The Fall of the House of Zeus

by Curtis Wilkie

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  Johnson was not a registered lobbyist, but he knew the legislators who mattered. He discovered that a bill relating to Medicaid had already cleared both houses of the legislature and now rested in the hands of a conference committee, where any differences between the House and the Senate would be resolved.

  Johnson needed help from inside players on the conference committee. He thought of Roger Wicker, a state senator from Tupelo. Wicker was a logical contact. Though he never advertised the affiliation, he was one of those who made up the new generation’s core of the old Eastland network. He had earned his political spurs as a member of Lott’s congressional staff—headed by Lott’s chief acolyte, Tom Anderson—and was now in his second term as a legislator. Of course, Wicker had also been a Sigma Nu at Ole Miss.

  At Johnson’s urging, Wicker slipped seventy-three words into the Medicaid bill. In one essential passage, the language authorized the state to “employ legal counsel on a contingency basis.” The measure passed with little notice.

  Only a handful of legislators were aware of the changes written into the bill. State senator Robert “Bunky” Huggins of Greenwood was one of them. A veteran of the legislature, Huggins counted P. L. Blake as both his constituent and his contemporary. As a committee chairman with oversight of health and welfare, Huggins had a major role in the conference committee. The night the bill became law, Huggins sidled up to Danny Cupit at a bar in Jackson with a message: “Tell Patterson we got the deal done.”

  Later in the decade, Scruggs talked with Michael Orey, who was writing a book about the tobacco wars called Assuming the Risk. Scruggs was candid. “There were people who had political connections, that I’m not even at liberty to tell you who they are, that had to be touched, that had to be talked to, that had to be given a stake in [the litigation].” He said he relied on clandestine consultants. “These guys have lots of friends and connections with legislature. These are people who are lobbyists, but they’re not really registered lobbyists. It’s really sort of the dark side of the Force.”

  He estimated that he paid these people over $500,000.

  Actually, it was much, much more.

  CHAPTER 5

  For much of his life, Scruggs had risen to the dare, taken up the challenge, so when Don Barrett told him of a mysterious man who might possess damaging information about Brown and Williamson Tobacco Corporation, Scruggs was intrigued. He agreed to join Barrett in Jackson for a meeting with Merrell Williams, who was driving down from Louisville, Kentucky, in the heart of the tobacco kingdom.

  Their meeting at a deli just off I-55 in March 1994 triggered mutual suspicion. Scruggs thought Williams flaky and unclear about this mission. Williams feared that Scruggs—about Williams’s age but considerably more composed—was an undercover FBI agent.

  Williams had reason to be careful. For some time he had been locked in a legal battle with Brown and Williamson, and details of his plaint against the company had already appeared in newspapers. A few years earlier, while working as a paralegal at a Louisville law firm representing the tobacco giant, Williams had copied hundreds of pages of documents that he believed would reveal a secret campaign by the tobacco industry to hide the deleterious effects of their product. He had leaked some of the papers to investigative journalists and anti-tobacco activists. Thus far, the recipients had been unwilling to use the material because it was stolen. When Williams moved to sue Brown and Williamson for what he perceived as deceit, the corporation countered with its own threat to have him prosecuted for blackmail.

  As he considered his options, Williams contacted Barrett, a central figure in the well-publicized tobacco trials in Mississippi. Though Williams had a personal history as a wanderer, he had spent a lot of time in the state. As a boy, he spent vacations at a family cottage on the Gulf Coast. After graduating from Baylor University, he taught drama at local colleges in Jackson before obtaining a Ph.D. in Colorado. Unbeknownst to either man, Williams’s peripatetic life had intersected with Scruggs’s several times. Williams had performed in summer theater productions in Pascagoula, opened an English-style pub in Oxford at the time Scruggs was winding up law school, and knocked around at different jobs along the Gulf Coast after Scruggs returned there.

