The Fall of the House of Zeus

by Curtis Wilkie

  Blake held no political portfolio, but his association with Senator Eastland enabled him to obtain government loans easily as he built an agricultural empire. Some of his transactions proved to be as puzzling as the mystery about him.

  Though Blake invested heavily in agriculture, buying farmland in North Mississippi, he dabbled in other ventures. In 1970, he served as a front man for the purchase of an American Basketball Association franchise that had been operating in New Orleans. Though he posed as the team’s owner, Blake said later, “I don’t think I put any money in it.” The Louisiana Buccaneers were moved to Memphis, where the club became known as the Pros. Their coach was Babe McCarthy, who had guided Mississippi State to a couple of Southeastern Conference basketball championships in the years Blake played football there. But after signing Ole Miss ace Johnny Neumann to a deferred $2 million contract, the Pros faltered. Nearly five thousand Tennesseans invested in five-dollar shares in an attempt to save the franchise, but the league had to take over operations of the club within a year. The team was sold in 1972 to Charles O. Finley, the iconoclastic owner of the Oakland A’s.

  In another sporting gesture, Blake bought the Fighting Bayou Hunting Club in the little Delta hamlet of Schlater, a well-known venue for duck hunters. During shooting season, the club attracted a number of prominent Mississippians to its grounds, and Blake nurtured his connections there.

  But Blake’s primary investments were in agriculture. It was no coincidence that the Farmers Home Administration loan program looked favorably on Blake while Eastland was in office. Eastland owned an extensive cotton plantation in the Delta, and over the years he had been instrumental in preserving a system of federal subsidies to cotton farmers while helping to dictate farm policies in Congress.

  By the time Eastland left office, Blake’s political bona fides were so secure that he held on to his Farmers Home Adminstration connections. In fact, they may have been strengthened by Ronald Reagan’s victory in 1980, for Lott became the Reagan administration’s favorite son in Mississippi. Even though Cochran, a Republican senator, outranked Lott, the congressman scrapped and clawed to claim credit for every pork barrel project in the state, for the right to dispense patronage and to name federal judges. He came into conflict with Cochran on some issues, and often Lott prevailed with the Reagan White House.

  The Reaganites remembered that Lott had been with them in their near-miss run for the GOP nomination against President Gerald Ford in 1976, while Cochran had not. Four years later, with Reagan closing in on the White House, Lott tried to wrest control of the state Republican Party from Clarke Reed, the state GOP chairman who helped deny Reagan the 1976 nomination by delivering the Mississippi delegation to Ford. The Mississippi votes proved decisive, and like elephants, Lott and the Reaganites never forgot. Once in power, they took care of their friends.

  In 1982, Jim Lake, a lobbyist who had worked as Reagan’s campaign press secretary, helped Blake win a government contract to store grain in elevators Blake had acquired in Texas. Tom Anderson also offered assistance. “He found out the routes that we had to go through, the procedures that we had to go through” to obtain a license to store grain, Blake said after questions were raised about the contracts. In 1984, the U.S. Department of Agriculture found Blake’s firm, PLB Grain Storage Corp., in default on a contract after PLB could not account for one million bushels of government-owned corn that had disappeared.

  Blake also ran into trouble when audits prepared by the inspector general of the Department of Agriculture determined that the Farmers Home Administration had failed to uphold agency regulations by making loans, intended for struggling farmers, to wealthy planters. The Gannett News Service followed up with a series of articles, and one of them featured P. L. Blake. The news report found that Blake, the sole stockholder of Dewitt Corporation, ostensibly a modest farming operation in Mississippi, owned several subsidiaries, including the Texas-based PLB Grain Storage Corporation, a catfish farm in Mississippi called Quiver River Plantation, a catfish processing plant known as Cupid Corporation, and a rice-growing operation in the name of Delta Rice Farms.

