manhattan this week to charges of money laundering conspiracy and conspiracy to commit interstate travel in aid of racketeering, in connection with the prostitution ring operated out of the club. Three others have been charged and two of them are also said to be near plea deals. The fate of favorite customer Eliot “Hoist by His Own Petard” Spitzer apparently has not yet been decided (NYT).

The US Court of Appeals for the Ninth Circuit has upheld the dismissal of a 64-count indictment against Daniel Chapman and Sean Flanagan, two attorneys charged in 2003 in what was described as a complex securities trading scheme, because the prosecution withheld 650 pages of potentially exculpatory evidence, lied about it, and turned it over only after the indictment had been dismissed. US District Judge James Mahan dismissed all the charges in 2006 and ruled that a retrial would prejudice the defendants. The appellate court also refused to order a retrial. In the decision, Judge Kim Wardlaw called the Nevada USAO’s actions “prosecutorial misconduct in its highest form; conduct in flagrant disregard of the United States Constitution; and conduct which should be deterred by the strongest sanction available” (National Law Journal).

Andrew Parker of San Antonio, the equipment exporter recently indicted for defrauding the Export-Import Bank of the US (earlier), was dating an employee of the bank. Parker was seen in public in DC with Mary Beth Adamchik “together in a very affectionate way.” And her title at the bank? “Relationship Manager.” No, really. She has not been charged, but federal authorities have been investigating her background and finances, and she resigned in February after being placed on administrative leave in January because of “a possible inappropriate relationship” between her and Parker. A bank spokesman claimed that she had no authority to approve or underwrite transactions, but the position paid $98,000 annually. Apparently a “Relationship Manager” doesn’t come cheap (San Antonio Express-News).

On Friday, US Magistrate Judge Nancy Nowak denied Parker’s request for release on bond pending trial. The Express-News described the hearing details as “worthy of a movie script,” including Parker’s alleged attempt to recruit an accomplice to “break legs” of his enemies and an alleged threat made against the attorney of a co-conspirator who is now cooperating with the FBI. The FBI agent who testified at the hearing identified Mary Beth Adamchik as a cooperating witness in the case and said that Parker gave her hush money.

Jerry Mitchell’s Sunday Clarion Ledger story asserts that DOJ officials are considering racketeering charges against Dickie Scruggs in connection with the Wilson v. Scruggs asbestos fee dispute case involving the alleged corruption of Hinds Circuit Judge Bobby DeLaughter. The article is short on detail but the investigation has been active. Joey Langston pleaded guilty in January to offering a bribe to DeLaughter on behalf of Scruggs in the case.

Lest we forget, in Scruggs’ March plea hearing in the Lackey bribery case, AUSA Thomas Dawson stated “I want to make it painfully clear that the investigation with respect to the Wilson matter that is currently under investigation — that this plea agreement and this plea has no affect with respect to any charging decision or subsequent prosecution with respect to that case.” Mitchell does report that Scruggs apparently rejected a plea deal in March that would have included the Wilson case along with his plea in the Lackey case.

Stay tuned.

Two former principals of now-defunct Brooklyn-based Olympia Mortgage Corporation were indicted on Thursday by a federal grand jury in Brooklyn in two separate mortgage fraud schemes. In one, Leib Pinter was charged with conspiracy and wire fraud in connection with the theft of $44 million of payoff proceeds for 257 refinanced home mortgage loans funded by Fannie Mae and serviced by Olympia; he allegedly misappropriated the funds that were to be used to pay off the original loans. In the second, Barry Goldstein was charged with conspiracy and bank fraud in connection with Olympia’s sale of a portfolio of 12 nonperforming mortgage loans to Credit Suisse using falsified loan histories; the amount of loss was not specified. Each count carries a possible maximum sentence of 30 years in prison. Both Pinter and Goldstein pleaded not guilty at their arraignment before US Magistrate Judge Joan Azrack and were released on bond (Newsday, Reuters).

