Articles by Dave Westheimer

“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.

Five jurors from the mistrial of former Allegheny County Coroner Cyril Wecht held a news conference on Monday to speak about the trial and its aftermath (WTAE-TV raw video here). The bottom line: they believe the prosecution was politically motivated; they were disturbed by the actions of lead FBI investigator Brad Orsini; they felt demeaned when prosecutors immediately requested and Judge Schwab granted a retrial without even polling them and before they were even dismissed; they were treated well during the trial by Judge Schwab but felt he was biased against the defense; and they are opposed to a retrial (WTAE-TV text), Pittsburgh Post-Gazette).

On Tuesday Judge Schwab denied the defense’s motion for dismissal on double jeopardy grounds and refused to delay the retrial, which is scheduled for May 27 (Post-Gazette). Wecht’s attorneys immediately appealed that ruling to the US Court of Appeals for the Third Circuit and filed another motion asking Schwab to delay the retrial until the Third Circuit rules (Philly Inquirer).

Angela Isley of Atlanta, former COO of medical supplier Orthoscript, Inc., was convicted on Monday by a federal trial jury in Atlanta on 52 counts including health care fraud, mail fraud and money laundering. Isley was indicted in February 2007 in connection with a three year scheme in which she allegedly submitted $600,000 in fraudulent claims to Medicare and embezzled $360,000 to pay her and her partner’s credit card bills. The Medicare billing fraud involved assigning incorrect product codes to certain products to obtain higher reimbursements.The embezzlement entailed coding company checks as legitimate business expenses while using them to pay her bills. Sentencing is scheduled for July 28 before US District Judge Charles Pannell (Atlanta Business Journal).

Developments in State Farm-related Katrina cases since US District Judge L.J. Senter’s momentous ruling earlier this month in McIntosh v. State Farm (here):

• Yes, he really meant it: If there were any doubt that his ruling applied to any attorneys even peripherally related to Scruggs Katrina Group/Katrina Litigation Group cases, it was dispelled on April 16 when Judge Senter disqualified the Taylor-Martino law firm from representing McIntosh because the firm had provided assistance to one of the KLG firms.

• Citing Judge Senter’s ruling, US District Judge Halil Ozerden on April 11 disqualified KLG, the Rigsby documents and the Rigsby sisters as witnesses from another Southern District of Mississippi case, Kreeger v. State Farm. US District Judge William Barbour on April 16 did likewise in Shows v. State Farm, the RICO case filed last year by SKG.

• State Farm moved to dismiss ex rel. Rigsby (the qui tam case) for lack of jurisdiction, to disqualify the Rigsbys’ lawyers, and for summary judgment. The two Kansas City law firms representing the Rigsby sisters (Graves, Bartle & Marcus and Bartimus, Frickleton, Robertson & Gorny) filed an emergency motion to stay proceedings pending a ruling on the motion to disqualify. State Farm fired back immediately, pointing out among other things that the Kansas City firms are already disqualified under Judge Senter‘s ruling.

• The motion to disqualify the Kansas City firms accuses several of the attorneys — including (fired US Attorney for Missouri) Todd Graves — of being present when the Rigsbys met with Dickie Scruggs in his trailer on the beach at Pascagoula in 2006 and illegally accessing password protected proprietary documents belonging to State Farm. This was based on Kerri Rigsby’s own deposition. Graves and Tony DeWitt (of BFR&G) went on the attack with a public hissy fit (here), specifically denying that they were ever on State Farm’s computer system. But that was a deliberate dodge, because that’s not what State Farm claims they did. They carefully avoided denying being present at the trailer meetings and accessing documents that the Rigsbys downloaded. Rossmiller has all the Rigsby depositions here.

• On Monday, the Kansas City lawyers responded to State Farm‘s disqualification motions, and both Graves and DeWitt filed affidavits. Graves acknowledges being present at one of the two trailer meetings, DeWitt at both. NMC at folo has an excellent analysis here.

• Rossmiller notes here that Don Barrett of the Barrett Law Office, one of the now-disqualified KLG firms, advised clients in an April 18 letter that the Provost-Umphrey law firm has agreed to take their cases. A commenter notes: “The address for the Nashville Provost-Umphrey office is the same as that on Barrett Law Office letterhead for the Nashville office. Remarkable.”

We’ll have more on the Rigsby sister act shortly.

