The Fall of the House of Zeus

by Curtis Wilkie

  Following the successful conclusion of the tobacco case, Scruggs met several times with Anderson and P. L. Blake to adjudicate issues. Though Scruggs professed later that he was “not sure what DMG is,” it seemed clear to him that Blake had an interest in it. Because of the long relationship between Anderson and Blake, Scruggs assumed the pair had a formal business association. But after an argument broke out over fees, Anderson insisted that Blake was not a part of DMG.

  Nevertheless, according to court documents, some of Scruggs’s early payments to Blake were routed through DMG. Scruggs agreed to pay the group $15 million for their services, plus another $1 million a year for the duration of the tobacco settlement. Blake got $10 million, which amounted to two thirds of the initial payment to DMG, and was guaranteed additional payments from Scruggs of almost $2 million a year. Blake’s $50 million understanding with Scruggs was breathtaking.

  Charles Merkel, an attorney who delved deeply into Scruggs’s finances in connection with another lawsuit, found evidence that $10 million to Blake had originally been routed through Scruggs’s friend Joey Langston before finding its way into Blake’s hands. Merkel was unable to reconcile those payments with documents showing that Blake got the money via DMG.

  In an attempt to determine how Blake used the money, Merkel succeeded in winning a subpoena for records of Blake’s account at a Greenwood bank. But U.S. District Judge Allen Pepper sealed these documents against wider inspection. Pepper was a prime example of Lott’s Sigma Nu network. Back at Ole Miss, Pepper had roomed with Lott and sung with him in a quartet, called The Chancellors, that still performed at Sigma Nu reunions four decades after their graduation. Scruggs attributed Pepper’s elevation to the federal bench by President Clinton in 1999 as a thank-you to Lott for the Mississippi senator’s refusal to join other Republicans in pressing for Clinton’s impeachment and ouster a few months earlier.

  How the pieces of Blake’s tobacco money were distributed would remain cloaked in secrecy. When Scruggs was asked, during a 2004 deposition, what Blake had done to earn the money, he gave few insights: “Mr. Blake for many, many years had been a confidante of politicians in high places,” Scruggs testified. “I think Senator Eastland was his principal contact, but he made numerous contacts because of the power of Senator Eastland. He knew lots of people, and he was the best person I could come up with to be a listening post for us on any sort of effort … I trusted his advice and his ability to advise us on political forces that might derail our litigation … We spoke almost daily for several years.”

  For instance, Scruggs explained, during the tobacco wars, Blake had suggested that Scruggs approach Senator Fred Thompson, who had represented Blake during his earlier troubles in Mississippi. Blake also recommended that Scruggs “make contact with the Lion Hall Group of which Senator Biden’s brother was a member—or maybe his brother’s wife was a member.”

  Blake’s explanations, in a separate deposition, were even more feeble. He said he provided Scruggs with pertinent newspaper clippings.

  While Blake got $10 million, the remaining $5 million in Scruggs’s original outlay went directly to DMG. In addition, Scruggs passed through the group a curious $4.3 million for Americans for Tax Reform, a conservative lobbying organization dedicated to fighting taxes. Its president was Grover Norquist, an influential figure during the rise of the far right in the Republican Party. The New Yorker once quoted Norquist as saying that an ideal government would be one cut “down to the size where we can drown it in the bathtub.”

  Scruggs’s contribution seemed totally out of character for a man fast acquiring a reputation as an ardent Democrat and advocate, as a trial lawyer, for the working class. When asked years later about the strange gift, Scruggs said it was given to fight a proposed “confiscatory tax” on tobacco fees.

  After Michael Kranish, a reporter for The Boston Globe, obtained in 2006 a list of donors to Americans for Tax Reform, he found two startling entries from Scruggs’s home state. The Mississippi Band of Choctaws gave Norquist’s group $1.5 million to oppose a proposal to tax profits at Indian casinos. Scruggs’s $4.3 million contribution also showed up. He told the reporter the payment had been made to fight Republican legislation “aimed at essentially de-funding the Democratic Party by penalizing trial lawyers.” No matter that he had given millions to a right-wing activist, Scruggs said. “There is an expression,” he said. “ ‘If you need a thief, take him from the gallows.’ ”

  Later, after Scruggs became ensnared in questions about some of the payments he had distributed from his tobacco largesse, he said he sent the money to Americans for Tax Reform at the behest of Anderson’s group, DMG. He explained that he made the donation to establish a “negotiating position” with DMG as he sorted out the claims made by the DMG partners. Scruggs complained that the Washington group sought more than 20 percent of the fees his firm expected to get out of the tobacco initiative.

