The Fall of the House of Zeus

by Curtis Wilkie

  But as he parsed through all of these associations, Scruggs had not forgotten that Cupit’s circle sometimes widened to take in people like Patterson, who now worked with Scruggs on political issues. Scruggs also remembered that it had been Cupit who helped intercede, on Scruggs’s behalf, with Patterson in the 1992 case drummed up by the dark side of the Force. To call upon that connection for help fifteen years later, Scruggs agreed to pay a half-million dollars.

  Patterson and Cupit’s relationship went back nearly forty years, to the time when they were young men involved in Democratic politics. Both men had served as state chairman of the party and worked together on legislative issues and other matters not so public. They were quintessential inside operators.

  As Scruggs tried to wind up negotiations with State Farm, Patterson called Cupit regularly to promote Scruggs’s position. Patterson acknowledged that Scruggs had assured him “a piece of the settlement”—even though Patterson was not a lawyer and, thus, was ineligible for any part of a contingency fee. He told Cupit, “Scruggs still thinks you’re trying to elbow in on the fee.” As a result, Scruggs didn’t want to deal with Cupit directly, and he hired Patterson to be his middleman.

  The dynamics of the State Farm case seemed to change from day to day, but the company’s agreement with SKG was contingent upon Hood abandoning the criminal investigation. Scruggs grew emotional over the prospect of a rich settlement, calling for Hood to end the investigation, while telling State Farm that he could not control the attorney general. Meanwhile, Hood complained to associates that he was drawing “friendly fire” from the Scruggs group.

  In one conversation with Patterson, Cupit instructed his friend to tell Scruggs to “cool his jets” while Cupit worked to get the attorney general out of the dilemma while retaining for Hood some measure of credit for resolving the State Farm case. Throughout the Christmas season, little progress was made.

  In January 2007, Patterson warned Cupit that Scruggs was prepared to deliver an ultimatum to the attorney general. Unless Hood agreed to assure State Farm that there would be no indictments, Scruggs would fall back on a plan conceived by his public relations team. There would be a press conference, attended by several high-ranking public officials—including Senator Lott, who had sued State Farm himself—to endorse a settlement benefiting hundreds of Gulf Coast residents. The group would announce that only Hood stood in the way. The publicity could kill Hood’s reelection chances.

  The scenario was the subject of a heated discussion in a private room at the Jackson airport in January 2007, involving Hood, Scruggs, Patterson, and Joey Langston (Patterson’s former employer who had strong connections to both the attorney general and Scruggs).

  Two days later, on January 22, Hood drove to Memphis—the Republican governor had denied him use of a state plane—to meet with three high officials of State Farm. On the way, he talked by cell phone with his staff members about the status of the criminal investigation. He was told by one aide, who had been meeting with a grand jury in Pascagoula, that there was plenty of evidence to support the state’s civil action against State Farm, but little to warrant criminal indictments.

  During his Memphis talks, Hood first reached a settlement with State Farm on the state’s civil case. The company agreed to pay $5 million to the attorney general’s office as reimbursement for its expenses in the investigation and to set up an apparatus to deal with unresolved claims that could cost the company as much as $400 million.

  Before he left the Tennessee city, Hood also informed State Farm that he would discontinue the criminal case.

  This cleared the way for the final settlement of the 640 cases represented by the Scruggs Katrina Group, but the war between Scruggs and State Farm would continue to reverberate throughout the year.

  A decade earlier, Scruggs had flirted with trouble by relying on whistle-blowers for information about the tobacco industry. The tactic won his character a role in the movie The Insider, but it also resulted in lawsuits and threats of prosecution for using material that had been copied and stolen from a law firm. He knew he had crossed a line and exposed himself to criminal charges, but he felt it was worth the risk.

