Disability lawyer Eric C. Conn remains in jail for now

Disability benefits lawyer Eric C. Conn, accused of rigging hundreds of cases for clients across Eastern Kentucky, will remain in jail until a federal judge decides whether it’s safe to release him pending trial.

At a detention hearing Thursday, FBI agent Mary Trotman testified that a half-dozen former employees of Conn’s Floyd County law firm said he has declared in the past that he would flee the United States rather than face prison for fraud.

The primary bank account for Conn’s firm received $44 million in deposits from 2005 to 2015, of which $23 million came from the Social Security Administration, which operates the federal government’s two major disability benefits programs, Trotman said. Simultaneously, Conn sent hundreds of thousands of dollars to foreign countries and traveled abroad extensively, she said.

Conn, 55, potentially faces life in prison if he’s convicted of all the charges in the indictment unsealed Tuesday and if his sentences run consecutively, Assistant U.S. Attorney Trey Alford told U.S. Magistrate Judge Robert E. Wier.

Conn’s defense team asked Wier to release the lawyer. They said Conn traveled the world for pleasure but always returned home to Kentucky, adding that his business fortune was earned honestly and should not be held against him.

“It is a substantial amount of money that he has made, and he is proud of what he has done,” said defense lawyer Abbe Lowell of Washington, D.C., who represented high-profile members of Congress, lobbyists and Hollywood actors.

Lowell attacked the credibility of the former Conn law firm employees around whom the government has built much of its case. Some of them tried to steal money from the firm or otherwise cheated Conn before they were let go, he said.

“They have a motive and a bias,” Lowell said.

Apart from being a flight risk, the government said, Conn might try to interfere with the ongoing investigation if he’s released. Trotman testified that witnesses say Conn’s law firm burned workplace computers and shredded more than 13 tons of paper documents after he learned in May 2011 that the government suspected him of fraud.

Lowell disputed that Conn destroyed case files or medical records related to the clients for whom he’s accused of rigging the system. In fact, he said, Conn’s law firm is providing those documents to the roughly 1,500 past clients who need them for new disability evaluation hearings that have been ordered by the Social Security Administration because of suspected fraud in their claims.

The mass document destruction alleged by the government “did not happen,” Lowell said.

But another Floyd County lawyer who is representing several dozen of Conn’s ex-clients at their new evaluation hearings called Lowell’s claim “totally false” after Thursday’s hearing.

“After the SSA suspension of benefits letter went out in May of 2015, folks flooded Conn’s office and demanded their files because the letters gave then 10 days to retrieve their medical records. I was consistently advised by the frightened clients that they only received skeleton files or no files,” said attorney Ned Pillersdorf. “The suggestion that he assisted is laughable.”

Wier said he would try to make a decision about Conn’s continued detention “as quickly as I can.” The trial is set to start June 7.

On Tuesday, Wier released one of Conn’s co-defendants, Pikeville psychologist Alfred Bradley Adkins, on his own recognizance.

The other co-defendant, retired Social Security Administration appeals judge David B. Daugherty, was arrested in Myrtle Beach, S.C., where he now lives, and was released Thursday on a $50,000 unsecured bond. A judge in South Carolina ordered Daugherty to undergo a mental health evaluation because of a 2011 suicide attempt, according to court records.

Conn, Adkins and Daugherty face charges including mail fraud and wire fraud, conspiracy to retaliate against a witness, destruction of evidence, making false statements and money laundering. The most serious charges carry penalties of up to 20 years in prison and up to $250,000 in fines. The government also seeks $11.67 million in forfeited assets.

From 2004 to 2012, Conn falsified medical documents to make his clients appear disabled and paid Adkins and other doctors $300 to $450 apiece to sign completed evaluations supporting his clients’ appeals, according to the indictment. Inside the Social Security bureaucracy, Daugherty arranged for Conn’s appeals to be assigned to him, collecting $9,000 to $9,500 every month from the lawyer in exchange for guaranteed approvals, according to the indictment.

At Thursday’s hearing in Lexington, the prosecution acknowledged that federal law enforcement agencies had investigated Conn and Daugherty since mid-2011 without taking action, although Conn’s clients had their benefits suspended a year ago because the government suspected fraud. Two of the clients subsequently committed suicide.

While federal prosecutors stalled on the case for years — the U.S. attorney for the Southern District of West Virginia declined to bring charges — details of Conn and Daugherty’s relationship were exposed in the news media and investigations published by U.S. Senate and House committees. After a front-page story about Conn and Daugherty appeared in The Wall Street Journal in May 2011, the appeals judge was allowed to retire.

Inside the Social Security Administration office in Huntington, W.Va., where Daugherty handled Conn’s cases, two women who tried to blow the whistle were at first ignored and then harassed by their superiors. “Several individuals” at the Social Security office, including the chief judge, Charlie Andrus, told Conn they needed to work together to get one of the women fired, and they tried to incriminate her at work with a falsified videotape, Trotman testified. None of those people was charged with a crime.

With the five-year federal statute of limitations approaching this spring, the U.S. Department of Justice acted by sending in Alford, a special prosecutor normally assigned to Kansas City. Conn, Adkins and Daugherty were ordered arrested Monday.

This story was originally published April 7, 2016 at 7:30 PM with the headline "Disability lawyer Eric C. Conn remains in jail for now."