  Scruggs balked at going beyond the $15 million he delivered to DMG in the months after the tobacco money began coming in. He was reluctant to pay any more to Hoppenstein, who, Scruggs said, “seemed to be taking far more credit for the result than I thought was justified.”

  In 2000 the bickering with Sears became even more intense. After Sears sent Scruggs a letter in January suggesting that the Mississippi lawyer might be close to committing “fraud” and a violation of “federal criminal laws” by failing to honor a DMG claim, Scruggs responded with a blistering letter of his own.

  He told Sears he had learned that his highly touted meetings with RJR officials were no more than “non substantive, courtesy meetings that lasted for only minutes.” Though Sears purported to be close to the tobacco industry, Scruggs wrote, he had, in fact, been “excluded from the loop” during negotiations. Despite Sears’s minor role on behalf of the anti-tobacco team, Scruggs said, he had been told that Sears actually “wanted $2 billion from the industry for ‘putting the deal together.’ ” Since the tobacco industry refused, Scruggs said, Sears turned to him. Though annoyed, Scruggs offered to settle with Sears and Hoppenstein.

  Sears wrote back that Scruggs’s response seemed to apply only to him and Hoppenstein. “As you know, there are four of us involved.” The other two, presumably, were Anderson and Blake. In a subsequent letter, bristling with anger, Sears told Scruggs, “Nobody is blackmailing anybody and I resent the charge.”

  Scruggs finally came to terms with Sears and Hoppenstein. Each man began to get $250,000 in quarterly payments out of Scruggs’s tobacco allotment. Blake’s cut was even greater. He began to draw $468,000 each quarter from Scruggs.

  In addition, Scruggs sent separate quarterly payments of $375,000 to Tom Anderson. Inexplicably, the money was paid by Scruggs personally, rather than out of his Delmas Capital account, which had been created to distribute the tobacco money. (Scruggs’s office in Pascagoula was located on Delmas Avenue.) After being questioned by one of his financial advisors about the method of paying Anderson, Scruggs began wiring the money to Anderson in the name of Bainberry LLC. Throughout the first quarter of the twenty-first century, the money will be disbursed to Anderson: $1.5 million a year from Scruggs’s tobacco revenues.

  Once all of the claims and assignments were factored into Scruggs’s tobacco income, he was left with less than a third of it. On a schedule of payments that began at the time of the settlement and will continue through 2025, roughly $1.6 billion will go to Scruggs’s legal operation. His total reward, adding up over the years, will amount to $500 million. David Nutt, who helped bankroll the tobacco initiative, will get a similar amount. The remaining $600 million will be distributed to others.

  While he tried to stamp out these calls on his checkbook, which seemed to be breaking out like brushfires on the prairie, Scruggs continued to fight off the old lawsuits filed separately by his former associates Roberts Wilson and Al Luckey. Neither would go away. And since the actions were first filed, their claims had grown. Both Wilson and Luckey were calling for a slice of the toba
cco money, too, arguing that Scruggs had used the asbestos money due them to fund his tobacco initiative.

  The demands were wearing Scruggs down. “Success has many followers,” he lamented a couple of years after the tobacco settlement. “People were coming out of the woodwork” making unjustified claims.

  At night, he found himself possessed by terrible dreams. In them, he scattered the symbols of his wealth in the streets and let his tormentors pick through the debris. He said he was resigned to live on what they left behind.

  CHAPTER 6

  Politics had been embedded in Scruggs’s psyche since boyhood. Although his family did not belong to the ranks of the bitter-end segregationists, when he attended old-fashioned rallies in South Mississippi he had found the oratory of the demagogues absorbing. There was something fascinating about these homespun politicians—something repellent and, yet, wild and alluring. Their pursuit of public office seemed as much a sport as football. And Scruggs realized, as he grew older, that the machinations of public policy also served as a game involving long-term strategies, short-run tactics, lots of money, and private persuasion. Though he never ran for office himself, Scruggs loved the competition, and he became a big-time player.

