LawReader : OUR MAIN - LAW DIGEST INDEX : LAWREADER TIPS & TOPICS : MORE HOME PAGE - 2006 : The Court under attack : Profiles of Cunningham, Chesley, Mills, Gallion

LEXINGTON, Ky. — When Shirley A. Cunningham Jr. announced in 2001 that he was giving $1 million of his fee from Kentucky's fen-phen case to endow a professor's chair at Florida A & M University's fledgling law school, officials at the historically black school were ecstatic.

But there was a catch. Cunningham, a 51-year-old Lexington lawyer, insisted on himself filling the chair that bore his name, at $125,000 a year in salary and benefits. Then, a school audit last spring found he hadn't done any work.

Cunningham's triumph turned into a major embarrassment, with no less than Gov. Jeb Bush denouncing the deal. "This arrangement stinks," President Bush's brother said after it was exposed last June by the St. Petersburg Times.

And things could get worse for Cunningham.

According to court documents obtained by The Courier-Journal, a federal grand jury is investigating his no-show at the law school in Orlando, and he is under investigation by both the FBI and the Florida Department of Financial Services. (The state had matched Cunningham's gift with $750,000.)

Cunningham declined to respond to questions, including those submitted to him in writing by registered mail.

An attorney for the university said Cunningham asserted his Fifth Amendment right not to testify at a March 28 hearing in a wrongful discharge case brought by the law school's dean, who was fired for falsely certifying that Cunningham had worked 80 hours every two weeks. Cunningham also was fired.

It was an inglorious moment for the prominent trial lawyer, businessman, horse owner and philanthropist, who also is caught up in a legal scandal over excessive fees in Kentucky's fen-phen class-action lawsuit.

The twin controversies enveloping Cunningham have surprised attorneys in Lexington, where he holds a position of prominence in the bar, said lawyer Harry B. Miller Jr., 82, who has practiced for 59 years in Fayette County.

"I have always liked Shirley, and I've never known him to cut corners," Miller said.

Cunningham's father, the late Shirley Allen Cunningham Sr., worked as a sharecropper before retiring as a small crop farm specialist at the Trigg County extension service. His mother, Marie, an 86-year-old retired schoolteacher who still lives in Cadiz, said by phone last month that she taught Shirley and his brother Henry, a physician in Fort Worth, Texas, to know right from wrong.

She also said she didn't know anything about the fen-phen case.

Cunningham told The Tennessee Tribune in a 2003 interview that he worked his way through Tennessee State University as a janitor and a bus driver.

Before starting his own practice in 1987, he was an assistant county attorney and taught at the University of Kentucky as an assistant professor of agricultural economics. He also was a television talk show producer and host for WLEX-TV in Lexington and served as vice president and general counsel for what is now Bank One in Lexington.

Seeking to become Fayette County's first black lawmaker, he ran as a Democrat for a seat in the Kentucky state House of Representatives in 1984, but lost a narrow race and then switched his party registration to Republican.

Cunningham used some of his riches from the fen-phen case to endow a foundation that built an 11,696-square-foot gymnasium and tutoring rooms northwest of Lexington. His foundation's tax records show that from 2002 through 2004 it gave away $163,251 in grants to support youth athletic and educational activities.

In 2001, he gave $100,000 to Florida A & M and in the same year he donated $313,060 to UK to endow a men's basketball scholarship.

In exchange, Cunningham earned the right to buy two courtside seats at Rupp Arena each season for life. One of his partners in the fen-phen case, William Gallion, made an identical gift.

Cunningham, who is divorced and has three sons, owns a thoroughbred stable with Gallion, as well as a 135-acre horse farm in Scott County valued at $1.9 million where his last name is emblazoned in bushes sculpted into letters on the side of a hill.

Omar Saleem, the associate dean for academic affairs at the Florida law school, has testified that he was asked to find an office there for Cunningham so he could get a tax break -- Florida has no state income tax.

But when the university's inspector general, Michael Brown, searched the office last spring, he found the computer had never been connected and everything was covered with dust, he said in a deposition. University lawyer Robert Norton said in an interview that it was a shame that Cunningham never showed up at the school to teach.

