Scruggs indicted on fraud charges

Published 6:00 am Thursday, November 29, 2007

NEW ORLEANS (AP) – An attorney who helped negotiate amultibillion-dollar settlement against tobacco companies in the1990s and has sued insurers over unpaid Hurricane Katrina claimswas indicted Wednesday in a suspected scheme to bribe a Mississippijudge.

The indictment accuses Richard “Dickie” Scruggs of conspiring topay the judge $50,000 to rule in his favor in a lawsuit brought byother attorneys who sought fees for work on Katrina insurancelitigation.

Circuit Court Judge Henry Lackey reported the “bribery overture”to federal authorities and agreed to assist investigators in an”undercover capacity,” according to the indictment.

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Scruggs was indicted along with three other attorneys, includinghis son, who is his law partner, and a former Mississippi auditor.They face charges including one count of defrauding the federalgovernment and two counts of wire fraud.

“I’m convinced that these guys did not do what they’re accusedof doing,” said Joey Langston, a lawyer for Scruggs’ firm.

Also named as defendants in the indictment are Zach Scruggs;Sidney Backstrom, a lawyer in Scruggs’ firm; Timothy Balducci, aNew Albany, Miss.-based lawyer; and former state auditor StevenPatterson, who works with Balducci.

Patterson resigned as auditor in 1996 after he was accused oflying on state documents to avoid paying taxes on a car tag.

Scruggs turned himself in to authorities Wednesday afternoon ata federal building in Oxford, Miss., where the grand jury handed upthe indictments earlier in the day, Langston said.

After their arraignment Wednesday, Richard Scruggs was releasedon $100,000 bail, while Zach Scruggs and Patterson each were freedon $50,000 bail. Langston said Backstrom is expected to bearraigned Thursday, but he couldn’t say when Balducci is expectedto appear in court.

Langston said it was too early for him to comment on the detailsof the allegations.

“Right now, we’ve just got to get our arms around it,” hesaid.

Richard Scruggs, whose brother-in-law is Sen. Trent Lott,R-Miss., earned millions from asbestos litigation and from his rolein brokering a multibillion-dollar settlement with tobaccocompanies in the mid-1990s.

His case against the tobacco companies was portrayed in the 1999movie “The Insider,” starring Al Pacino and Russell Crowe.

After Katrina hit on Aug. 29, 2005, the Gulf Coast native suedinsurers on behalf of hundreds of policyholders whose claims weredenied after the storm.

On Tuesday, FBI agents searched Scruggs law offices and leftwith copies of computer hard drives, Langston said.

The alleged bribery scheme stems from a lawsuit filed in Marchagainst Scruggs by a Jackson, Miss., law firm, Jones, Funderburg,Sessums, Peterson & Lee in a dispute over $26.5 million inattorneys’ fees.

Scruggs created a legal team called the Scruggs Katrina Group torepresent policyholders who sued their insurers after thehurricane.

In January, Scruggs’ legal team reached a mass settlement ofsuits with State Farm Insurance Cos. that involved more than $26million in lawyers’ fees.

The lawsuit accuses Scruggs of trying to “freeze out” lawyersfrom the Jackson law firm, including senior partner John G. Jones,and pay it a “ridiculously low figure” for its “substantial”work.

After the suit was filed, Balducci is accused of having severalmeetings and conversations with Lackey in which Balducci agreed topay the judge for ruling in favor of Scruggs in the case, accordingto the indictment.

Scruggs allegedly tried to cover up the scheme by falselycreating documents that showed he hired Balducci to work on anunrelated case, when he was actually reimbursing him for the cashbribes, the indictment said.

The indictment includes excerpts of telephone conversationsbetween Balducci and the judge that were presumably recorded byfederal authorities.

A copy of the indictment may be viewed at