  His early efforts in Mississippi were innocent, the stuff of moderate reformers: supporting such candidates as his former boss William Winter, who was elected governor in 1979, and his Ole Miss classmate Ray Mabus, who won the office eight years later. Both Winter and Mabus were progressive Democrats. So was Attorney General Mike Moore, one of Scruggs’s closest friends.

  But Scruggs had learned from his 1992 brush with the old guard that politics were not played out on a field of fairness, with referees maintaining order. To win—and Scruggs became obsessed with winning—he knew that he had to consort with rascals, and that he had to employ grit and guile to prevail.

  He also recognized that many things could be done simply with money.

  Following the election in 1991 of Kirk Fordice, a hard-bitten conservative, as the state’s first Republican governor since Reconstruction, the trial lawyers in the state were faced with a belligerent adversary in high office. Fordice had made his own money in construction. With his crude manners, he would never be mistaken for a plutocrat. But he was a businessman holding a businessman’s values and a contempt for liberals, Democrats, and trial lawyers. He thought them synonymous.

  Much of Mississippi shared Fordice’s beliefs. A growing resentment of the plaintiffs’ bar was fired by the escalating judgments they were winning, with corresponding increases in insurance premiums. The first stirrings of a national movement called “tort reform”—a campaign to control costly class action lawsuits and to rein in the power of trial lawyers—began to quiver in the state.

  To protect their position, the lawyers saw a need to create a political arm. Danny Cupit, the most politically active attorney among those who had made millions in asbestos litigation, had become disgruntled with the work of the Mississippi Trial Lawyers Association. He felt that decisions being made by the organization were dictated by attorneys who had little at stake in the struggle and who had failed to raise significant funds to wage the coming fight over “tort reform.” The subject came up one night in 1994 during a leisurely dinner in New Orleans between Cupit and another like-minded Mississippi lawyer, John Grisham, whose novels with legal themes were beginning to attract national attention. As a former Democratic legislator, Grisham was no stranger to state politics, and he had a suggestion: Why not create a political action committee?

  The idea took form shortly afterward at a breakfast at Primos Restaurant in Jackson between Steve Patterson, the state auditor at the time, and an out-of-work political consultant named Jere Nash. Both were seasoned Democratic operatives. Patterson had been state party chairman before winning statewide office, and Nash served as chief of staff for Governor Mabus. Patterson’s connections to the “dark side” went back two decades. Nash seemed more of an idealist, a former state director for the “good government” advocacy group Common Cause, and one of the few liberals active in Mississippi politics. They seemed an odd pair. Neither man held a law degree, but both had natural ties to the trial lawyers through the Democratic Party. Importantly, Scruggs—who would be the political action committee’s first president—knew them both and trusted their political judgments. Even Patterson’s. With Scruggs’s approval, Nash wound up as director of the committee.

  For financing, the committee asked for $5,000 contributions from at least one hundred lawyers around the state. Scruggs, Cupit, and a few others gave much more. Bill Liston, the lawyer who had helped prepare charges against Scruggs two years earlier, was a key supporter, along with David Nutt and Gulf Coast attorneys Paul Benton and David McCormick—who would all go on to make fortunes with Scruggs in the tobacco venture. Other activists included Grady Tollison, Joey Langston, and Joey’s brother, Shane, all of whose names would resonate across the state fourteen years later as Scruggs’s empire came under siege. A Jackson lawyer named Johnny Jones, who became deeply involved in the future struggle against Scruggs, thought of a whimsical acronym for the group: ICEPAC. It would serve as shorthand for Institute for Consumers and the Environment Political Action Committee.

  Rather than have individual lawyers randomly putting a $500 contribution behind a friendly legislative candidate in their home district, the committee planned to channel much larger donations—big enough to sway the outcomes—to targeted races. Nash would analyze the records and reputation of candidates around the state and recommend who should be supported. To get ICEPAC’s endorsement, the candidates were required to pledge their opposition to “tort reform” efforts. Those favored by the committee would be blessed with contributions of $40,000 or more from the pool of money raised from the trial lawyers. If elected, the candidates would be expected to honor their commitment.