  According to court papers, Dewitt’s 1977 tax returns had listed assets of just over $3 million. But by 1983, its assets had grown to more than $42 million. Blake’s grain enterprise in Texas appeared especially profitable. Since 1980, the federal Commodity Credit Corporation had paid Blake’s company more than $17 million to keep surplus government-owned corn. The grain was stored in elevators once owned by a famous Texas con artist named Billie Sol Estes, who swindled investors and the government out of millions of dollars in the early 1960s by using nonexistent stores of cotton and anhydrous ammonia fertilizer as collateral for loans. Estes became so notorious that he appeared on the cover of Time magazine in 1962.

  Blake, in applying for his own farm loans in Mississippi, made no mention of his investment in Texas. The Gannett article reported that Farmers Home had first heard from Blake in 1975 and “found him so persuasive it has loaned him money ‘to make ends meet’ every year since then—$11 million in all.” Although the federal loan program requires borrowers to disclose all assets and income, Blake never listed the PLB operation in Texas. As a result, he qualified for loans designed for farmers in financial stress and unable to get conventional credit.

  After reporters began to ask questions in Washington, Tom Anderson called Blake to warn him of the news service’s probe. In a rare interview at his Greenwood home, Blake insisted to the Gannett reporters that his business was “still struggling our asses off and trying to make ends meet.” He said he had intended to notify Farmers Home of his Texas holdings in the coming year. “I feel like I’ve done to the best of my ability of being honest. I never stole a soybean. I never stole a bushel of rice. Everything I’ve done has been reported and aboveboard.”

  Gannett’s 1983 article noted that Blake “had friends in high places.” One of those was Mississippi lieutenant governor Brad Dye, a major political figure in the state who grew up in the Eastland organization. Dye was said to earn at least $2,500 a year for serving on an “advisory board” for Blake’s Dewitt Corporation. (“I’ve asked his help in a lot of things,” Blake later said in a deposition.)

  The news story identified another contact as Mark Hazard, an Eastland protégé who served as state director for Farmers Home Administration from 1977 to 1981, a period when Dewitt received most of its loan money.

  After Hazard left, the state office was run by a Republican appointee named Pete Perry, who told the Gannett reporters that Anderson had made repeated calls to the agency on Blake’s behalf. (Perry was later fired, but he kept his keys to the Farmers Home office. An agency employee discovered Perry inside the office one Sunday night, going through papers. P. L. Blake’s file was found lying, open on a desk.) Anderson, for his part, acknowledged that he “may have made a call on behalf of Mr. Blake in the past.” Lott merely confirmed that he knew Blake. “He’s been up here [in Washington] a time or two,” the congressman said.

  Outraged by the Gannett series, Blake sued The Clarion-Ledger, a Jackson newspaper that published the stories, for libel. The articles affected his mental health, he claimed, “probably the same way of a private on the battlefield of a war, anticipating the next barrage.” Blake demanded $40 million in damages. In a decision upheld by the state supreme court, a district judge delivered a summary judgment in favor of The Clarion-Ledger. The newspaper used as its defense the ultimate weapon employed by the press in libel cases: the stories were true.

  Despite his reversals, Blake’s web of alliances grew stronger.

  Later in the decade, Lott and Anderson called on Scruggs to help steer Blake through his bramble of financial difficulties, including bankruptcy by the Dewitt Corporation and the criminal case involving bribery at Mississippi Bank. In the latter, Blake escaped a prison sentence by pleading guilty to a misdemeanor in federal court. He was put on probation and ordered to pay $1.5 million in restitution, ending a long ordeal that lasted sev
eral years.

  Along the way, Blake and Steve Patterson, who had once worked at Mississippi Bank, became close associates. That was obvious to Scruggs from the manner in which they disposed of his problems at Blake’s home in 1992. Newspapers looking into Patterson’s activities as state auditor confirmed the Blake-Patterson friendship. After obtaining records of Patterson’s state-owned telephone through the Freedom of Information Act, The Clarion-Ledger reported that Patterson had made an inordinate number of private calls to Blake.