"I heard he is a very good trial lawyer," Norton said.

Reporter Andrew Wolfson can be reached at (502) 582-7189.

KENTUCKY'S FEN-PHEN CASE: A BREACH OF DUTY

Lawyer defends his fee
Mills says most of case's millions are already gone

By Andrew Wolfson
awolfson@courier-journal.com
The Courier-Journal

Lexington lawyer Melbourne Mills Jr. said he knows his $23.6 million fee from Kentucky's fen-phen case sounds like a lot of money. But he said he has gone through most of it, and couldn't pay it back to former clients even if ordered to do so by a judge.

"If 10 years ago somebody had told me it is easier to make money than to keep it, I wouldn't have believed them," said Mills, a 75-year-old attorney known in Lexington for his TV ads that urge prospective clients to "call the man."

First, there were the "very significant taxes," Mills said, then the $2 million he said he had to pay to a former partner who alleged he had been cheated out of fen-phen fees on his partnership draw.

Next, there were the substantial bonuses he agreed to pay out of his fee -- $800,000 to his office administrator and $100,000 each to six employees, including his office cook.

Mills had to pay $125,000 to a paralegal to settle a sexual harassment suit in which she accused him of walking around his office in his underwear and allegedly trying to grab her and take her to bed with him, according to court records.

Finally, there was the Jan. 12 verdict from a Fayette Circuit Court jury, which found that Mills should pay $900,000 to a former assistant who said she suggested the fen-phen case and that Mills reneged on a promise to reward her with a huge bonus if he ever "obtained a big payday."

A judge has since reversed the judgment on the grounds that oral contracts are not binding for more than a year. That ruling has been appealed.

Mills initially denied making the pledge to Cindy Sawyer, but when confronted with a tape recording she made secretly in which he promised to pay her $1,065,000 -- including $65,000 for a luxury car -- Mills said he didn't remember the conversation because he was drinking a fifth of bourbon a day at the time.

Mills, who has practiced since 1958, says he's a magnet for controversy because he's so well known and advertises heavily -- he ran his first commercial the day after the U.S. Supreme Court approved lawyer advertising in 1977. He says his name recognition exceeds that of the Lexington mayor and the governor, which has "ruffled some feathers."

In a recent 90-minute phone interview, he conceded he erred in the fen-phen case by not telling clients the size of the $200 million settlement, although he says he expects his eventual punishment from the Kentucky Supreme Court to be something short of disbarment.

"There are several places I could have done better, and in a similar situation, I would do better," said Mills, who was publicly reprimanded by the court in 1991 for improperly advancing fees to a personal injury client in another case.

But Mills said news accounts of the fen-phen case have failed to mention that the settlement made millionaires out of many of his clients.

Mills also says he wasn't paid an excessive fee because he personally signed up 311 of the 440 clients -- and thus deserved higher fees than his co-counsel, Shirley Cunningham Jr. and William Gallion.

"My colleagues were overpaid on that basis," he said.

In an affidavit filed April 25, Mills' office administrator, Rebecca Phipps, said that his clients grossed $80.8 million from the settlement, meaning he should have been paid $24 million, based on his 30 percent fee. In other words, he was paid less than he should have gotten, he says.

Mills said he and Cunningham were entrusted with recruiting the fen-phen clients and working with them, while Gallion was "the courtroom leader." Mills said he never set foot in court.

"I am not terribly successful in the courtroom," he said.

While acknowledging that he had recently returned from a cruise to Portugal, Mills said he has not splurged since the settlement. He drives a 2002 GMC and bought his vacation home in a gated community in Hilton Head, S.C., many years before striking fen-phen gold.

Mills, who is divorced and the father of two adult children, said the case did have one unexpected benefit: He met his current girlfriend through it. She was one of his clients, he said.

Asked whether she has joined the lawsuit filed against him and the other two lawyers by their former clients, Mills laughed and replied, "Not yet."

Reporter Andrew Wolfson can be reached at (502) 582-7189.

