The Fall of the House of Zeus

by Curtis Wilkie

  Scruggs and Moore operated more openly in Washington with another powerful Republican, Senator John McCain of Arizona. McCain was not only one of the biggest champions of the anti-tobacco effort in Congress, but he held a position as chairman of the Senate Commerce Committee. He and Scruggs, both former navy pilots, struck up an easy friendship that led to an invitation for Dick and Diane Scruggs to spend a weekend with McCain and his wife, Cindy, at their home in the Arizona desert. More important to the campaign against tobacco, McCain allowed Scruggs and Moore to set up a war room inside the Capitol Hill offices of the Commerce Committee.

  His access to working space in the halls of Congress, coupled with the knowledge that other Capitol Hill doors were opening to him, put Scruggs in his element. He loved politics, and this seemed infinitely better than doing business with the rinky-dink operators back in Mississippi. Still, some of those old relationships proved helpful to him in Washington. Especially those with P. L. Blake and Steve Patterson.

  In the years since Scruggs escaped the clutches of the dark side of the Force, he had learned how to navigate Mississippi politics. To keep his initiatives afloat, he knew it was necessary to establish links with some of the same people who had once plotted to indict him. There was something a bit louche about these connections, Scruggs realized, but consorting with rogues was far more fascinating than wallowing in the drudgery of bankruptcy law.

  Patterson, who had worked a decade earlier on Joe Biden’s failed attempt to win the Democratic presidential nomination, opened doors to the Delaware senator. It was important to win support among Democratic liberals such as Biden, who generally opposed Big Tobacco but were skeptical of any settlement—such as the one Scruggs seemed to be forging—that might immunize the tobacco industry against future lawsuits.

  It helped that Scruggs agreed to Patterson and Blake’s suggestion to hire the senator’s brother Jim Biden as one of those assigned to the “legislative, executive, political and social” campaign in Washington on behalf of the anti-tobacco team. Before the struggle ended, Scruggs would pay thousands of dollars—he was never sure exactly how much—to Jim Biden’s lobbying operation, Lion Hall Group.

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  Scruggs courted other Democratic allies at the highest levels in Washington. At the White House, he felt Vice-President Al Gore would be a strong advocate. Gore’s sister, Nancy, had died from lung cancer after years of smoking, and her widower, Frank Hunger, was an acquaintance of Scruggs who had been a lawyer in Mississippi before coming to Washington to take over the civil division of the U.S. Department of Justice.

  The Mississippi team had another connection to Gore, through David Nutt, the Jackson attorney who had come to their financial rescue. Nutt hosted a private dinner for the vice-president at his Mississippi home and invited members of the HALT group to come discuss with Gore their anti-tobacco litigation.

  At the same time, Trent Lott helped arrange secret White House meetings for Scruggs. Though the Senate leader of the opposition party, Lott was in regular contact with President Clinton’s chief of staff, Erskine Bowles, crafting compromises before congressional issues blew into political crises.

  Negotiations between anti-tobacco lawyers, industry representatives, and political leaders seemed to be making progress. Scruggs, who had never been gifted as an orator in an actual trial, preferred out-of-court settlements and, in August 1996, felt that the various sides were on the verge of an acceptable plan. It would cost the tobacco interests billions of dollars in payments each year to a settlement fund, but it would protect the industry from future lawsuits.

  The deal was set back by a story in The Wall Street Journal that described specific provisions of the proposal and reported that “formidable opposition” to the plan was developing. Scruggs felt the information had been turned over to the newspaper by a California congressman, Henry Waxman, the ranking Democrat with oversight on the issue in the House. Waxman was a staunch critic of tobacco, and another of the Democratic liberals unwilling to give immunity to the industry.

  Scruggs felt betrayed. Early in the struggle against tobacco, he and Mike Moore had entrusted Waxman with the Brown and Williamson papers provided by Merrell Williams. And Scruggs had shared with Waxman a draft of the prospective settlement.

  Negotiations got back on track, but nearly another year would be needed to complete the deal.

