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Fen-phen lawyers bond slashed

COVINGTON — A federal judge has reduced bond for two Lexington-area lawyers accused of pocketing millions of dollars that should have gone to their former clients in a diet-drug settlement.

Bond for William Gallion was reset at $2.5 million. Shirley Cunningham Jr.’s bond was reset at $1.25 million.

The two men have been in the Boone County Jail since August 2007. They are awaiting their second trial, which has not been scheduled.

Bond was previously set at $52 million for Gallion and $45 million for Cunningham.

Stephen S. Dobson III, Cunningham’s attorney, said his client will begin working to secure the property and cash to post bond.

U.S. District Judge Danny Reeves is “doing what’s in the interest of justice,” Dobson said.

Attorney Hale Almond, who represents Gallion, said that whether his client can post bond is an “issue we’re going to have to discuss.”

“We’re just very please we have the opportunity to have bond,” he said.

Federal prosecutors had opposed lowering bond, saying they could not track the attorneys’ assets.

An attorney who represents the fen-phen clients in a lawsuit against the lawyers filed a brief stating that Gallion has placed $4 million into a charity that is protected from civil judgments. Gallion also owns a Florida property worth $1 million that is protected by the state’s homestead exemption, meaning it cannot be obtained by creditors, attorney Angela Ford wrote in a brief.

Ford wrote that Gallion and Cunningham have attempted to hide assets through limited liability corporations and through other measures.

Ford said in an e-mail Friday that the judge’s decision “was reasonable.”

She said the parameters are fairly severe and, in addition, there will be some monitoring of their assets to control the dissipation of assets.

Ford said some of her clients were disappointed with the release but the controls imposed by the court will benefit the victims and should guarantee their appearance for trial.

Gallion and Cunningham filed motions last month asking a federal judge to release them from jail so they can help their attorneys prepare for their second trial. Their trial ended July 3 with a deadlocked jury.

Gallion argued in his earlier motion that he has little money for bond or to flee because his assets have been garnisheed by a civil lawsuit over his handling of a $200 million fen-phen class action lawsuit settlement.

Gallion and Cunningham also argued that they should be released from jail because the first jury couldn’t decide whether the two were guilty of conspiring to commit wire fraud. The jury foreman later said the vote was 10 to 2 to acquit the two men.

They are accused of taking millions of dollars that should have gone to 440 former clients in a 2001 fen-phen settlement in Boone Circuit Court. A third defendant, Lexington-area attorney Melbourne Mills Jr., was found not guilty by the same jury.

U.S. District Judge William Bertelsman declined the two men’s request to be released after the mistrial was declared. But Bertelsman later stepped down from the case, and Reeves was assigned to it.

In their motion, federal prosecutors point out that Bertelsman, who oversaw the six-week trial, said there was even more evidence and concern that the two men would flee.

On Friday, Reeves laid out several restrictions on the bond. Gallion and Cunningham must be subject to home detention, wear GPS monitoring equipment and keep logs of visitors and telephone calls. Also, their computer usage will be monitored.

Reeves said the men can give out gifts worth only up to $1,000 to make sure they’re not liquidating or hiding assets. The judge said he might appoint someone to monitor their business assets, and he ordered them to withdraw any power of attorneys they had authorized.

Gallion is forbidden from seeing his son, Joseph, and girlfriend, Melissa Green, whom he’d given power of attorney. Ford has accused them of helping Gallion hide assets.

If Gallion or Cunningham violate any condition of the bond, it will be forfeited, Reeves said.