Andrew Bodnar, a doctor and former senior vice president of Bristol Myers-Squibb, on Wednesday was indicted in US District Court in Washington on one count of violating of the Federal False Statements Act for allegedly lying to the FTC about a secret settlement of a challenge to the company’s Plavix patent. The indictment charges that in 2006, he negotiated a secret agreement between Bristol Myers-Squibb and the Canadian generic drug manufacturer Apotex Inc., failed to submit it to the FTC and later lied to the FTC by denying the existence of the agreement. Apotex had filed suit against Bristol Myers challenging the validity of its patent on Plavix and was threatening to market a generic equivalent. In the supposedly undisclosed deal, Bristol Myers allegedly agreed not launch a generic version of Plavix when its patent expires in 2011 if Apotex agreed not to launch its Plavix generic until 2011. The charge carries a maximum sentence of five years in prison. Bristol Myers pleaded guilty to related charges in the case last June and paid a $1 million fine (Reuters, NYT).

Federal prosecutors in Columbus, Ohio on Monday moved to recoup some of the funds lost in the 2002 collapse of National Century Financial Enterprises: the government is seeking to “attach a $1.7 billion IOU” to each of the five National Century executives who were convicted in March (here and earlier) on multiple counts including conspiracy, wire fraud, securities fraud and money laundering. US District Judge Algenon Marbley is expected to rule on the motion in June (Columbus Dispatch).

In Sacramento on Friday, US District Judge Garland Burrell sentenced Joel Nathan Ward of Turlock, California to nine years in prison in connection with a fraudulent foreign currency exchange trading scheme in which about 100 investors lost $11.3 million. He pleaded guilty in August 2007 to wire fraud, mail fraud and money laundering. Although he had no financial training, Ward lured investors through trade shows, online columns and infomercials in which he represented himself as a skilled trader. His Joel Nathan Forex Fund took in $15 million from early 2003 to late 2006. He paid back $3.7 million to early investors in what essentially was a Ponzi scheme but he diverted 85% of the rest for personal use. He actually invested only $2 million and lost almost all of that. After Ward revealed to investors in late 2006 that all their money was gone, his personal journal became public, thanks to his now ex-wife. In it, he described himself as a “financial serial killer” and “just another scumbag con artist bilking old people out of their retirement money” (Modesto Bee, DOJ).

Proscutors got what they wanted: In Ocala, Florida on Thursday, US District Judge William Terrell Hodges sentenced actor Wesley Snipes to three years in prison. Snipes was convicted February 1 on three misdemeanor counts of failure to file federal income tax returns for 1999-2001 but acquitted on two felony tax counts and three more failure to file misdemeanor counts. Hodges sentenced Snipes to the maximum of one year on each count, to be served consecutively. He said “these are serious crimes, albeit misdemeanors, because he has a history of contempt over time.” Hodges also sentenced Snipes’ co-defendants Douglas Rosile and Eddie Ray Kahn, both convicted on the felony counts. Rosile was sentenced to 4 years and six months in prison and Kahn was sentenced to ten years in prison. Judge Hodges was obviously not swayed by a large number of celebrities asking him to sentence Snipes to probation. Among them were Woody Harrelson, Judge Joe Brown and Judge Greg Mathis. It’s hard to believe any federal judge would be influenced by requests from the son of Charles Harrison and two TV show judges. Bloomberg, Orlando Sentinel, DOJ (via PR Newswire).

It sounds like the plot for a yet-to-be-written Coen Brothers’ movie: according to a search warrant unsealed earlier this week in US District Court in Minneapolis, a St. Paul area man named Michael Anthony Powell is under investigation for allegedly swindling investors who were told he had contracts to deliver containerloads of carp worldwide for humanitarian purposes. The search warrant affidavit indicates that more than 40 people have invested in “fraudulent humanitarian carp proposals” with Powell since 1992, and six people have invested $694,000 into Powell’s ventures from 2000 through 2005. No one has been repaid, and Powell has allegedly converted the money to personal use. He has operated under a number of different company names. Among the ventures:

[The affidavit] said Powell allegedly told some investors in 2004 that he had a $1.2 million contract to deliver container loads of carp fillets to China; persuaded some business associates in 2005 to buy a fish plant in Pepin, Wis., where they were going to process carp for buyers he had supposedly lined up in Serbia, and pitched a deal as recently as last December to haul carp from Utah Lake that would be shipped as “humanitarian aid to countries around the globe.”

Minnesota is perhaps the only state where a bottom-dwelling sand-sucking primitive life form (the carp, not Powell) could generate such interest from investors (Star Tribune).