Tuesday, May 30, 2006

Profile | Stan Chesley | Cincinnati lawyer

Wealth mounts for 'prince of torts'

By Andrew Wolfson
awolfson@courier-journal.com
The Courier-Journal

CINCINNATI — Dubbed the "master of disaster" and "prince of torts," he has represented tens of thousands of victims of airplane crashes, defective products, hotel fires and toxic spills.

By his own count, he has racked up more than $7 billion for his clients.

Forbes magazine once credited him with helping turn the plaintiffs bar "from a rag tag army of ambulance chasers into a force that strikes fear into the hearts of even the biggest, most powerful corporate defendants."

But Stan Chesley, one of the world's leading and most knowledgeable class-action lawyers, says he had no idea that his co-counsels in the $200 million Kentucky fen-phen settlement five years ago were deceiving their clients.

Chesley, of Cincinnati, collected a $20.5 million fee to negotiate the settlement and claims he had no legal duty to the 440 plaintiffs, because he was hired by their lawyers.

"I was not a lawyer for those people," he said in an interview earlier this year. The plaintiffs eventually received only one-third of the settlement.

Chesley, 70, declined to respond to a reporter's questions about the case, or his career.

Whether he will be sanctioned is one of the intriguing unanswered questions in Kentucky's simmering legal scandal over the settlement.

A judge already has found that Lexington lawyers Shirley Cunningham Jr., William Gallion and Melbourne Mills Jr., breached their fiduciary duties in part by taking fees that exceeded their contracts. But Special Judge William Wehr, who is presiding over a lawsuit filed against the lawyers by more than 400 of their former clients, has reserved judgment on Chesley's role.

Angela Ford, a Lexington lawyer who represents the former plaintiffs, has alleged in court that Chesley knew of the "shockingly fraudulent conduct" of his fellow lawyers and was "up to his eyeballs" in their scheme.

Ford argues that while Chesley had no direct contact with clients, simple arithmetic would have shown him that his fellow lawyers had taken excessive fees: Chesley's contract called for him to get 21 percent of the lawyers' gross fees, so his own take would have shown that the other lawyers took about $100 million, or half the settlement.

In interviews, three of the nation's leading authorities on legal ethics rejected Chesley's contention that he had no fiduciary duty to the plaintiffs.

"He was unquestionably co-counsel for the clients, and had all lawyer-client fiduciary duties to them," said Hofstra University law professor Monroe Freedman, whose opinion was shared by professors Geoffrey Hazard Jr. of University of Pennsylvania and Stephen Gillers of New York University.

Chesley's lawyer, Frank Benton IV, has said that if Chesley was overpaid, he will reimburse the three Lexington lawyers so they can pay back their clients.

But if Chesley is found by Wehr to have breached his duties, he could be liable for punitive damages and forced to surrender even more of his fee.

Chesley has contended in court papers that he had no communications with clients, that he didn't sign the settlement, and that he had no role in a charitable foundation into which the three Lexington lawyers diverted more than $20 million from the settlement funds.

But Ford says in court papers that Chesley's own contract listed him as "co-counsel" for the plaintiffs. And Mills has said in a deposition that Chesley represented the clients. Ford also said that Chesley received court orders showing that settlement money was being poured into the foundation.

"Chesley was either an active participant or stood by and did nothing," Ford said.

A rich life

Chesley is the son of Ukrainian immigrants and he once sold shoes at a local department store. He now enjoys fabulous wealth.

He lives in what The Cincinnati Enquirer has described as the most expensive home ever sold in greater Cincinnati, a 25-room, 27,000-square-foot French chateau that he bought in 2004 for $8 million. The sprawling slate-roof mansion on five acres is attached to an eight-car garage and a carriage house and surrounded by 300 acres of forest and fields.

He and his wife, Susan Dlott, a federal judge, live there with two Cavalier King Charles Spaniels whom Dlott has sworn in as honorary federal marshals and regularly takes to her chambers, The Cincinnati Enquirer has written.