US Office of Special Counsel head Scott Bloch, whose office and home were raided on Tuesday by the FBI, ordered his agency’s own task force to stop an investigation it had begun into the prosecution of former Alabama Governor Don Siegelman. The task force was formed at the agency last year to pursue political investigations in Washington, including whether the White House played politics in firing nine US Attorneys and whether the White House improperly sponsored political briefings at federal agencies. The previously undisclosed investigation came to light in a memo (.pdf) written in January by the four task force attorneys and their three senior advsors and obtained last week by the nonprofit Project on Government Oversight. The memo states that in September and into October 2007, the task force worked to obtain publicly available evidence about the allegations, including the sworn statement and testimony before Congress of former Alabama Republican Party operative Jill Simpson, and had created an investigation plan to include information to be requested from the DOJ. But on October 11, Bloch ordered the investigation closed immediately because he did not authorize it. On October 15, “after concerns are expressed that OSC simply cannot close a file without conducting an investigation,” the task force was directed “to not further investigate this case and to wait for further instructions from the Special Counsel.” As of the January 18 memo, the task force was still requesting authorization to continue.

The AP/Birmingham News story quotes Siegelman: “The question is who told them to shut it down. Why would you start an investigation and let it proceed and then shut it down? The logical conclusion is that somebody intervened and told them to shut down the investigation.” The WaPo story here also discusses other investigations covered in the memo.

A three-judge panel of the US Court of Appeals for the Third Circuit on Thursday voted unanimously to stay indefinitely the retrial of former Allegheny County Coroner Cyril Wecht while it considers defense motions in the case. The ruling is a slap in the face of U.S. District Court Judge Arthur Schwab, who presided over Wecht’s trial. The retrial was scheduled to begin on May 27. The principal issue on appeal is the defense motion for dismissal, which contends that Schwab failed to follow proper federal procedures in declaring a mistrial and immediately ordering a retrial, violating Wecht’s constitutional protection against double jeopardy. Among other pending issues are a defense motion to remove Schwab and a local media appeal to force Schwab to follow an earlier Third Circuit order to release juror names (Pittsburgh Tribune-Review, Pittsburgh Post-Gazette).

US District Court Judge Robert Blackburn on April 29 sentenced 72-year-old Norman Schmidt of Denver to a mind-boggling 330 years in prison and ordered him to forfeit more than $38 million for his central role in a $56 million high-yield investment scam that allegedly defrauded about 1,000 investors. A jury convicted Schmidt in May 2007 on 37 counts including conspiracy, mail fraud, wire fraud, securities fraud and money laundering. Schmidt and his co-defendants — his wife Jannice and 5 others — allegedly used most of the investor funds for their own personal gain. In written response to an earlier government recommendation for such a sentence, Schmidt’s attorney Thomas Hammond called it outrageous and unreasonable and said it “threatens to make a mockery of the federal sentencing process” (Denver Post, Denver Bizjournal, DOJ).

One day later, 72-year-old defendant Charles Lewis was sentenced by Judge Blackburn to 30 years in prison for his role (Denver Post). Blackburn previously sentenced Jannice Schmidt to nine years in prison.

Hat tip to AUSA Mark Barrett for forwarding this story to us.

According to court filings made on Thursday, State Farm has settled Hurricane Katrina lawsuits out of court with 13 homeowners who were formerly represented by Dickie Scruggs or other member firms of the former Scruggs Katrina Group (now known as the Katrina Litigation Group). Scruggs is now a convicted felon and the remaining firms were disqualified in April by US District Judge L.J. Senter, whose order also applied to any law firm even peripherally involved with SKG. The negotiations were initiated or reopened by State Farm, and the 13 homeowners all represented themselves. Terms of the settlements were not disclosed (Houston Chronicle/AP).

On April 22, as we noted here, the Pittsburgh Tribune-Review, Pittsburgh Post-Gazette and WPXI-TV asked the US Court of Appeals for the Third Circuit to overturn US District Judge Arthur Schwab’s decision not to release the identities of jurors in the case of of former Allegheny County Coroner Cyril Wecht until after the case is resolved. That appeal was successful, but attorneys for the three media organizations on Monday filed an emergency appeal with the Third Circuit because Schwab allegedly has not followed through with the appellate court order. This would apply to jurors who heard the first trial and to the voir dire for the second trial, still scheduled to begin May 27 (Post-Gazette).

A jury in US District Court in Miami on Monday convicted Nicholas Bachynsky on one count of conspiracy, three counts of wire fraud and one count of securities fraud after a six and a half week trial. The charges arose from a cancer cure marketing scheme that raised $6 million from investors, most of whom lost all their money. Bachynsky was cofounder and medical director of Helvetia Pharmaceuticals, which was launched in 2001 to administer and develop a cancer treatment in Europe known as intracellular hyperthermia therapy. Helvetia solicited investors with significant misrepresentations, including falsifying results of unsuccessful laboratory and clinical trials to claim that the therapy was successful, and making false claims that Helvetia owned exclusive rights to the therapy when Bachynsky had actually sold the rights years before to a former business partner. Most of the $6 million in investor funds was converted for personal use by Bachynsky and his three co-defendants, all of whom have previously pleaded guilty. Bachynsky is scheduled to be sentenced on September 5 before US District Judge Adalberto Jordan (South Florida Business Journal, DOJ).