  Although Scruggs was bemused by Williams at their first meeting, he agreed to help him relocate. The furtive air about Williams and the explosive potential of the Brown and Williamson papers appealed to Scruggs. It was another instance in which Scruggs found himself tugged by the excitement of operating in the shadows while at the same time exploiting an opportunity to obtain an edge over his adversaries. Dealing with Williams represented a high-stakes gamble, but it could prove to be worth the risk.

  Once ensconced back on the Mississippi coast, subsidized with “loans” from Scruggs and working in a job arranged by the Pascagoula lawyer, Williams told him of the documents stored months ago with a friend in Florida. In mid-April, a few weeks after their first encounter in Jackson, Scruggs used his plane to fly Williams to Orlando to pick up the contraband material. The documents were packed, like so much typing paper, in small boxes, about three reams in all.

  Scruggs realized that he was engaged in activity that was probably illegal. He was indirectly paying for stolen property. Since the papers came from a law firm, it was privileged material that had been copied and sneaked out of the office. But he knew that his adversary in the coming conflict had deep resources and a record of disregarding rules, and he felt he needed all the ammunition available to him.

  For the 1,500 pages Williams provided, Scruggs would eventually buy Williams a house and a car, and pay him more than $2 million.

  The same spring that Scruggs obtained the Brown and Williamson documents, the state of Mississippi girded for battle with Big Tobacco. At least Attorney General Mike Moore did. The governor, a conservative Republican named Kirk Fordice, wanted nothing to do with the lawsuit, and allied himself with the old political guard working to thwart Moore.

  The attorney general’s coalition of trial lawyers was not blind to the political implications. Though the issue might be argued in a court of law, they knew politics would help determine the outcome. So they weighed a number of factors before deciding how to proceed.

  Mississippi judges, from the county level to the state supreme court, are elected, and there are often sharp distinctions between those who frown on product liability suits and those who generally sympathize with plaintiffs in civil cases. To the Moore-Scruggs group, it became important to find the right venue. There was another consideration. If the pollster Dick Morris’s data indicated difficulty in winning a jury verdict, it would be better to submit the suit to a chancery court, where there are no juries and where judges rule on issues of law and equity.

  In late May 1994, the case to recover damages from Big Tobacco for Mississippi was filed in chancery court in Pascagoula, the home of Moore and Scruggs.

  Later, the governor, who despised Moore and his cadre of trial lawyers, filed his own lawsuit before the state supreme court in an attempt to block the litigation.

  Political war broke out over tobacco in Mississippi, and hostilities soon spread across the country as Scruggs and Moore lined up attorneys general in other states to turn the case into a national issue.

  For Mississippi, Moore would serve as the public official representing the state’s interests, while Scruggs would emerge as the principal voice for the plaintiffs. They worked in tandem, backed by the investments of others in the group. Ultimately, a dozen law firms, including those of Scruggs, Barrett, and Mike Lewis, who had conceived of the approach, signed on for a joint venture. They called themselves the “Health Advocates Litigation Team”—HALT for short. With 25 percent, Scruggs held the biggest share, followed by Ron Motley from the redoubtable South Carolina firm of Ness Motley, the only partner outside Mississippi. Other than Scruggs and Motley, no shareholder controlled more than 10 percent.

  As the offensive began, it became clear that more infusi
ons of cash would be needed. In their enthusiasm to take the battle across the country, Scruggs and Moore ran up budget-busting bills with their travel expenses. Scruggs also tended to take initiatives without informing others in the partnership. His investment in Merrell Williams was one of them.

  Scruggs’s practice of making lone decisions for the partnership annoyed some of his associates. His freewheeling style and his propensity to make secret side payments to people such as P. L. Blake also ate into his own resources.

  For all of his fortune built on the ruins of asbestos, Scruggs was no longer able to keep up with expenses for this new venture, so he went to David Nutt, a prosperous attorney in Jackson, and made an arrangement to assign half of his prospective income from the HALT project to Nutt in exchange for a commitment of $2.5 million to support the litigation. Nutt would ultimately reap a staggering return on his investment. Even though Scruggs would negotiate Nutt’s share downward, Nutt would wind up getting $17 million a year for the next quarter-century from Scruggs’s allocation.