Chesley's more than 20 cars include Jaguars, Rolls-Royces, Ferraris, Aston Martins and Bentleys, the Cincinnati Business Courier reported two years ago.

He has raised millions of dollars for the Democratic Party and for former President Bill Clinton, who three times came to his home for fundraisers; Clinton appointed Dlott to the federal district bench in 1995, according to media accounts.

Recounting his own career, Chesley has said that he worked for 17 years as an obscure products-liability lawyer until May 28, 1977, when the Beverly Hills Supper Club burned to the ground in Southgate, Ky., killing 165 people.

The nightclub's owner had only $1 million in insurance, but Chesley devised the novel strategy of suing the entire aluminum electrical wire industry, whose product was found to have caused the blaze, as well as more than a dozen other companies. He eventually won $49 million in verdicts and settlements.

He later went on to negotiate settlements in blockbuster cases involving Agent Orange and Bendectin, among other products. He became one of the feared and famous members of the plaintiffs bar, earning his living off disasters that included the 1980 MGM Grand hotel fire in Las Vegas, the 1985 Arrow Air crash that killed 248 Kentucky-based soldiers, and the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland.

He also helped win $5 billion from Dow Corning, the manufacturer of silicone breast implants, and was one of a group of lawyers who brokered the $246 billion national tobacco settlement in 1996.

Journalist Peter Pringle wrote in a 1998 book on that case, "Cornered: Big Tobacco at the Bar of Justice," that Chesley was "one of the least liked leading members of the plaintiffs inner circle, mainly because of his seemingly uncontrolled vanity and relentless name dropping."

Mississippi lawyer Dick Scruggs, who represented state attorneys general in the tobacco settlement, told The Courier-Journal last month: "I didn't know him five minutes and I wanted to hit him."

Chesley was an "effective advocate" and had a "keen knowledge of all the political players," including Clinton, Scruggs said. "But Stan will take every advantage you will allow him to take. Some will say his style is a bit ruthless."

However, Cincinnati plaintiffs lawyer Jim Helmer, a competitor who has sometimes clashed with Chesley, credits him for taking high-risk cases that most lawyers couldn't understand, let alone win.

"There is a lot of jealousy in the plaintiffs bar for anyone who is successful," Helmer said, "and no lawyer in America may have collected more money for injured plaintiffs than him."

That includes $85 million that he and a team of lawyers won in January for parishioners sexually abused by priests in the Diocese of Covington. The group, led by Chesley, stands to collect a $25.5 million fee.

Chesley won acclaim in that litigation by getting a court to certify the first class action in a priest-abuse case in the United States. But the case has attracted scrutiny because it involved the same judge, Joseph Bamberger, and the same trial consultant, Mark Modlin, who served in the fen-phen case.

Bamberger was publicly reprimanded and forced to resign in February by the Judicial Conduct Commission, in part for failing to recuse himself from the fen-phen case in light of his close friendship with Modlin, for whom he approved a $2.04 million fee.

Reporter Andrew Wolfson can be reached at (502) 582-7189.

William J. Gallion

Tuesday, May 30, 2006

Profile | William J. Gallion Lexington lawyer

Fen-phen case fees poured into racehorses

By Andrew Wolfson
awolfson@courier-journal.com
The Courier-Journal

William J. Gallion was a successful lawyer in Lexington long before the 2001 Kentucky fen-phen settlement made him an extremely rich one.

He has defended the University of Kentucky Medical Center in malpractice cases for at least 25 years, according to the university, which has paid his firm more than $1.2million in fees this fiscal year.

"My experience with Bill Gallion is that he is a very good lawyer," said plaintiff's lawyer Joe Savage, a former president of the Kentucky Bar Association who has litigated more than 10 cases against him.

But after money from the fen-phen case began to be disbursed, Gallion's former law firm sued him for allegedly diverting fees from that and other cases from the firm.

"He misrepresented to me the amount of the attorneys' fees and how they were divided," partner Michael Baker claimed in an interview, adding that Gallion, who left the firm to start his own, agreed to settle for a confidential sum and insisted that the case be sealed.