Since US District Judge Sim Lake refused to answer last week’s private letter from attorney Lloyd Kelley asking him to recuse himself and gave the letter to the USAO instead (earlier), attorneys for convicted former Dynegy executive Jamie Olis on Tuesday filed a recusal motion in US District Court in Houston.

The Houston Chronicle/AP story notes that Olis is scheduled for release in August 2009. Due to the repeated and obstinate delays by the both the USAO and Lake, we would be surprised if the appeals process is completed by then.

“She walked into the vault and took stacks and stacks of money.” That’s how AUSA Susan Dowd described the actions of Patricia Sherman of New Albany, Indiana, former head teller for Obelisk Federal Credit Union in New Albany. Willie Sutton would have pointed out that that’s where they keep it. Sherman, who had pleaded guilty to a single count of embezzlement by a credit union employee, was sentenced on April 25 to 97 months in prison by US District Judge David Hamilton in New Albany. She admitted embezzling $7 million from Obelisk over a 46 month period starting in 2003 until she was caught in early 2007. According to the DOJ press release:

She accomplished her embezzlement by taking large amounts of currency from the vault, secreting it on her person and taking it out of the credit union. She was able to conceal the embezzlement by making journal entries to the Vault Cash account whenever there was an audit or cash count by the credit union supervisory committee and then making adjusting entries after those counts were completed. In addition, when Sherman was going on vacation or had jury duty, she would make an entry to the cash account before she left so that it would properly reflect the amount of cash in the vault; when she returned, she would reverse the entry. As Head Teller she was responsible for ordering and accounting for all cash replenishments for the credit union. She was also responsible for reconciling and overseeing vault activity. She also was responsible for the general ledger and reconciling the vault cash account to the physical count of cash on hand.

As a direct result of Sherman’s actions, Obelisk had to merge with another credit union in July 2007 after the NCUA placed it into conservatorship and determined that it was no longer viable. Judge Hamilton stated “This is a theft, a case of grand theft, on an astonishing scale, driving what had been a healthy credit union into insolvency” (News and Tribune).

In Philadelphia on Friday, Carl Spitko, former CEO of two suburban Philadelphia area electronics companies, pleaded guilty to  to 11 counts of bank fraud and two counts of aiding and abetting in connection with a scheme to defraud Wachovia Bank and a predecessor of nearly $1.5 million between 2001 and 2005. He was indicted in January 2007. Spitko’s Maintech Inc. manufactured and distributed laminators for the printed circuit board industry. He had a line of credit with Wachovia secured largely by Maintech’s accounts receivable. He admitted lying about the amount of money in Maintech’s accounts, hiding money and property from the bank and opening up a second company, Sentek, to use and sell Maintech’s assets without paying back the bank. Spitko is scheduled to be sentenced on July 31;he faces a sentence in the range of 46 to 71 months in prison, according to the USAO in Philadelphia (Philadelphia Business Journal, DOJ).

FBI agents today executed search warrants at the Office of Special Counsel in Washington, shutting down the office’s email service and seizing computers and documents. Scott Bloch, who heads the Office, is apparently the target of the raid. Bloch’s suburban Virginia home was also raided.

The independent agency has the responsibility of enforcing protection of federal civil service employees from politicization. Bloch has been under investigation since 2005 in connection with employees’ claims that he retaliated against them after it was leaked that he refused to investigate whistleblower cases which claimed sexual orientation-based discrimination. He is also under investigation for obstruction of justice in connection with hiring of an outside contractor to scrub his computer in December 2006. At the same time, his office has been investigating the firings of eight US Attorneys and he has complained to AG Michael Mukasey that the DOJ is impeding his office’s investigation. WSJ, AP, NPR.