  As Mississippi’s case against Big Tobacco moved forward in 1995, another Brown and Williamson whistleblower came to Scruggs’s attention. Jeffrey Wigand, a disaffected biochemist who had formerly been in charge of research and development at the company, was convinced that the tobacco industry was deliberately jacking up the impact of nicotine to hook consumers on their product. Fired earlier after a dispute with his boss at Brown and Williamson, Wigand remained dependent upon the company for health insurance and had signed a confidentiality agreement that posed a problem for him. But he harbored anger at the industry, and in the months after he left Brown and Williamson, a producer for CBS’s 60 Minutes named Lowell Bergman began to draw information from him. Among Wigand’s allegations, he charged the company with deleting damning material from its own documents and he accused the chief executive officer of committing perjury in testimony before Congress.

  By cooperating with the television network, Wigand exposed himself to retaliatory action by the company. He needed legal defense, so Scruggs was called upon. As in the Williams case, the unfolding drama and corporate warfare fascinated Scruggs. After meeting with Wigand that fall, he agreed to represent his interests at no charge.

  Knuckling under to legal threats from Brown and Williamson, CBS killed its 60 Minutes exposé featuring Wigand. Unhappy over the network’s decision, someone leaked the information to The New York Times and other newspapers. Wigand became a cause célèbre.

  Scruggs not only offered Wigand his services pro bono, but he also spent thousands of dollars to hire a San Francisco private detective, Jack Palladino, to develop counterintelligence against Brown and Williamson after the company released a lengthy, unflattering dossier it had compiled on Wigand. Scruggs also developed a lasting friendship with Bergman, even though the 60 Minutes piece remained unseen.

  To ensure that Wigand’s critical remarks gained wide circulation, Scruggs called upon Wigand to give a pretrial deposition in connection with the Mississippi case. Wigand flew to Pascagoula and stayed at Scruggs’s beachfront home, where private guards were deployed to protect the star witness. In a circus-like atmosphere, Wigand appeared the next day in a courtroom filled with members of Moore’s Mississippi team and lawyers representing the tobacco industry. The deposition was punctuated by frequent legal spats, and Wigand’s testimony ratcheted up the offensive against tobacco.

  (A few years later, director Michael Mann would turn the Wigand affair into a popular movie, The Insider. Al Pacino had the role of Lowell Bergman; Russell Crowe portrayed Wigand. Moore played himself. Scenes were shot at Scruggs’s beachfront mansion, but Scruggs’s voice was deemed insufficiently southern for Hollywood’s purposes. He speaks in a clear and precise manner, in the style of a newscaster who doesn’t betray a regional background. Scruggs’s part was given to Colm Feore, a Canadian actor who appeared in the film as a dashing aviator-attorney in dark glasses, speaking with a distinct southern accent.)

  Wigand’s testimony, based on his experiences at a high level in the industry, gave credibility to the case against tobacco. While Mississippi pursued litigation in state court, the fight took on wider proportions, and the major battleground shifted to Washington.

  With the strength of other states behind them, Moore and Scruggs were working to increase pressure on the industry and force surrender. As a goal, they envisioned a national settlement so vast in its sweep that it would involve hundreds of billions of dollars. But it would require congressional action that would, among other things, ensure the tobacco companies’ protection against future lawsuits based on health issues.

  In the fall of 1995, Scruggs called upon his best contact in the nation’s capital, his brother-in-law, the second-ranking Republican in the U.S. Senate. He told Senator Lott of a possible breakthrough against tobacco. The Liggett Group, a traditional name in the tobacco trade, seemed to be considering a settlement. The company’s share of the market had been reduced over the years, and the prospect of an expensive legal struggle projected further losses. Scruggs hoped to use Liggett’s weak link in tobacco’s united front to strike for greater concessions. He solicited Lott’s help.