  In the case of the Rigsby sisters, Scruggs tried to inoculate himself against charges that he had purchased stolen material. Rather than buying documents, he hired the two women as consultants when they lost their jobs as adjusters with E. A. Renfroe and Company in Alabama. They were fired after they told their employers of a weekend in early June 2006 in which they downloaded hundreds of pages of computerized State Farm files in a “data dump.”

  They had come to Scruggs months earlier, and he knew he had dramatic material in his hands. He shared it with state and federal authorities, then the public. One of his gifts as a plaintiff’s attorney was an ability to drive his message across to journalists. While others might be uncommunicative with the press, Scruggs invariably responded to interview requests and cultivated friendships with reporters. He often proved a reliable source for what is known in the trade as “good copy.” Because he understood the tactics that worked with journalists, he was often able to plant useful stories in the hands of well-known, legitimate reporters.

  Drawing upon his wiles, Scruggs set up interviews with the Rigsby sisters. One story struck a raw nerve with State Farm. Brian Ross, an ABC correspondent who had developed Katrina stories with Scruggs’s assistance, featured the women in an exposé on the popular investigative show 20/20. Wearing State Farm jackets on camera, the sisters accused the company of doctoring engineering reports.

  A week later, the Renfroe company, which provided adjusters for State Farm, sued the Rigsbys in federal court in Birmingham. The case was assigned to a conservative judge who had been put on the bench by President Ronald Reagan in 1982. Judge William M. Acker was eighty years old but still active, and his views tended to reflect the farthest shores of the right wing in America.

  Early in his tenure as a federal judge, Acker had been the subject of controversy when he was rebuked by a federal appellate court for his handling of a criminal case involving Alabama members of the Ku Klux Klan. The appeals court found that Acker had ruled improperly when he ordered the acquittal of a Klansman convicted by a jury, dismissed the indictment of another, and suppressed critical evidence against other Klan defendants.

  In 2000, Acker summarily dismissed a First Amendment case brought by two students who said they were punished for refusing to say the Pledge of Allegiance because they believed it constituted “idol worship” and violated their religious beliefs. Five years later, he declared that he would no longer consider students from Yale Law School, his own alma mater, for clerkships because Yale had limited campus access for military recruiters.

  After the Renfroe company, working in concert with State Farm, demanded the return of the stolen documents, Judge Acker obliged with a December 8, 2006, injunction ordering the Rigsby sisters and their attorneys to hand over the material and to cease disclosing information taken from the papers.

  There were two loopholes in Acker’s order. He excluded “law enforcement officials” from the injunction, and the order did not take effect for three days. In the interim, Scruggs called Jim Hood and had his set of papers sent to the Mississippi attorney general before the December 11 deadline.

  Acker was outraged by Scruggs’s action, and the mood of Scruggs’s other adversaries darkened after they learned that his Katrina group had sponsored a television commercial on the Gulf Coast containing a double-barreled blast at Insurance Commissioner George Dale and State Farm. In the commercial, Kerri Rigsby told viewers, “I used to work for State Farm. I know firsthand how far they will go to avoid paying your claim. Take it from me, you need a lawyer, not the Insurance Commissioner’s mediation program … Don’t give in to big insurance.”

  In June 2007, Scruggs and his son, Zach, spent two days in Washington speaking individually with a bipartisan list of senators—many of them members of the Judiciary Committee—in favor of legislation to
raise the salaries of federal judges. The informal lobbying—suggested by other Mississippi lawyers as a legitimate way to help the judges—served as an opportunity for Scruggs to renew his Washington contacts. On the way back to Mississippi, Senator Lott hitched a ride on his brother-in-law’s jet. Although Lott had reached a settlement with State Farm in April over the loss of his home to Katrina, the senator was still steaming with indignation that was almost Democratic and populist in its intensity.