  By the spring of 1997, thirty-nine other states had joined Mississippi in the campaign against the tobacco industry. With Moore and Scruggs handling the case for the coalition, a series of private talks were held with industry attorneys. It was high drama, albeit behind closed doors. To ensure privacy, the meetings took place in out-of-the-way hotel conference rooms around the country.

  On June 20, an agreement was finally reached. Over a twenty-five-year period, Big Tobacco would pay out $368 billion to compensate for health costs related to smoking. The industry would also submit to tougher regulations and put an end to much of its advertising. In exchange, tobacco would no longer face massive class action suits, eliminating the danger of crippling punitive litigation in the future. When Moore announced the settlement, he called it “the most historic public health agreement in history.”

  But the agreement still needed congressional approval.

  Anxious to resolve the dispute, the tobacco industry began to make a separate peace with the various states. An agreement was reached within two weeks with Mississippi that gave $3.4 billion to the state.

  For the members of HALT, this represented the ultimate big lick. They had risked their own money to represent the state at a time when state officials—other than Moore—were unwilling to challenge Big Tobacco. And the fees that they reaped did not come directly out of the state’s windfall, but were assigned by independent arbitration panels.

  For the next twenty-five years, each of the Mississippi attorneys who had signed on for the fight would be paid millions of dollars. A 10 percent share in HALT, such as those held by Crymes Pittman and Mike Lewis, would be worth roughly $140 million.

  Scruggs’s big lick would be even bigger, for he had a greater share in HALT and was involved in additional litigation on behalf of Florida, Texas, and others. Tobacco was settling with these states, too. The total amounts coming to Scruggs seemed incalculable. Some news accounts had him getting as much as $848 million, leading to descriptions of him as a billionaire. The lick was never that big, but far more than most Americans would earn in a lifetime.

  Looking back on the period a few years later, Scruggs would tell a friend, “The money was obscene. Nobody thought we’d make money like this. It was a frenzy.”

  Even though the national settlement, announced with great fanfare in 1997, broke down in Congress the next year, the victim of legislation that had become top-heavy (tobacco’s liability had grown to more than $500 billion), the industry had been dealt a severe blow, and Scruggs had been given a title: King of Torts. It complemented his college nickname, Zeus, king of the gods.

  But the crown did not rest easily on him.

  Instead of enjoying his riches in comfort, he was forced to fight rearguard actions to protect his interests. During the four-year struggle over the tobacco litigation, Scruggs agreed to assign various percentages of his eventual payout to others. Some of the promises were sealed with nothing stronger than a handshake, leading to bitter quarrels over disputed terms. Later, questions would arise about payments to agents of the dark side of the Force.

  No better example of the curious deals and money frenzy exists than Scruggs’s agreement with a prominent North Mississippi trial lawyer named Joey Langston.

  Less than two months after the tobacco interests began to reach agreements with various parties to the conflict, Scruggs was alarmed by an article in The Wall Street Journal that touched on a problem that could wreck the process. The story reported that Ron Motley, one of Scruggs’s chief partners in the tobacco fight, had been sued for $1.5 billion by a former client in Jones County, Mississippi. The pl
aintiff was the widow of a small-town barber named Burl Butler who had died of lung cancer after a career of inhaling smoke in a barbershop dense with the discharge of cigarettes. Initially, Mrs. Butler had been represented by Motley, who had boasted of the suit’s unpredecented nature—the first to claim that death had been caused by secondhand smoke. After Motley emerged as one of the lawyers involved in a settlement that would spare the industry from suits such as Mrs. Butler’s, she accused him of undermining her interests.

  The Butler case had been valuable to the members of HALT. The judge in Jones County who presided over the case was considered sympathetic to the plaintiffs and had allowed Motley a great deal of leeway to obtain tobacco industry documents through a legal process known as discovery. To Scruggs, the Butler case had become a “discovery engine,” providing much detail and information to the plaintiffs.

  The new conflict had the potential of jeopardizing any settlement with tobacco because it might affect an agreement on immunity.