  The tobacco issue did not thrill Lott. As a deeply conservative, pro-business lawmaker, he was philosophically opposed to the profession of trial lawyers and the idea of mass torts. Over the years, he had become friends with many of the chieftains in the tobacco industry. But like his brother-in-law, Lott enjoyed swimming in political back channels and consummating deals behind closed doors. There could be something in it for him. A business connection. A political IOU. The satisfaction of brokering an important agreement.

  The process would introduce Scruggs to the Washington branch of the Mississippi network he thought of as “the dark side of the Force,” a consortium of political interests led by Lott and his principal factotum in Washington, Tom Anderson. Although he no longer had a place on the congressional payroll, Anderson continued to handle affairs for Lott. Among Mississippians in Washington, he was regarded as Lott’s “hatchet man.”

  Lott and Anderson served as Scruggs’s entrée to men with connections to the tobacco industry, to Washington operators who could prove helpful when Scruggs decided to pounce.

  After Liggett settled with the anti-tobacco forces in March 1996, others in the business appeared to be looking for the best way out of their dilemma. Steven Goldstone, the chief executive officer of RJR Nabisco, the parent company of R.J. Reynolds, floated a trial balloon in an interview with the Financial Times of London. The tobacco industry did not have “such a fight-to-the-death mentality that it would ignore eminently reasonable solutions,” Goldstone said. Though Reynolds would not follow Liggett’s course, he said, the CEO clearly opened the door to compromise, speaking of “legislative, executive, political, social and other sources” that might come together to resolve the issue. That was, of course, the way things worked in Washington, through legislative, executive, political, and social means.

  At Lott’s suggestion, Scruggs hired Anderson and his associate John Sears, a well-known Washington political figure, to serve as intermediaries to the tobacco industry.

  After seventeen years as Lott’s chief of staff on Capitol Hill, a span interrupted by a stint as American ambassador to a collection of Caribbean islands during the Reagan administration, Anderson became head of Team Washington, Inc., an operation that held the franchise for a chain of Domino’s pizza outlets in the area and delivered free pizza to friendly Republican congressional offices.

  Over the years, Lott and Anderson managed to keep each other comfortable. Lott and his son Chet invested in Domino’s pizza parlors themselves, while in 1995 Team Washington paid for a five-day excursion to Aspen for the senator and his wife that attracted the interest of journalists. Anderson could afford to operate on the same level as his old boss because he had been able to accumulate great wealth and an estate in horse country outside Washington. Like so many former congressional aides, Anderson had become a c
lassic insider in the commerce of the nation’s capital.

  But Sears had more political pull. He had served as a White House lawyer under President Richard Nixon and went on to become the national campaign manager for Ronald Reagan. Though he led Reagan to the brink of the Republican presidential nomination in 1980, Sears was overthrown during a campaign makeover by Reagan. Still, he retained celebrity as a Republican insider. His Notre Dame degree helped extend his social circle to some Democrats, and journalists enjoyed his company at long liquid lunches in Washington’s better restaurants.

  Though both Anderson and Sears had separate offices in Washington, they were partners with a prominent figure in Florida’s Jewish community named Joel Hoppenstein, in an enterprise called The Developing Markets Group. The firm had stationery indicating an office on Van Ness Street in Washington.

  Hoppenstein’s curriculum vitae listed him as a lawyer specializing in structuring financial transactions. In one deal, Hoppenstein and Sears were involved in the sale of a Red Sea resort, built in disputed Sinai territory when it was controlled by Israel, to the Egyptian government after the land changed hands following the Camp David Accords.

  There was never any formal mention of him, but P. L. Blake turned out to have a silent role with The Developing Markets Group.

  Without the knowledge of his partners in the Mississipppi team, Scruggs met with Anderson and Sears in the spring of 1996 to discuss inroads to the tobacco industry, explorations that might include a meeting with the RJR Nabisco CEO Steven Goldstone, to feel him out about a settlement.

  There were contacts between Sears and Anderson and the tobacco interests, but apparently the only fruit the meetings produced turned out to be a distasteful quarrel between Sears and Scruggs over millions of dollars Sears claimed to have been owed for his services.