  The day after Scruggs returned from his mission on behalf of federal judges, he was hit with a criminal contempt citation from Judge Acker for his “brazen disregard” of the injunction. There was further irony. Alice Martin, the Republican U.S. attorney for North Alabama who would be accused of political motivation in connection with the conviction of Don Siegelman, the former Democratic governor of Alabama, declined to prosecute Scruggs. Refusing to give up, Judge Acker appointed two Birmingham attorneys as special prosecutors.

  Scruggs countered by hiring a prominent criminal defense lawyer from San Francisco, John Keker, to represent him. Keker had been recommended to Scruggs by Lowell Bergman, the former CBS producer whose work with tobacco industry whistle-blower Jeff Wigand had led to a friendship with Scruggs. Neither Scruggs nor Keker knew it at the time, but the association would lead to countless hours together in the coming months.

  Judge Acker was not the only federal judge giving Scruggs difficulty. Over the past year Scruggs had been dealing with a succession of adverse rulings by U.S. District Judge L. T. Senter, who had been given jurisdiction over hundreds of Katrina-based lawsuits pending in Gulfport, Mississippi.

  In one of Senter’s crucial decisions, he effectively ruled that insurance companies were not liable for flood damage during the hurricane. After hearing a case brought by Scruggs on behalf of a Pascagoula couple, Paul and Julie Leonard, Senter limited their recovery to $3,000. The Leonards had sought $130,000 from Nationwide Mutual Insurance Company.

  Senter, who heard the case without a jury, upheld the insurer’s contention that water had caused most of the damage. His verdict was hailed as a major victory for the insurance industry. It was a setback for Scruggs, but he insisted he was pleased that Senter had upheld the insurance company’s liability for any wind damage. “We didn’t bring home the full measure of damages for the Leonard family,” he said. “But they cleared a big path for all the other homeowners on the Gulf Coast.”

  Another Senter ruling made it more difficult for Scruggs to consolidate Katrina cases into mass tort actions. At one point, it appeared he would be forced to try each claimant’s case individually, a task that could last a lifetime.

  Still, Scruggs and other members of his Katrina group battled to reach mass settlements with the industry, and by the summer of 2007, they had succeeded in obtaining agreements with Nationwide, Allstate, and Met Life that covered several hundred other families on the Gulf Coast.

  The pace was furious. To Scruggs, it now seemed inconceivable that he had ever contemplated retirement.

  CHAPTER 15

  Through the summer of 2007, a time of languor and oppressive heat in Mississippi, there was little progress by the federal investigators in developing a case against Scruggs. The sun beat against the pavement in visible waves, and the courthouse square in Oxford seemed to lie stricken under the assault. Only a few hardy shoppers and laborers ventured outside for long periods. Air-conditioning had made the climate more bearable three quarters of a century after Faulkner (who privately deplored the modern contraption for “messing with the weather”) had begun his short story “Dry September,” with the words “Through the bloody September twilight, aftermath of sixty-two rainless days …” The fierceness of the season in the Deep South had not ebbed over the years.

  Down the road in Calhoun City, Judge Lackey felt frustrated; he thought of himself “like a lost ball in tall weeds.” He had effectively placed his life under the control of federal authorities. They had become his handlers, and he had been reduced to the role of spy. Yet there was little about the situation that seemed romantic.

  The federal agents running the Lackey operation were discouraged, too. No incriminating evidence had been turned up since the judge had tried to take himself out of the case in May. They encouraged Lackey to keep trying. Finally, on the afternoon of August 9—less than forty-eight hours after the defeat of his friend, Insurance Commissioner George Dale, in the Democratic primary—Lackey resumed his efforts. He placed a call to Tim Balducci and opened the conversation on a mirthful note.

  “I’m looking for the piss ant,” the judge began, making a joking reference to the dispute in Balducci’s home town over Steve Patterson’s lack of a law degree.

  “Well, the piss ant ain’t here right now,” Balducci replied, laughing.

  “You stirred up a wasp’s nest.”

