A federal grand jury on Wednesday issued additional charges against two Lexington-area lawyers accused of taking millions of dollars from their former clients in a diet drug settlement.
William Gallion and Shirley Cunningham Jr. were charged in 2007 with one count each of conspiracy to commit wire fraud. On Wednesday, the grand jury charged Gallion and Cunningham with conspiracy and eight new charges of wire fraud.
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If convicted, Gallion and Cunningham could now face a maximum of 180 years in prison. Federal prosecutors now say that 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. However, it is rare for someone to get the maximum sentence.
Gallion and Cunningham were initially accused of taking $65 million from their former clients, and faced a maximum of 20 years.
A mistrial was declared in July after a jury could not decide whether Gallion and Cunningham were guilty of conspiracy to commit wire fraud. Gallion, Cunningham and a third lawyer, Melbourne Mills Jr., were charged with one count each of conspiracy to commit wire fraud in 2007. A jury acquitted Mills of all charges in July. Cunningham was released from the Boone County Jail on bond Aug. 27.
The lawyers sued fen-phen maker American Home Products in Boone Circuit Court and settled the case for $200 million in 2001. The indictment outlines a series of monetary transactions between Cunningham's and Gallion's bank accounts and accounts designated solely for client money.
Stephen Dobson, an attorney who represents Cunningham, said it's puzzling that the government added the additional wire fraud charges because the indictment released Wednesday contained basically the same information that federal prosecutors had before the July trial. "I certainly hope that it is not vindictiveness on their part," he said.
Dobson said his client will plead not guilty. The jury foreman during the July trial said it was 10 to 2 to acquit the two men.
An attorney for Gallion, O. Hale Almand, was not immediately available for comment.
Kyle Edelen, a spokesman for the U.S. attorney for the Eastern District, said he couldn't explain the increase in the amount prosecutors say the two men are accused of taking from their clients.
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 were supposed to receive. In reality, the clients received far less than what the side letter to the settlement said. The attorneys also put $20 million into a non-profit and then paid themselves more than $5,000 a month to manage the non-profit, the indictment alleges.
Defense attorneys have said their clients made some mistakes during the fen-phen settlement but there was never any criminal intent to defraud their clients.