Attorneys for convicted former Dynegy executive Jamie Olis on Friday filed a Response to the government’s answer to his §2255 Motion To Vacate. From the Introduction:

The government’s Answer starts with the cynical assertion that Olis should suffer a procedural default because the United States Attorney’s Office (“USAO”) successfully deceived Olis and his attorneys by concealing its interference with Olis’s lawful access to defense funding. From there, the Answer devolves downward. Contrary to the government’s contentions, the record establishes that (1) the USAO violated Olis’ fundamental rights by interfering with his access to defense funding; (2) the government constructively and impermissibly amended the indictment; (3) the government presented false testimony from Jeffrey Heil, a key government witness; (4) the petit jury included an admittedly biased and unrehabilitated juror; (5) the jury instructions erroneously defined the elements of wire fraud and mail fraud; and (6) Olis received ineffective assistance of counsel.

The response also asks for reconsideration of his motion for discovery in connection with the §2255 motion; US District Judge Sim Lake denied the motion for discovery in March. Also pending is last week’s request by Olis’ attorney Lloyd Kelley that Lake recuse himself.

There has been no news of late in the ongoing federal bribery investigation of Judge Bobby DeLaughter, former Hinds County DA Ed Peters and Dickie Scruggs in connection with the Wilson v. Scruggs state asbestos fees case, but there is an April 22 filing in the fees case which is of interest. Wilson’s motion for sanctions filed by his attorney Vicki Slater lays out the allegations of bribery in much greater detail than previously revealed in Joey Langston’s guilty plea in January. Of particular interest is a description of how information was allegedly passed between Scruggs’ associates and DeLaughter via Peters and how the rulings were previewed and worked out in advance. The motion asks that all Scruggs’ pleadings after January 2006 be stricken from the case and that all DeLaughter’s rulings after January 2006 favoring Scruggs be declared null and void.

Laura I. Flores of Arlington, Virginia, a former congressional office manager for House Democrats Jane Harman of California and Neil Abercrombie of Hawaii, was sentenced on Friday to six months in prison for wire fraud by US District Judge Leonie M. Brinkema in Alexandria. Flores, who pleaded guilty to a single wire fraud count in January (earlier), admitted receiving approximately $200,000 from false expense vouchers she submitted during 2005 and 2006 and diverting the funds to her personal account.

The Washington Post story here reports that prosecutors filed petitions to reduce her sentence because she is helping them with a previously unreported investigation into whether members of Congress used phones, supplies and staff time for campaign purposes. The motions were filed under seal.

John Torkelsen of Princeton, New Jersey, a former expert witness in
numerous class action securities cases for several law firms including the former Milberg Weiss (now Milberg LLP), on Thursday pleaded guilty to a single count of perjury in US District Court in Philadelphia. A plea agreement had been reached in February (earlier). The single perjury count arose from a case filed in US District Court in San Jose,California in which Torkelsen submitted a false declaration that he was an independent agent under a non-contingent arrangement with plaintiff’s counsel, when he was actually being paid on a contingency basis under a secret agreement.

Torkelsen is currently serving a 70 month prison sentence for stealing SBA funds in an unrelated case. He faces up to five years in prison on the perjury count; sentencing has been scheduled for August 5 (Law.com, Reuters).

Convicted former Dynegy executive Jamie Olis’ §2255 Motion to Vacate is pending before US District Judge Sim Lake (earlier). The Houston Chronicle’s Legal Trade blog reports that Olis’ attorney Lloyd Kelley has written Lake a seven-page private letter asking him to recuse himself:

Kelley’s basic argument seems to be that Lake was too close to the late Mike Shelby, who was the local U.S. Attorney when Olis was prosecuted. Shelby suffered greatly with cancer and eventually took his own life. Kelley notes that Lake and Shelby went to the same schools, served in the military and worked at the same law firm (all at different times) and that Lake swore in Shelby. Kelley argues that Shelby’s demise must cloud Lake’s judgment on the Olis case.

Kelley had requested that Lake respond by Friday (Olis’ reply to the government’s response to his motion is due Monday), but Lake on Thursday filed an order giving the letter to the US Attorney’s office and asking for a response within 20 days.

Andrew Parker of San Antonio, who owns an equipment exporting company called San Antonio Trade Group, Inc., was indicted this week by a federal grand jury in San Antonio in connection with an alleged scheme to defraud the Export-Import Bank of the US. The 28-count indictment includes one count of conspiracy, nine counts of wire fraud, two counts of use of a false document, 12 counts of money laundering, two counts of tax evasion, and two counts of filing a false income tax return.

