Embattled trial lawyers Shirley Cunningham Jr. and William Gallion were only two jurors away from freedom last summer.
On Tuesday, the men will have their second day in court. The Lexington-area lawyers will be retried in Frankfort on accusations they cheated their former clients out of millions of dollars in the settlement of the fen-phen diet drug lawsuit.
In July, a federal judge declared a mistrial after jurors were deadlocked through eight days of deliberations. The jury foreman later told reporters that jurors leaned 10-2 in favor of letting Cunningham and Gallion walk. A third defendant, Melbourne Mills, was acquitted.
But their second trial promises to be different.
For starters, both the prosecution and defense have seen each other's case, virtually guaranteeing both sides will make adjustments.
More important, U.S. District Judge Danny Reeves has prohibited the defense from arguing that Kentucky fen-phen users fared better than victims in other states. Reeves ruled such arguments irrelevant.
And a federal grand jury added eight new charges of wire fraud, which prompted defense attorneys to accuse the government of vindictive prosecution. In their first trial, the lawyers were just charged with conspiracy. Cunningham and Gallion are out of jail on bond.
Despite the mistrial, the lawyers' 440 former clients are confident the men will be convicted, said Lexington attorney Angela Ford, who represents the clients in a civil suit against the lawyers.
"They understand fully what happened to them," Ford said. "So it is sort of incomprehensible for them to believe that there will not be any justice."
But Cunningham's attorney, Stephen Dobson of Florida, notes that the facts of the case have not changed since last July.
"The first jury voted 10-2 not guilty, so we will have another trial since the government insisted on having another trial," Dobson said.
On behalf of Kentucky fen-phen users, Cunningham and Gallion sued fen-phen maker American Home Products in Boone Circuit Court and settled the case for $200 million in 2001. Federal prosecutors say Gallion and Cunningham took $94 million — an increase of nearly $30 million from the previous indictment — that should have gone to 440 former clients, according to the indictment.
The case has generated national attention in part because Cunningham and Gallion allegedly used money they received from the fen-phen settlement to purchase Curlin, the 2007 Horse of the Year.
Federal prosecutors allege that Cunningham, Gallion and Mills lied to their clients about the $200 million settlement. In the indictment, federal prosecutors said there was a side letter to the settlement agreement that outlined what each of the 440 clients was supposed to receive. In reality, the clients received far less than what the side letter to the settlement said, prosecutors said.
Much of the case has centered on $20 million that was placed into a non-profit organization, which paid the lawyers more than $5,000 a month to manage it.
The lawyers have argued that the non-profit was meant to pay claims from victims who had not joined the class action. They said they were following the advice of well-known trial lawyer Stan Chesley of Cincinnati.
Defense attorneys for Cunningham and Gallion have acknowledged their clients made mistakes but maintain there was no criminal intent to defraud clients.
A $42 million judgment against the lawyers is pending. The case is on appeal, but the clients are close to being allowed to collect because the lawyers did not post bond. Liens have been placed on the lawyers' assets. Ford said she is waiting for a written order from a Frankfort judge so she can proceed with collection.
A blow to the defense
Throughout the first trial, defense attorneys rarely missed an opportunity to point out that Cunningham and Gallion got more for their clients than attorneys did in other states. A neutral mediator had valued the clients' cases at far less than the actual settlement.
"The claimants, instead of getting $30 million, got $200 million," Chesley boasted when cross-examined by a defense attorney.
Prosecutors successfully sought to prohibit the defense from making such arguments in this trial.
Ford said the arguments over the settlement size likely sowed confusion among jurors.
UK law professor Robert Lawson agreed. He called class-action law "the most complex area of the law," something most lawyers don't even understand.
"You just don't get into that as a lawyer without being a specialist," Lawson said.
Stan Billingsley, a former Northern Kentucky judge who runs www.lawreader.com, said the ruling was a big blow to the defense.
"It seems to me if you're going to put someone away for 20 years, you ought to allow them to put on the facts of the case," Billingsley said. "That just seems harsh to me. Whether it is legally correct, to me, I don't know."
Billingsley presided over Ford's lawsuit against the attorneys for about a week. He stepped down from the case after Ford asked him to recuse because he is a friend of the judge who presided over the fen-phen civil case.
Dobson downplayed the impact of Reeves' ruling. But he said he is disappointed that jurors will not learn that Kentucky claimants got 30 times more than claimants in other states.
"We would have liked for the jury to be fully aware of the results that these gentlemen got," Dobson said.
One other factor, though indirect, is that more former clients are likely to be in attendance with the trial now in Frankfort.
Ford said about 60 clients watched some portion of the eight-week trial last year.
"People have jobs and lives, so it is difficult to spend a lot of time watching a trial," Ford said. "But they have a lot of interest, according to phone traffic into my office."