Fen-phen settlement lawyers William Gallion and Shirley Allen Cunningham Jr. have been permanently disbarred from legal practice by the Kentucky Supreme Court.
The high court entered orders Thursday afternoon disbarring both attorneys. Neither man can ever apply for reinstatement to the bar, the orders say. Cunningham and Gallion had filed motions with the court asking to withdraw from the Kentucky Bar under terms of permanent disbarment.
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Thursday's disbarment is just the latest twist in the legal saga involving the $200 million diet-drug lawsuit that began in 2001, shortly after the case was settled on behalf of 440 former clients who said the drug fen-phen damaged their hearts and lungs.
In agreeing to the court's disbarment order, Gallion and Cunningham admitted to committing eight of 22 ethical violations that had been alleged in their handling of the settlement money.
Gallion, Cunningham and a third lawyer, Melbourne Mills Jr., had been temporarily suspended from legal practice since August 2006 over questions surrounding the fen-phen case.
James Shuffett, a lawyer for Mills, said Thursday that Mills' status with the Kentucky Bar Association is still pending. Mills will have a hearing soon before an administrative law judge, Shuffett said. Officials with the Kentucky Bar Association said Thursday that Mills is not allowed to practice law until his case is resolved.
The three lawyers were tried in federal court this summer on one count each of conspiracy to commit mail fraud. A federal jury in Covington acquitted Mills but couldn't reach a verdict in the cases of Cunningham and Gallion. Cunningham and Gallion are scheduled for retrial in federal court in Frankfort early next year.
The state bar association, which began investigating the three lawyers' conduct shortly after the 2001 settlement was completed, said in a statement that the high court's orders Thursday "confirmed multiple violations of the rules of professional conduct" by Cunningham and Gallion.
"Never again will these two persons have the privilege of practicing law in the Commonwealth of Kentucky," Linda Gosnell, the bar association's general counsel, said in a statement.
Gallion and Cunningham admitted in their disbarment orders that they failed to inform their clients in writing about fee arrangements in the fen-phen settlement; failed to tell clients that they were seeking fees greater than contingency fee agreements provided; failed to advise clients about the total amount of the settlement; and failed to get clients' consent to place $20 million in settlement money in a charitable fund that the lawyers controlled.
Gallion and Cunningham will also have to pay almost $25,000 in court costs.
Stephen Dobson, a lawyer who represents Cunningham in the pending criminal case, said he had not seen Thursday's Supreme Court order and could not comment on how the admission of guilt by the two lawyers would affect the criminal case against the two men. O. Hale Almand, a lawyer for Gallion, could not be reached for comment. Neither Dobson nor Almand represented the two men in the bar association proceedings.
Mary Meade McKenzie, a lawyer who has represented Gallion and Cunningham in other civil matters, also could not be reached for comment.
Federal prosecutors have alleged that Gallion and Cunningham pocketed more than $104 million out of the $200 million settlement that should have gone to more than 440 former clients.
Gallion and Cunningham have said that there was never any criminal intent to defraud their former clients but have said that they did make some mistakes in the case. Those mistakes were ethical violations at most, attorneys for the now-disbarred lawyers have said.
In addition to the criminal case, Gallion, Cunningham and Mills have been sued by their former clients in state court. A special judge has ordered that the three men should repay their clients $42 million.
The case has attracted national attention in part because Gallion and Cunningham were part-owners of the Thoroughbred Curlin, the 2007 Horse of the Year. Their 20 percent share of the horse is to be auctioned by Keene land by Nov. 5 to help satisfy the $42 million judgment.