Robert E. Coughlin II, former deputy chief of staff of the DOJ’s criminal division, on Tuesday pleaded guilty to a single count of violating federal conflict-of-interest laws in connection with the Jack Abramoff public corruption scandal. His plea was entered before before US District Judge Ellen Segal Huvelle in the District of Columbia.  Coughlin admitted accepting meals, concert tickets and luxury seats at sporting events from a lobbyist who has been identified by sources as Kevin Ring, a key lobbyist for Abramoff, while helping Ring and Abramoff’s clients by leaking inside information, attempting to influence department colleagues and providing other help. Coughlin accepted the gifts from 2001 to 2003 while he was working on legislative affairs for the DOJ.  Under a plea agreement with the government, he faces up to 10 months in prison and is actively cooperating with prosecutors who are investigating Ring. Court papers also refer to at least two other unnamed DOJ officials who accepted meals from Ring.  Rep. John Doolittle (R-Calif.) and his wife Julie are known to be still under investigation in the Abramoff scandal and have been linked to Ring, who once worked for Doolittle, so Coughlin may also provide information in that matter (AP, Washington Post).

David Bermingham, Giles Darby and Gary Mulgrew, three British investment bankers known as the NatWest Three, were each ordered on Tuesday by US District Judge Ewing Werlein to report to prison within the next three weeks, each at a different prison.  Mulgrew was ordered to surrender to the facility in Big Spring, Texas, on April 30; Darby to the Allenwood facility in White Deer, Pennsylvania, on May 7; and Bermingham to the prison in Lompoc, California on May 9. They all asked for Allenwood at their sentencing hearing and Judge Werlein recommend it, but the Bureau of Prisons has final authority(Bloomberg).

The former Greenwich NatWest bankers were indicted on seven counts of wire fraud in 2002 in connection with a scheme devised by former Enron CFO Andrew Fastow and his right-hand man Michael Kopper. They pleaded guilty in 2007 to one count of wire fraud and were sentenced to 37 months in prison plus restitution by Judge Werlein on February 22, 2008 (earlier). Their plea agreements call for them to be eligible for transfer to the UK after several months imprisonment in the US, and under the UK system they will be eligible for parole after serving half of their sentences.

The latest developments in the bizarre aftermath of the mistrial of of former Allegheny County Coroner Cyril Wecht:

• A defense motion for dismissal alleges that the FBI falsified the proabable cause affidavit that led to the search of Wecht’s office in 2005, then deliberately hid the information from the defense (Pittsburgh Tribune-Review).
• The juror who was excused from deliberations has stated that he never asked to be excused, contrary to what the trial record states (WTAE-TV).
• The Tribune-Review, Pittsburgh Post-Gazette and WPXI-TV have asked US Court of Appeals for the Third Circuit to overturn US District Judge Arthur Schwab’s decision not to release the identities of jurors until after the case is resolved; that ruling applies to jurors who heard the first trial and those yet to be seated for the second trial, scheduled to begin May 27 (Tribune-Review).

After a two-week trial in US District Court in East St. Louis, Illinois,  a jury on Friday convicted Kyle Kimoto of St. George, Utah and Las Vegas on one count of conspiracy to commit mail fraud, wire fraud and money laundering, one count of mail fraud and 12 counts of wire fraud. The charges arose from a telemarketing scheme he operated in 2001 and 2002 through his Utah-based Assail, Inc. and a network of call centers; people with substandard credit were led to believe they would receive a MasterCard after paying a processing fee of $159 or more; what the consumers actually received was a “benefits package” which contained an application for a stored value MasterCard, a form of debit card that had no credit line and which had to be “loaded” with funds before it could be used. Over 300,000 consumers paid approximately $43 million to Kimoto’s various companies. Kimoto faces a sentence of up to 175 years in prison; sentencing is scheduled for September 5 (St. Louis Post-Dispatch, DOJ).

Two Roseville, Minnesota men entered guilty pleas in Minneapolis on Thursday before US District Judge Joan Ericksen in connection with a mortgage flipping scheme that involved 162 properties and approximately $35 million in fraudulently obtained mortgage funds. Jonathan E. Helgason and Thomas J. Balko , co-owners of TJ Waconia, pleaded guilty to charges of real estate and mortgage fraud. From 2005 to 2007, they bought the properties, many of them in a three-block area in north Minneapolis, and quickly flipped them for $20,000 to $60,000 more to straw “investors” who were lending their name and credit in exchange for kickbacks and a promise to pay the mortgages. The scheme collapsed in 2007, the investors were left upside down and most of the properties are in foreclosure. Sentencing has not been scheduled. Each man could receive up to 20 years in prison but Helgason faces a recommended sentence of about 12 1/2 years and Balko faces a sentence of about 10 years (Star Tribune, DOJ).

In Anchorage, Alaska on Thursday, US District Judge Ralph Besitline sentenced Mark Avery of Anchorage to 8 1/2 years in prison for embezzling the entire $52 million trust fund of May Wong Smith, a wealthy San Francisco widow who suffered from Alzheimer’s; she died in 2006.  Avery pleaded guilty to wire fraud and money laundering charges in March 2007.