Gallion, who received $21.8million in the fen-phen settlement, declined to respond to any of more than three dozen questions submitted to him by registered mail.

But according to other media reports, Gallion has poured a portion of his settlement fees into thoroughbred racehorses.

He won his first race as an owner at Saratoga in 2002 with a filly named Midnight Cry, who his partner, Shirley Cunningham Jr., another of the fen-phen attorneys, named after an old Baptist hymn.

Watching his own horses and others run, Gallion has traveled seven times to Dubai — home of the richest race program in the world — according to an October 2004 account on the Robbreport.com, which bills itself as "the ultimate Web site for the luxury lifestyle."

"Everything is top-notch — that's what Dubai does," he was quoted as saying.

Before the settlement, he appeared to visit less upscale haunts.

In February 2001, he sued an adult nightclub, Thee Tree House, alleging he was injured by bouncers who tossed him and a friend from the club.

In a counterclaim, the security men said the pair had to be escorted out when they refused to pay the full price for a pair of nude dances. Gallion's suit was settled for "basically nothing," said Lexington lawyer Oscar Geralds Jr., who represented one of the bouncers.

Gallion took out warrants accusing both of assault; they entered Alford pleas to the lesser charge of harassment, disputing their guilt but acknowledging there was enough evidence to convict them.

According to published accounts and interviews, Gallion grew up near Ashland with eight siblings; his father owned a liquor distributorship. He was president of his high school class and graduated from UK law school in 1976.

Gallion's principal residence is now on Sanibel Island, Fla., where in December 2001 he paid $800,000 for a 5,029-square-foot home on a private golf course, according to Florida property records. He also owns a 4,130-square-foot home on five acres at the Champions, a golf course in Nicholasville, and since the settlement has owned a Mercedes, a Jaguar, a BMW and Porsches in yellow, red and stainless steel.

In 2002, with a gift of $3.4million, he launched the William J. Gallion Family Foundation, whose mission is listed as supporting nonprofit organizations, according to tax records.

Over its first three years, it gave away $122,474 as its assets grew to $3.9million. Its largest gift was $25,000 to Habitat for Humanity, the tax records show.

Reporter Andrew Wolfson can be reached at (502) 582-7189.

Tuesday, May 30, 2006

Profile | Shirley A. Cunningham Jr. | Lexington Lawyer

A second controversy surrounds lawyer

By Andrew Wolfson
awolfson@courier-journal.com
The Courier-Journal

And things could get worse for Cunningham.

Cunningham declined to respond to questions, including those submitted to him in writing by registered mail.

"I have always liked Shirley, and I've never known him to cut corners," Miller said.

She also said she didn't know anything about the fen-phen case.

Cunningham told The Tennessee Tribune in a 2003 interview that he worked his way through Tennessee State University as a janitor and a bus driver.

In 2001, he gave $100,000 to Florida A & M and in the same year he donated $313,060 to UK to endow a men's basketball scholarship.

In exchange, Cunningham earned the right to buy two courtside seats at Rupp Arena each season for life. One of his partners in the fen-phen case, William Gallion, made an identical gift.

"I heard he is a very good trial lawyer," Norton said.

Reporter Andrew Wolfson can be reached at (502) 582-7189.

Disclaimer: We are not attempting to practice law, give advice or represent ourselves as anything more than a resource portal with many unique features. Our design is copyrighted. We have no claim of any affiliation with any linked website nor any liability for anything they may say or do. We, and our contributing authors, offer no warranties of any type, to anyone, about anything express or implied. What you see is what you get, we cannot afford to be your insurer.

By going further into this site, you accept this complete waiver of all warranties.

ERROR LOG: 100: Couldn't delete session row! IN FILE /var/www/vhosts/lawreader.com/httpdocs/FreeEnergyModules/database/standard_library ON LINE 233 You have an error in your SQL syntax; check the manual that corresponds to your MySQL server version for the right syntax to use near 'WHERE ID='uEmB1sA7mIWvdcnYo0GBYm3W5mRATCRO'' at line 1