Friday, November 30, 2007

Dickie Scruggs Is in a Heap of Trouble, But Did the Government Charge the Right Crimes?

Mississippi plaintiffs tort lawyer Dickie Scruggs, his son, another lawyer in his firm, and a lawyer and staffer from a different firm have been charged in a six-count indictment (available below) with trying to bribe a Mississippi state court judge to rule in their favor in a dispute over claims to $26.5 million in attorney's fees.  Scruggs was charged earlier with contempt in federal court in Alabama related to his conduct in litigation involving State Farm over insurance coverage from Hurricane Katrina (also available below).  The current indictment includes conspiracy, Sec. 666 bribery, and wire fraud/honest services counts (Sec. 1346), and these charges could result in a substantial prison term.  The federal prosecutors allege that Scruggs and the others tried to pay the judge in the attorney's fee dispute $50,000 in bribes to rule in his favor.  Rather than take the money, the judge went to the FBI and agreed to work undercover.

The centerpiece of the government's case is a tape recording of a meeting between the judge and the lawyer from another firm in which they discuss the payment and the fact that Scruggs could be counted on to keep quiet about it because of all the "bodies buried" over the past six years.  The recorded conversation includes the following quoted in the indictment:

“We, uh, like I say, it ain’t but three people in the world that know anything about this . . . and two of them are sitting here and the other one . . . the other one, uh, being Scruggs . . . he and I, um, how shall I say, for over the last five or six years there, there are bodies buried that, that you know, that he and I know where . . . where are, and, and, my, my trust in his, mine in him and his in mine, in me, I am sure are the same.”

That sure is eloquent, isn't it?  The conspiracy charge is the key here, because the tape recording is hearsay as to Scruggs and the other defendants not present, except that statements by one conspirator in furtherance of the conspiracy -- which this certainly is -- are admissible against all other members under FRE 801(d)(2)(e).

The Sec. 666 charge makes it a crime to offer anything of value to a state or local official with the intent to influence or reward the official "in connection with any business, transaction, or series of transactions" of the government agency.  This is not the typical Sec. 666 case, in which the official usually is an administrator or elected official steering a contract or other government benefit to the offeror of the bribe.  Here, the state judge allegedly was being asked to rule in favor of Scruggs to the detriment of the opposing parties in the attorney's fee suit, so the government was unharmed, and indeed Scruggs and the others had no intention to cause the government any loss.  Does this fall outside of Sec. 666 if the government is not the intended victim?  The statute could be read that narrowly, but the courts, led by the Supreme Court, have construed Sec. 666 fairly broadly, so the charge will probably survive a challenge.  The fact that the judge might have ruled in their favor in the suit is irrelevant to the bribe because the propriety of the decision is not an issue.

The wire fraud charge based on the right of honest services theory may be a bit more difficult to defend as charged in the indictment.  These two counts allege that Scruggs and the others sought to deprive the citizenry of Mississippi of the honest services of the state judge as part of a wire fraud scheme.  The judge is supposed to perform is job "free from deceit, bias, self-dealing and concealment" according to the indictment.  Honest services fraud is a rather malleable concept, to say the least, and the statue has been used in a variety of public corruption cases.  The problem is that Scruggs and the defendants did not owe the state a fiduciary duty, and the real victim of the crime was the opposing party in the attorney's fee lawsuit, and only indirectly the state if the judge had taken the bribe.  Absent the judge's participation, and he clearly was not going to accept the bribe, was there a scheme to defraud Mississippi of honest services, or is this case better cast as a scheme to defraud the litigants of an honest judge by depriving them of whatever value the lawsuit had?  The better victim might well have been the opposing party because the defendants were trying to take money, or at least the opportunity for a fair claim to the attorney's fee, and not the more ephemeral right of the citizenry to an honest judge.  That said, prosecutors love to charge honest services fraud with public servants, even when they are not corrupt themselves, and I suspect any defense challenge based on failure to charge an offense will likely fail.

The federal anti-corruption laws are a bit of a mishmash, with the key to cases being things like "honest services fraud" or showing under Sec. 666 that a state or local agency received $10,000 in a twelve-month period from the federal government.  As I've argued before (see my article Federalism and the Federal Prosecution of State and Local Government, 92 Kent. L.J. 75 (2003))), federal prosecutors have a crucial role to play in policing corruption at the state and local level.  While there are efforts in Congress to expand Sec. 666 and make it a bit easier to pursue these types of bribery, skimming, and embezzlement cases through other modest changes (see S. 1946 here), it may be even more helpful to prosecutors to have coherent laws that don't rise and fall on how a court construes the scope of a phrase like "honest services fraud."  But then, asking for coherence out of Congress may be just a bit too much.  (ph)

Download us_v_scruggs_indictment_nov_28_2007.pdf

Download us_v_scruggs_contempt_charge_aug_2007.pdf

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Listed below are links to weblogs that reference Dickie Scruggs Is in a Heap of Trouble, But Did the Government Charge the Right Crimes?:

» An insightful look at the charges against Scruggs from Insurance Coverage Blog
You'll want to check out this excellent post by Peter Henning at White Collar Crime Prof Blog that analyzes the strength of the federal charges against Scruggs.... [Read More]

Tracked on Dec 3, 2007 9:24:12 AM

» Scruggs indictment IV from Overlawyered
The WSJ law blog's Peter Lattman is now reporting from Scruggs hometown Oxford, Miss. and with co-reporter Paolo Prada is in today's paper with "It's Party Time For Dickie Scruggs In Oxford, Miss." (WSJ, Dec.... [Read More]

Tracked on Dec 4, 2007 7:23:01 AM

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