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Wednesday, Jul. 02, 2008

Fen-phen lawyer Mills is found not guilty

COVINGTON — For the first time in almost a year, Lexington-area lawyer Melbourne Mills Jr. will wake up today in his own bed.

After six days of deliberation, a jury on Tuesday found Mills –who argued that he was too drunk to take part in a criminal conspiracy — not guilty of taking millions from his former clients in a $200 million fen-phen settlement.

Mills' face broke into a wide grin and he mouthed “thank you, thank you” to the jury after the verdict was read.

Mills was released from the Boone County Jail about 1 p.m. Tuesday. James Shuffett, his attorney, said Mills will most likely return to his Lexington-area home.

Mills, 77, who had to be hospitalized during the trial because of heart problems, had been in custody since August, when U.S. District Judge William Bertelsman jailed him and co-defendants William Gallion and Shirley Cunningham Jr., saying they were too much of a flight risk.

The jury will continue deliberations Wednesday on the fate of Gallion and Cunningham.

Tuesday's not-guilty verdict came in the eighth week of the trial.

The three were charged in June 2007 with conspiracy to commit wire fraud, which carries a sentence of up to 20 years in prison and a $250,000 fine.

The case has generated national media attention in part because Gallion and Cunningham are minority owners of Curlin, the 2007 Horse of the Year.

The lawyers represented about 440 clients in a Boone Circuit Court case against fen-phen manufacturer American Home Products. The case was settled in 2001. The attorneys on the case received the bulk of the settlement — about $105 million — while the clients received $74 million.

Prosecutors say the three might have taken more of the money if they had not received a subpoena from the Kentucky Bar Association in February 2002 asking about the settlement money.

Shortly after they received the subpoena, bank records showed that Gallion and Cunningham wired money from accounts in their name back into accounts designated solely for client funds.

The three lawyers have said they had to withhold some of the settlement money in case other people came forward with claims against American Home Products. When those claims never materialized, the three went back to the original judge and the clients received a second round of checks. The judge also approved fees above what the contracts with their clients said the attorneys should have received.

To prove their case, federal prosecutors had to show that the three men intended to defraud their clients. Defense attorneys argued that the three made some mistakes but that those were ethical violations at most and there was never any criminal intent to take money from clients.

Shuffett argued that Mills was a barely-functioning alcoholic during the time the fen-phen case was settled and attended none of the key hearings in the case. Testimony showed that Mills thought the case was settled for $150 million and did not know it was settled for $200 million until nearly a year later.

Federal prosecutors countered that Mills later received treatment for his alcoholism and knew that the attorneys took too much in fees but did nothing to help his clients.

Shuffett said he couldn't point to any one thing that may have convinced the jury that his client never intended to defraud his former clients.

“You never know. Whatever it was, we're very happy,” Shuffett said.

Mills said little as he walked quickly to his girlfriend's car in the parking lot of the Boone County Jail.

“We got the greatest court system in the world,” he said. He predicted that he would get his law license back.

“I knew he was innocent all the way,” said Darlene La, Mills' girlfriend. “I'm just glad to get my honey back home so we can start our life again.”

But many said they were shocked that the jury acquitted Mills – who was known for years as “The Man,” a moniker taken from his once ubiquitous TV commercials.

W.L. Carter, who testified during the trial and is a former fen-phen client of Mills, said Tuesday that he was “very, very distraught and disappointed” about the acquittal. “They successfully used his alcoholism as a defense and it worked. They have made alcoholism a pass or a get-out-of-jail-free card for all criminals.”

A former paralegal who worked for Mills and was involved with the fen-phen litigation said she was surprised by Tuesday's verdict. Cindy Sawyer of Versailles said it's a sign that all three lawyers may be acquitted.

Sawyer and Mills had a falling out in 2001. Sawyer said that Mills backed out of an agreement to pay her $1 million if the fen-phen litigation was successful. Mills has denied making such an agreement, and the issue is currently before the Kentucky Supreme Court.

Despite the hard feelings between the former friends, Sawyer thinks Mills was the least culpable of the lawyers.

“I do think that Gallion and Cunningham had their hands in it more than Mills, but they were what they called the three caballeros,” Sawyer said. “I can't imagine one would not know what the other one was doing.”

Federal prosecutors declined to comment on the not-guilty verdict. Attorneys for Gallion and Cunningham also declined to comment.

But Mills' legal troubles are not over.

Aside from the criminal case, the Kentucky Supreme Court has temporarily suspended the three attorneys from the practice of law. Their former clients also sued them, and a state court judge has ruled that the three owe their former clients $42 million. The clients are also entitled to $20 million of settlement proceeds that was placed in a non-profit the attorneys helped oversee. Part of that case is on appeal and a trial on other damages has not been set.

Shuffett said Mills' not- guilty verdict will likely have a minimal effect on the civil lawsuit but added that it “can't hurt.”

Angela Ford, who represents 418 of the roughly 440 former clients, said Mills' not-guilty verdict will have no effect on the $42 million civil judgment. Collection of that money has already started. In fact, the $20 million in the Kentucky Fund for Healthy Living, the non-profit that was started with fen-phen settlement proceeds, has already been disbursed to the 418 clients, Ford said.

Ford said she thinks Mills' former clients will find the verdict troubling.

“Three hundred and eleven former Mills clients will not understand how their former lawyer was found not guilty when he wasn't too drunk to put their money in his bank account,” Ford said. “Mills was not involved in planning the scheme to defraud, but there was evidence that he went along with it after he discovered it.”