  The Butler case had taken a strange turn. Instead of representing the widow, Motley had been sued by her. Handling Mrs. Butler’s suit was a Jackson lawyer named Shane Langston. His sister, Cindy, though associated with another law firm, was also a member of the new Butler legal team.

  To see if the affair could be resolved, Scruggs turned to the Langstons’ brother Joey. Scruggs knew Langston as a successful attorney who had maintained his father’s practice in the little town of Booneville while his siblings had gone off to more urban locations. Scruggs didn’t know Langston well, but he recalled sending a few asbestos cases his way after Steve Patterson, who now worked with Langston, asked for the business. Scruggs felt he was in position to seek a favor.

  “This is going to be a big stink,” Scruggs said of the suit against Motley when he called Langston. Invoking the brotherhood of trial lawyers, Scruggs added, “It takes away our high ground.”

  Langston agreed to see what he could do. If he was successful, Scruggs promised to assign 3 percent of his take from tobacco toward a settlement of the Butler disagreement. (According to Langston, Scruggs had made a commitment to him earlier for a 3 percent “contingency” cut of anticipated fees from the tobacco initiative.) The conditions were vague, but some of Motley’s share of the tobacco money would also go to resolve Mrs. Butler’s complaint.

  Langston traveled to Jackson to meet with lawyers representing the various parties. He found himself shuttling between different floors of a building, carrying offers back and forth. One of the sticking points was Scruggs’s promise of 3 percent, which had not been sealed with a signature. After some discussion on the phone, Scruggs agreed to meet with Langston at a familiar setting, P. L. Blake’s home in Greenwood, to sign the papers.

  A settlement was reached, and the case was sealed by a judge in Jones County, with details of the arrangement kept secret. The deal would lie smoldering for nearly a decade until it was revived in another dispute between Scruggs and an erstwhile friend and associate. This time the antagonist would be Joey Langston.

  Diane Scruggs had long been troubled by some of her husband’s associates. Coming from a privileged environment, the daughter of a prosperous dentist and the wife of a successful attorney, she detected in Dick’s associates’ character scents of raw greed and uncultured manners that were almost Snopesian in their dimension.

  Langston’s effort to horn in on Scruggs’s tobacco money represented an early warning sign to her. She resented Langston’s grasping style—she felt he had been slow to repay a significant loan, $2 million from Scruggs that Langston described as an “advance” on expenses in Fen-Phen cases. Though Diane considered Langston something of a charlatan, she felt even more uncomfortable in the presence of his associate Steve Patterson.

  From the time he sought to indict Dick in 1992, Diane had an aversion to Patterson. She thought him, at best, a boor. She recoiled when Langston and Patterson visited the Scruggses’ skybox at Ole Miss football games, glad-handing Dick and Diane and their guests during halftime breaks. To the elegant Diane, the two men seemed relentlessly on the make for money.

  When she complained to her husband, Scruggs brushed off her objections. He liked to invoke an old maxim: Keep your friends close and your enemies closer. He laughed at Diane’s objections and asked her not to say anything unpleasant in public.

  She dutifully kept a smile in the men’s presence, but it was difficult.

  Diane had questions about P. L. Blake, too. He was something of an enigma. Though she saw him no more than two or three times throughout the years, she recognized his deep voice when he telephoned, and he called Scruggs’s home often. He was invariably cordial and seemed to be watching out for the Scruggses’ interests. (When the planes crashed into the World Trade Center towers on September 11, 2001, he was the first to call to make sure the Scruggses were watching television.) After learning that Scruggs paid Blake thousands of dollars a month, Diane wondered exactly what services he provided. And why would Dick respond to Blake’s summons to come to his home in the Delta to settle business? “If I were working for somebody, wouldn’t it be presumptuous for me to tell the boss to come meet with me?” she asked her husband. “It sounds like the tail is wagging the dog.”

  Scruggs laughed at her questions, explaining that Blake had valuable political connections.