  Although Scruggs began to do business with both men after their dinner at Lusco’s, his friend Mike Moore was skeptical. Like Diane, Moore was uncomfortable around the pair. He knew of the federal criminal charges in Blake’s background, but he was more troubled by Scruggs’s association with Patterson. Though Patterson had shared a place on the ballot with Moore as a Democrat and also held state office, the attorney general carried a grudge dating back to Patterson’s role in the 1992 plot to undermine Scruggs and Moore. When an opportunity arose to retaliate in 1996, Moore never hesitated to gather evidence related to a variety of improper transactions traced to Patterson’s office. To avoid indictment, Patterson resigned his public position.

  Nevertheless, both Patterson and Blake continued to prosper. Still a major player in the old organization, Patterson went to work as a “rainmaker” for a well-connected North Mississippi lawyer, Joey Langston, where he was able to use his influence with state politicians.

  Blake also retained the vestiges of wealth. His home on Bell Avenue in Greenwood covered nearly seven thousand square feet and featured a swimming pool and a huge stone fireplace. He, too, stayed active in the politics of the conservative alliance.

  When, in 1989, Tom Anderson ran for the congressional seat Lott had vacated to go to the Senate, Blake contributed to his campaign and turned over his $1 million Cheyenne twin-engine turboprop to fly Anderson around the district. The Democratic Congressional Campaign Committee filed an ethics complaint against Anderson for failing to report eighteen flights on Blake’s plane. Though the district invariably supported Republican presidential candidates by wide margins, Anderson lost the election by thirty points.

  According to Blake’s testimony in a deposition taken during the newspaper litigation, he also loaned his plane to Brad Dye, during his campaign for reelection as lieutenant governor, and paid for flights for Trent Lott.

  In November 1993, after Blake helped head off Scruggs’s indictment in the asbestos case, Scruggs began to make significant loans to Blake. At first he gave him $15,000 a month, but those payments then increased to $25,000 a month. The loans were unsupported by any collateral, other than Blake’s signature on a note and his promise to keep Scruggs informed of political developments. By 1994, Scruggs’s income had reached such proportions that he felt he would never miss the money. He didn’t mention the arrangement to his wife because he knew she would be troubled that he was now investing in “the dark side of the Force.”

  CHAPTER 4

  Scruggs was in a position to dole out money in large amounts because his breakthrough theories on asbestos litigation led to massive concessions by the industry in the 1980s.

  He had tackled the issue relatively late, a decade after other attorneys had begun winning big settlements. The asbestos industry first came under serious attack in the 1970s, with lawsuits against Johns Manville and other giants. Ron Motley, a flamboyant trial lawyer from Charleston, South Carolina, who called Johns Manville “the greatest corporate mass murderer in history,” took his offensive to Mississippi. He won $1 million in federal court in Biloxi in 1982 for a client suffering from asbestosis after years as a sheet metal worker at Ingalls Shipbuilding. Mississippi attorneys also began cashing in on the assault, and some of the most successful included Danny Cupit, the Jackson lawyer who later came to Scruggs’s rescue, and Gulf Coast attorneys Paul Minor and Lowry Lomax.

  Scruggs did not make a major move until the mid-1980s, but it proved to be a profitable one. His skills as a trial lawyer were never based on courtroom pyrotechnics or densely articulated legal briefs. Instead, he seemed to have a genius for determining strategies, developing a line of attack, and assembling a coalition to carry out his plans.

  With asbestos, Scruggs devised a way to consolidate thousands of claims into one case, breaking a logjam of individual lawsuits stacked ahead of him in federal court. First, he collected hundreds of clients by establishing a clinic where a pulmonologist diagnosed asbestos-related illnesses and pronounced patients fit to become plaintiffs. Then he was able to get cases filed in state courts, rather than federal, by naming local asbestos distributors as co-defendants. Finally, in a daring gamble, he had an idea to lump all of the plaintiffs into one case. Even though Mississippi had no legal provision for class action, Scruggs took advantage of an opening in the law that enabled him to consolidate cases with “common issues.” The strategy behind the approach was based on Scruggs’s plan to link a few strong cases with hundreds of lesser claims. He intended to set up a trial situation in which it would be possible for a jury to find the asbestos manufacturers and distributors liable for multiple damages, a verdict that could force corporate defendants to pay untold millions to thousands of claimants. If, however, a jury ruled for the corporations, all would be lost for every one of Scruggs’s clients.