  “These sons of bitches stirred it up,” Balducci said. “All I’ve done is respond to it. There’s a lot of things I can take, and I can take all the slings and arrows, and I can take all the talking and the backbiting and all the gossiping around the courthouses. But when you haul off and start writing letters to the bar, and trying to get me in trouble with the way I practice my living and feed my children, that I take awful seriously.”

  As the judge had suspected nearly three months earlier, Balducci had no further interest in pushing for a decision from him in Jones v. Scruggs. It was time for the judge to revive the subject.

  After a bit more banter, Lackey asked if Balducci was in a position to talk confidentially. Assured that he was, the judge asked, “You think Dickie wants this thing in mediation—I mean arbitration?”

  “Yes, sir. That’s his number one goal.”

  “Well, I just wondered if he wanted me to take care of it somehow.”

  “Yes, sir. That’d be terrific. If that’s how you sees [sic] it after you’ve taken a look at it.”

  “I’ve got it in the bosom of the court now,” the judge said. “I don’t know him, and of course I trust you.”

  “Yes, sir,” Balducci said, ever obsequious. “The only concern I think anybody had after the hearing was Johnny Jones blowing his snot bubbles and stuff. Everybody was afraid he might pull on somebody’s heart strings. But, you know, I think this is one of those where it has the added benefit of being right. If you look at the agreement, hell, I think they’re right. So all they want is for the thing to get kicked to arbitration.”

  “As long as they feel comfortable with that,” Lackey said, “rather than in the court …”

  “That’s what they want.”

  “All right,” Lackey agreed.

  “That’d be terrific, judge.”

  The conversation constituted more improper talk with a judge. Still, there was no mention of a bribe, no quid pro quo, and until that was offered, no real crime existed.

  Lackey’s subsequent attempts to reach Balducci during the month failed. This show has got to stop, the judge thought to himself. I have been living with this thing since March and I want to bring it to a head one way or another.

  To buck up Lackey’s spirits, the FBI praised him for his value to the investigation, for bringing Balducci’s overture on behalf of Scruggs to their attention. It was not the first time that Scruggs had been in the crosshairs of the FBI. They had been unable to secure an indictment against him in the Paul Minor case on the Gulf Coast, but they were prepared to try again. They encouraged Lackey to keep trying, too. It would be helpful, they said, if Lackey arranged another meeting with Balducci. And it would be decisive if money were mentioned explicitly. Otherwise, the case would go nowhere, and all of Lackey’s agony over the past six months would have been for nothing.

  Suddenly Lackey grew very uncomfortable with the role he had been playing. He was, after all, a god-fearing deacon, and the thought of asking for money flew against his nature. He didn’t want to do it. And even if he did, he still privately hoped that his young friend might say that it had all been a terrible misunderstanding. Then that wou
ld be the end of it.

  Lackey was ambivalent over continuing, but the FBI prevailed upon him to make one more effort. The judge called Balducci’s office in New Albany and learned he was in Washington for a couple of days. He hung up, cleared his throat, and with fresh resolve prepared to pursue him further. Speaking into the FBI’s recording device, Lackey set the stage:

  “I could not reach Mr. Balducci on his phone at his office, was advised he was in Washington, D.C., and would not be back until Thursday, which is day after tomorrow. I’m going to attempt to reach Mr. Balducci on his cell phone, and, again, I’m going to attempt to make a recorded telephone call to him from my office number. The time is approximately three minutes until five p.m. on this, the eleventh day of September.”

  Instead of talking with Balducci, the judge got his cell phone’s voice mail. Even as he spun one of the last strands in his web, Lackey could not resist another joke based on the recent news that Vice-President Cheney had inadvertently wounded a hunting companion.

  “Baldooch,” Lackey said, “I know you’re running around those ivory towers. If you run into Cheney, tell him I’m going to pass on the duck hunt.”

  Then the judge became more serious. “I do need to talk to you about this matter that we’re both concerned about. I’ve got something I want to run by you and see what you think about it.”