  ICEPAC was successful in the 1995 legislative races, and its influence grew in the statewide elections of 1999 after its members, suddenly flush with millions of dollars from the tobacco settlement, poured hundreds of thousands of dollars into Mississippi races where once a few thousand might have made a difference.

  Scruggs was not content to rely on ICEPAC. He relished his position as a powerbroker in other statewide races, though his enthusiasm was tempered somewhat by his naïveté. One day, as he marched with other lawyers toward the capitol on a lobbying expedition, he had to ask on which side of the building lay the state senate. His Democratic contemporaries were leery of his relationship with Trent Lott, who had become Senate majority leader. In a crunch, they feared, Scruggs would prove unreliable.

  But the days immediately after the tobacco settlement were a heady time for him. Not only was The Insider playing in theaters across the country, but he was being saluted in print as the scourge of unscrupulous business interests.

  A lengthy 1999 profile in Newsweek magazine, which Scruggs clipped and framed for his office wall, described him as a modern-day Robin Hood, “a master at marshaling the forces of fellow attorneys against industries that he believes betray the public trust.” The article went on: “Using a web of high-powered political connections and a keen sense of what plays on Wall Street, Scruggs embodies the class action lawsuit gone thermonuclear, a new weapon hovering over corporate America.”

  To extend his influence in the political sphere, Scruggs handed out millions of dollars to candidates who spanned a spectrum of loyalties. He predictably supported the Democratic candidate for governor Ronnie Musgrove with financial backing in 1999. (Four years earlier, he had guaranteed a $75,000 loan from a Pascagoula bank to Musgrove’s campaign for lieutenant governor.) Scruggs also provided new contributions and help for others on the party slate. But in the independent style he demonstrated during the tobacco fight, passing out money with abandon, he strayed from the norm in the Democratic primary in 1999 to choose an unusual candidate for lieutenant governor, an important office. (Under law, the lieutenant governor effectively controlled the state senate,
with authority to appoint committees and set the legislative agenda.)

  The logical choice for progressives that year was Grey Ferris, a two-term veteran of the senate and a leading champion of public education. His brother, William Ferris, was one of the state’s most respected visionaries: the founder of the Center for the Study of Southern Culture at Ole Miss before becoming President Clinton’s chairman of the National Endowment for the Humanities.

  But Scruggs’s “dark side” had another candidate: a thirty-six-year-old woman named Amy Tuck, who was masquerading as a populist Democrat. P. L. Blake arranged a lunch at Nick’s, a popular steakhouse in Jackson, to introduce her to Scruggs. Afterward, Blake convinced him that to succeed in Mississippi, one needed to fish in waters away from “the elites” such as Ferris. Scruggs quietly agreed to “loan” Tuck $500,000 for her campaign. She defeated Ferris in the Democratic primary and went on to win the election.

  Tuck proved to be one of the poorest political investments Scruggs ever made. Two years after taking office, she switched parties to become a Republican and helped lead “tort reform” to passage. Both she and Scruggs were embarrassed when details of the $500,000 arrangement, which Tuck had not repaid, were made public. Democrats were furious after learning that Scruggs had financed a closet Republican.

  Scruggs, however, remained philosophical. Tuck was emblematic, he said, of a maxim he attributed to Earl Long, who inherited the political machine his brother, Huey the Kingfish, created in Louisiana: “You don’t buy politicians; you just rent ’em.”

  Although Mississippi had developed a reputation as a plaintiff’s paradise by the turn of the twenty-first century, Tuck’s political betrayal was symptomatic of the problems that the trial lawyers began to encounter there.

  For a time in the 1990s, it seemed as though power had been transferred into the hands of this new breed of swashbuckling advocates. Scruggs acted as the prototype, but there were scores of others who also suddenly got rich. With the fortunes they accumulated through litigation, they represented new wealth in a poor state, and they were willing to use their money to stave off “tort reform” in the legislature, elect friendly judges on the local level, and keep a majority of sympathetic justices on the state supreme court.