Fen-phen lawyers must forfeit $30 million

they must give up non-profit

bmusgrave@herald-leader.comApril 8, 2009 

FRANKFORT — Two disbarred lawyers convicted of taking millions of dollars from their former clients must forfeit $30 million, a jury decided Tuesday.

The jury came to the decision after deliberations that began late last week. Federal prosecutors had argued that Shirley Cunningham Jr. and William Gallion should have to repay $94 million that they took from 440 clients in a 2001 diet drug settlement.

The jury ultimately decided that Gallion and Cunningham should repay $30 million and turn over more than $20 million from a non-profit that was set up from proceeds from the $200 million diet-drug settlement. The bulk of that money has already been turned over to the clients in a separate civil lawsuit.

On Friday, the jury convicted Gallion and Cunningham of conspiracy and eight counts of wire fraud.

Lawyers used money from the settlement to set up a non-profit called the Kentucky Fund for Healthy Living, which later paid the attorneys more than $5,000 a month to serve as board members.

Defense lawyers and prosecutors disagreed on what the jury ultimately decided on Tuesday.

The jury verdict form asked the jury how much the men should have to repay but also asked whether they should have to turn over money from the fund.

Defense lawyers said the jury decided that the two men had to repay only $10 million in addition to the $20 million in the Kentucky Fund for Healthy Living.

Prosecutors said, however, that the two lawyers are responsible for a total of $50 million.

If the issue is not resolved, a judge will have to make a final determination.

Regardless, David Davidson, a lawyer for Cunningham, said he thought the verdict showed that the jury decided that the scope of the alleged fraud was much less than what prosecutors said it was.

Defense lawyers for the two men had argued that Gallion and Cunningham should not have to repay money that other attorneys on the case took.

For example, Stanley Chesley, a Cincinnati lawyer, received $20 million in fees from the case. Yet federal prosecutors aren't asking him to repay that money, Davidson said.

It's not fair for Cunningham and Gallion to repay the entire $94 million when they received only more than $20 million each from the settlement, lawyers for the two men argued.

But federal prosecutors argued that under the law, the two men are responsible for repaying all of the money that should have gone to the former clients.

The $30 million probably will go back to the former clients. When Gallion and Cunningham are sentenced in July, the judge typically enters a restitution order, which says the money will be returned to the clients.

The former clients filed a civil lawsuit against the two men. A judge already has ruled that Cunningham, Gallion and a third lawyer on the case, Melbourne Mills Jr., should repay their clients $42 million.

Angela Ford, an attorney for the former clients who represents them in the civil lawsuit, said Tuesday that the jury probably subtracted the amount of money other attorneys made from the fen-phen settlement and came up with the amount of money the two men took.

"The jury's decision makes a lot of sense," Ford said.

Ford has attached liens on the men's property to collect the $42 million in the civil case. With a forfeiture judgment against them, the clients will no longer have to fight to get control of the two men's assets, Ford said.

It is unlikely that Cunningham and Gallion would have had $94 million in assets to seize, Ford said. The $30 million is a "more realistic sum," she said.

Cunningham and Gallion will remain in jail until they are sentenced on July 27. U.S. District Court Judge Danny Reeves revoked bonds for both on Friday after the jury found the two guilty.

The two men could face decades in prison. Each count carries a penalty of 20 years in prison. It is unlikely that the two men will receive the maximum penalty.

But lawyers for both men have said they probably would appeal the decision.

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