The Ex-Im Bank helps US companies export products by guaranteeing loans made by private banks to foreign businesses who use the proceeds to buy the products. Parker is accused of causing multi-million dollar losses to the Ex-Im Bank by falsifying loan applications, submitting false reports that goods were bought with the loans, and diverting millions of the loan proceeds for his personal use. In some cases, associates in Mexico allegedly received the proceeds as direct cash payments; in other cases, the businesses allegedly did not exist. Investigators say Parker and his company are involved in more than $163 million in loans and allege that none have yet been found to be legitimate (San Antonio Express-News, DOJ).

Convicted spammer Eddie Davidson of Louisville, Colorado was sentenced to 21 months in prison on Monday by US District Judge Marcia Krieger in Denver. He was also ordered to pay $714,000 to the IRS. Davidson was indicted in May 2007 in connection with a 5 year long operation during which he allegedly sent hundreds of thousands of spam emails on behalf of 19 clients who paid him at least $3.5 million. The spam, which promoted penny stocks and merchandise such as cheap watches and perfume, was sent with fake email headers to disguise the source. He pleaded guilty in December to charges of tax evasion and falsifying email headers in violation of the CAN-SPAM Act (PC World, DOJ).

It’s slo-pitch season at the Biloxi Sun-Herald. Anita Lee’s Sunday interview with Cori and Kerri Rigsby lobbed such softballs at the sisters that the paper acted as their mouthpiece, allowing them to deliberately misrepresent what occurred and failing to ask some very pertinent questions.

“I guess they’re going to get away with hiding the truth,” Kerri Rigsby said. “That’s what they’ve been trying to do the whole time. There is no justice. How is State Farm now the good guy?”

In fact, no one is claiming State Farm is the “good guy.” State Farm may possibly have unfairly denied some claims or even engaged in a pattern of unfair claims practices. But that has not been established one way or the other in a court of law. And why not? Because the whole modus operandi of Dickie Scruggs and his stooges has been to extort settlements from companies before cases are heard, preventing evidence from being examined and facts from being established. He files class action lawsuits with the intention of intimidating companies into settling; he operates hand-in-hand with cronies who present themselves to the defendants as shakedown artists “facilitators” to negotiate settlements. The Rigsby Sister Act was an essential part of the process in the Katrina cases.

The Rigsbys wish they had known what they were getting into. They found out after the fact that whistle-blowers suffer a common fate: retaliation, lost wages, stress and more stress.

In fact, the Rigsbys are not whistleblowers. On April 4, US District Judge L.J. Senter ruled that they wrongfully appropriated the documents. He excluded the documents and disqualified the sisters from testifying. The effect of his ruling is that their actions were not protected whistleblower actions under the False Claims Act. If ex rel. Rigsby somehow is allowed to continue, which is highly doubtful since the US Attorney has so far declined to join the case, it will be in spite of the Rigsbys.

The report’s conclusions about the timing of surge and wind dovetailed with a State Farm “wind-water protocol” vetted and edited by corporate executives and attorneys in Bloomington. The protocol, an internal company document…

In fact, the anti-concurrent causation clause is part of the standard policy language, not some secret company plot to ignore policy language.

The sisters said they were naive in February 2006 when they first reported in a meeting with policyholders’ attorney Dickie Scruggs…

The Rigsbys …went to Scruggs, taking with them records from State Farm files. They had begun saving and copying the records in the fall of 2005.

In fact, they used a list of Dickie Scruggs’ clients to determine what documents to steal, months before they allegedly first met him. It’s in their own depositions. Yet Ms. Lee repeatedly fails to challenge them.

In a related puff-piece, the Sun-Herald reports here on the Rigsbys’ latest response in the qui tam case.

Attorneys for James Dierker, one of the five National Century Financial Enterprises executives convicted on March 13, on Tuesday filed a motion for acquittal based on claims of newly discovered evidence; alternatively they asked that he be granted a new trial. Dierker testified during the trial that he was unaware of any fraud. Tuesday’s motion asserts that prosecutors withheld SEC documents that would have supported his defense. The documents allegedly show that Dierker relied on opinions of outside auditors who failed to properly evaluate company records, leading him to believe the company was sound (Columbus Business First).

Dierker is the only one of the four rearrested executives who was allowed out on bond pending sentencing. He was National Century’s associate director of marketing and vice president of client development, a lesser position than the other convicted executives, and he faced fewer charges. He was found guilty on one count of conspiracy to commit securities/wire fraud and three counts of money laundering.