  While various claimants nibbled at Scruggs’s share of the tobacco initiative, solidarity among members of the HALT venture unraveled. Pauline and Mike Lewis were troubled over Scruggs’s tendency to take center stage. He had rushed around the country piling up heavy expenses while making unilateral decisions. Sometimes he seemed to be taking the initiative in uncharted directions. Without consulting with his partners, he spoke for them in public forums and television interviews.

  The couple felt Scruggs was taking all of the credit for Lewis’s groundbreaking idea. To the husband-and-wife team, Scruggs’s conduct amounted to theft of their “intellectual property.” Acting independently, he had used Lewis’s concept—designed for Mississippi—and applied it in cases where he represented other states outside the scope of the HALT alliance. As a result, Scruggs made millions more than the others in the group.

  Though the Lewis firm’s share of the Mississippi settlement was $140 million, they never forgave Scruggs for his handling of the case. They concluded that he was nothing more than a megalomaniac, and they joined the ranks of other Scruggs partners who believed they had been chiseled by him.

  There were other, more bizarre demands on Scruggs’s tobacco funds.

  Pete Johnson, the former state auditor who had fixed the legislation to approve contingency fees for outside counsel in state cases, claimed that Scruggs had failed to live up to his agreement to pay him 10 percent of his tobacco fortune. There was nothing on paper, but Johnson insisted he had Scruggs’s word.

  Scruggs had paid him $5,000 a month for several months after Johnson got the language inserted in the Medicaid bill, but then cut him off. Before Johnson could reach an understanding with Scruggs, he became gravely ill with a liver malady. Johnson moved with his wife, Scruggs’s cousin Margaret, back to her Delta home in Clarksdale—he thought to die. He decided to spend his final days fighting Scruggs, summoning enough energy to drive more than three hundred miles to Scruggs’s office in Pascagoula in order to confront him. Johnson languished in Scruggs’s waiting room all afternoon and never saw him; he figured Scruggs had escaped through a back door. Still, Johnson persevered.

  Johnson obtained a liver transplant in 1996. (Scruggs says he helped get Johnson to Texas for the operation; Johnson insists Scruggs offered no such assistance.) Restored to better health, Johnson sought vindication with a lawsuit, asking for $140 million, which he understood to be 10 percent of Scruggs’s share of the tobacco money. The suit never got traction.

  Finally, in 2001, P. L. Blake called Johnson with instructions to come to his home in Greenwood. For years, Johnson had known Blake as a spoke in Eastland’s wheel; any message from Blake carried a
uthority. So Johnson made the hour-long drive through the cotton fields of the Delta, then sat and listened as Blake told him to give up his lawsuit. It was folly, Blake said. To settle, Scruggs was willing to pay him $100,000. Johnson decided to accept. Blake closed the deal by writing Johnson a check that day for $100,000 from his own account.

  The same year, coincidentally, Johnson was appointed chairman of the federal Delta Regional Authority, a Republican patronage position that could be traced to Trent Lott. With the job, Johnson got a spacious office in the abandoned chambers of a federal judge in the post office in Clarksdale, where he proudly displayed the hardwood walking stick his grandfather “Big Paul” Johnson, the governor of Mississippi, had once used to cane a political enemy.

  There were others. An anti-tobacco activist named Richard Daynard also sued Scruggs and Ron Motley. A law professor at Northeastern University in Boston, years before the Mississippi Medicaid litigation Daynard had founded the Tobacco Products Liability Project to discourage smoking, and had served as a consultant in the case.

  In a 2000 lawsuit, Daynard contended that he had made a handshake deal with the two lawyers who agreed to pay him 5 percent of any tobacco fees they collected.

  Scruggs dismissed his claim, saying that Daynard was “a bit more mercenary than people think he is.”

  But Scruggs yielded in the end. Each quarter, Daynard began to get $100,000 from Scruggs’s tobacco account.

  A particularly nasty dispute grew out of Scruggs’s arrangement with The Developing Markets Group, the partnership held by John Sears, Joel Hoppenstein, and his brother-in-law’s associate Tom Anderson. Even though Scruggs channeled millions of dollars through the group, they clamored for more. And details of where the money went were murky.