Avery is a former San Francisco prosecutor who had moved to Alaska. The fund had been administered by his father, a prominent trust attorney; he took over administration of the fund after his father’s death in 2001. He withdrew all the funds during a six month period in 2005 and started several companies including Security Aviation in Anchorage. His spending spree brought him to the attention of federal investigators, “ especially the purchase of weapons, body armor, fighter jets and rocket launchers” (Anchorage Daily News, San Francisco Chronicle).

John B. Kim, also known as Jung Bae Kim, pleaded guilty on Thursday to a single count of wire fraud in connection with the collapse of hedge funds operated by KL Group LLC, originally in California and later in Palm Beach County, Florida.   His plea was entered before US District Court Judge Kenneth Ryskamp in West Palm Beach. John Kim, his brother Yung Kim and Won Sok Lee were indicted in January 2007 on 35 counts alleging a massive investment fraud scheme which caused investor losses of $195 million. In his plea, John Kim admitted misrepresenting unprofitable funds as successful, sending out false account statements and counterfeiting clearing firm statements. In the specific count covered by the guilty plea,

Kim admitted that in February, 2005, fictitious stock trading sheets were created that purported to show a one-day profit of $22 million in a stock known as RIMM, the company that manufacturers the “Blackberry” device. The RIMM trade, however, never took place, and the fictitious stock trading sheets were used to fool investors concerning the profitability of trades being conducted by the KL Hedge Funds.

After a hearing in Columbus that lasted all day Wednesday, US District Judge Algenon Marbley ruled that convicted National Century Financial Enterprises executives Donald Ayers, Randolph Speer and Roger Faulkenberry were flight risks and will remain in custody. The fourth, James Dierker was released on bond pending sentencing. The four executives and a fifth, company co-founder Rebecca Parrett, were convicted on March 13 of securities fraud and related charges in connection with the company’s 2002 collapse (here and earlier). All were allowed to remain free on bond with electronic monitoring, but Parrett disappeared (here) and remains at large. The other four were taken into custody on April 2 following disclosure of an alleged plot to escape to Aruba (here and here). Dierker currently works in marketing for Victoria’s Secret, and testimony from the company’s president and CEO Sharen Turney apparently helped convince Judge Marbley that Dierker would not flee (Columbus Business First, AP).

Meanwhile, the US Marshal Service is offering a reward for information leading to the arrest of Parrett — but won’t say how much the reward is (Columbus Dispatch).

A jury in US District Court in Manhattan on Thursday convicted former Refco Inc. President Tone N. Grant of conspiracy, securities fraud, wire fraud, bank fraud and money laundering in connection with the October 2005 collapse of the company which caused investor and partner losses estimated at $2.4 billion. Refco, at one time the largest futures broker on the Chicago Mercantile Exchange, collapsed just two months after its IPO. Prosecutors alleged that Grant, former CFO Robert Trosten and former Chairman and CEO Phillip Bennett engaged in a years-long scheme to hide extensive trading losses from auditors, banks, investors and Thomas H. Lee Partners, which had purchased a majority interest in Refco in August 2004; the losses were transferred from the company’s books to a company controlled by Bennett, Grant and another partner. Trosten and Bennett pleaded guilty in February; Santo Maggio, former CEO of Refco’s offshore unit, pleaded guilty in December (earlier here and here). All three men agreed to cooperate with prosecutors; both Trosten and Maggio testified against Grant. Sentencing for Grant is scheduled for August 7; he faces a maximum of 85 years in prison. He was allowed to remain free on bond (Bloomberg, Dow Jones Newswires).

Circuit Court Judge William Coleman on Wednesday granted the motion by the Jones, Funderburg law firm to sanction Dickie Scruggs and all the other members of the former Scruggs Katrina Group and enter a default (here and earlier), striking the defendants’ motion to compel arbitration. He also granted Jones’ reasonable attorney fees in this proceeeding in addition to the question of damages originally sought from the partnership. He has scheduled a hearing on damages for November 12, 2008. H/t to David Rossmiller for the order, here. Legal Newsline has more here.

In yet another bizarre move, AUSA Stephen Stallings suggested in a court filing on Tuesday that the government may seek to empanel a jury of outsiders in the retrial of former Allegheny County Coroner Cyril Wecht. It was not a formal request, but Stallings said the government would accept a trial delay “if such a continuance were to become necessary to empanel a jury untainted by defendant’s unethical media campaign.” That’s right, the prosecution is complaining about prejudicial coverage (Pittsburgh Post-Gazette, Pittsburgh Tribune-Review).

On Wednesday US District Judge Arthur Schwab refused to delay the retrial, scheduled for May 27, and refused to recuse himself. Lawyers for Wecht will appeal (Post-Gazette).