  In the end, the industry blinked. Faced with the prospect of staggering losses, the asbestos corporations settled with Scruggs before the case went to trial.

  Dick Scruggs, who had strived for years to move up and out from his middle-class milieu in Pascagoula, became a rich man.

  He began to acquire the accoutrements of wealth. He bought a single-engine propeller-driven plane, but soon graduated to a Learjet. An avid sailor, he expanded his fleet from an ordinary sailboat to yachts. Remembering the time when he and his college roommate, Johnny Morgan, drove to the coast in Scruggs’s Corvair—a car branded as a death trap by Ralph Nader—while milking leftover gasoline from hoses at service stations along the way, Scruggs traded his Mercedes for a Bentley. Even his friends thought the purchase a tad ostentatious. In 1991, a beachfront mansion owned by Johnny Walker, who had operated a small Pascagoula shipyard, went on the market following his death. Scruggs bought it and moved his family to the city’s most elegant neighborhood.

  While lavishing millions on an extravagant lifestyle, Scruggs shared his fortune with others. He poured funds into the Boys’ and Girls’ Clubs in Pascagoula, organizations that existed to help youngsters on the edge of poverty and trouble, in straits similar to his own as a boy. He bought the antebellum Longfellow House (so called because the author of the epic poem Evangeline was thought to have stayed there) and turned it over to the city for use as a public reception hall. Quietly, he paid the doctor’s bills and college tuition of people he barely knew. Scruggs’s contributions, friends felt, represented a throwback to his youth. At times he seemed haunted by his experiences as an only child in a single-parent home, by memories of financial insecurity, as if he could ensure that others avoided hard times with the wave of his checkbook.

  Despite his generosity, he wound up with enemies. One of them was a former partner, Roberts Wilson.

  Scruggs and Wilson began working together in 1984 on asbestos litigation and formalized their relationship a year later as partners in an enterprise called Asbestos Group. Though it started under the same roof as Scruggs’s law office in Pascagoula, Asbestos Group was a separate entity designed to deal with claims against the industry. Scruggs and Wilson each had client lists of potential plaintiffs and thought they could be more effective by pooling their interests.

  It proved to be a mismatch. Both men were graduates of Ole Miss law school, but there the similarities ended. Wilson was a son of the Mississippi Delta, overweight and a bit rumpled. Because his given name had an s at the end, Roberts, he was known at law school as Bobs. Scruggs, meanwhile, felt at home on the Gulf Coast, exercised regularly, and dressed fashionably. His nickname at school had been Zeus.


  Wilson felt that Scruggs took advantage of his client list. Scruggs deplored Wilson’s frequent absences from the office.

  Diane Scruggs warned her husband from the beginning that the partnership would not work. After the Scruggses first returned to Pascagoula, Diane filled in as a temporary secretary in Wilson’s law office and acquired a distinct distaste for him. As she anticipated, the pair’s disagreement made its way into a rancorous legal dispute. After Wilson threatened to sue Scruggs for stealing his clients, Scruggs responded with a letter in February 1992. “Suffice it to say,” he wrote, “that our styles are different and incompatible.”

  To Wilson’s warning that litigation between the two would lead to a “public airing of our finances,” Scruggs replied, “I can only interpret your statements as a threat to attempt to destroy us both … Frankly, a public airing would be embarrassing to me only in the sense that our colleagues in the bar would learn how much you have received from your association with me. Notwithstanding, I will seek appropriate safeguards from such disclosures should you attempt to ‘poison the well.’ ”

  Predictably, the argument led to lawsuits and countersuits that dragged on for the better part of two decades, like Dickens’s endless Jarndyce v. Jarndyce in Bleak House.

  The dispute between Scruggs and Wilson had a nasty by-product. Alwyn Luckey, a young partner in Scruggs’s firm in Pascagoula, was given a minority share of the Asbestos Group in 1988. Scruggs fired Luckey in 1993, but because Luckey still owned 25 percent of Asbestos Group, he sued Scruggs to recover money he claimed was due him.