The Fall of the House of Zeus (10 page)

BOOK: The Fall of the House of Zeus
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In March 1994, a couple of years after an unsuccessful bid to follow his relatives as governor, Johnson got a call from Blake. By this time, Johnson had switched parties and become a Republican. No matter. Most of the old guard had gone over to the GOP, too, and Blake was now closely allied with Trent Lott.

“Dickie needs your help,” Blake told Johnson. Scruggs wanted to draw on Johnson’s experience as state auditor and his contacts in the legislature to arrange passage of an amendment that would eliminate the problem that had exposed him to indictment in 1992. He wanted to be sure that future contingency fees for lawyers representing the state would be legal. “Are you willing to talk to him?” Blake asked.

“Sure,” Johnson replied. Not only had he known Scruggs as an undergraduate at Ole Miss, but Johnson was married to Scruggs’s cousin.

Blake drove Johnson to a rendezvous with Scruggs at a restaurant at the Jackson airport. On the way, he told Johnson that the Pascagoula lawyer was willing to pay him a $10,000-a-month retainer.

After Johnson sat down with Scruggs, he was told of the plans for the Medicaid initiative on behalf of the state. The lawyers who took part in the action against tobacco, Scruggs said, needed Johnson to determine what changes were necessary in state law to ensure that they could be paid contingency fees.

Johnson was glad to be involved in the effort, and he left the meeting with the impression that Scruggs had promised him a $5,000-a-month retainer for two years—less than Blake mentioned, but a nice bonus nonetheless. More alluring, Johnson believed, was a cut of Scruggs’s share in any settlement Mississippi might get out of the litigation. Afterward, he would swear that Scruggs had given him assurances of 10 percent, a figure that would eventually amount to a king’s ransom.

·    ·    ·

    
Johnson was not a registered lobbyist, but he knew the legislators who mattered. He discovered that a bill relating to Medicaid had already cleared both houses of the legislature and now rested in the hands of a conference committee, where any differences between the House and the Senate would be resolved.

Johnson needed help from inside players on the conference committee. He thought of Roger Wicker, a state senator from Tupelo. Wicker was a logical contact. Though he never advertised the affiliation, he was one of those who made up the new generation’s core of the old Eastland network. He had earned his political spurs as a member of Lott’s congressional staff—headed by Lott’s chief acolyte, Tom Anderson—and was now in his second term as a legislator. Of course, Wicker had also been a Sigma Nu at Ole Miss.

At Johnson’s urging, Wicker slipped seventy-three words into the Medicaid bill. In one essential passage, the language authorized the state to “employ legal counsel on a contingency basis.” The measure passed with little notice.

Only a handful of legislators were aware of the changes written into the bill. State senator Robert “Bunky” Huggins of Greenwood was one of them. A veteran of the legislature, Huggins counted P. L. Blake as both his constituent and his contemporary. As a committee chairman with oversight of health and welfare, Huggins had a major role in the conference committee. The night the bill became law, Huggins sidled up to Danny Cupit at a bar in Jackson with a message: “Tell Patterson we got the deal done.”

    
Later in the decade, Scruggs talked with Michael Orey, who was writing a book about the tobacco wars called
Assuming the Risk
. Scruggs was candid. “There were people who had political connections, that I’m not even at liberty to tell you who they are, that had to be touched, that had to be talked to, that had to be given a stake in [the litigation].” He said he relied on clandestine consultants. “These guys have lots of friends and connections with legislature. These are people who are lobbyists, but they’re not really registered lobbyists. It’s really sort of the dark side of the Force.”

He estimated that he paid these people over $500,000.

Actually, it was much, much more.

CHAPTER 5

F
or much of his life, Scruggs had risen to the dare, taken up the challenge, so when Don Barrett told him of a mysterious man who might possess damaging information about Brown and Williamson Tobacco Corporation, Scruggs was intrigued. He agreed to join Barrett in Jackson for a meeting with Merrell Williams, who was driving down from Louisville, Kentucky, in the heart of the tobacco kingdom.

Their meeting at a deli just off I-55 in March 1994 triggered mutual suspicion. Scruggs thought Williams flaky and unclear about this mission. Williams feared that Scruggs—about Williams’s age but considerably more composed—was an undercover FBI agent.

Williams had reason to be careful. For some time he had been locked in a legal battle with Brown and Williamson, and details of his plaint against the company had already appeared in newspapers. A few years earlier, while working as a paralegal at a Louisville law firm representing the tobacco giant, Williams had copied hundreds of pages of documents that he believed would reveal a secret campaign by the tobacco industry to hide the deleterious effects of their product. He had leaked some of the papers to investigative journalists and anti-tobacco activists. Thus far, the recipients had been unwilling to use the material because it was stolen. When Williams moved to sue Brown and Williamson for what he perceived as deceit, the corporation countered with its own threat to have him prosecuted for blackmail.

As he considered his options, Williams contacted Barrett, a central figure in the well-publicized tobacco trials in Mississippi. Though Williams had a personal history as a wanderer, he had spent a lot of time in the state. As a boy, he spent vacations at a family cottage on the Gulf Coast. After graduating from Baylor University, he taught drama at local colleges in Jackson before obtaining a Ph.D. in Colorado. Unbeknownst to either man, Williams’s peripatetic life had intersected with Scruggs’s several times. Williams had performed in summer theater productions in Pascagoula, opened an English-style pub in Oxford at the time Scruggs was winding up law school, and knocked around at different jobs along the Gulf Coast after Scruggs returned there.

Although Scruggs was bemused by Williams at their first meeting, he agreed to help him relocate. The furtive air about Williams and the explosive potential of the Brown and Williamson papers appealed to Scruggs. It was another instance in which Scruggs found himself tugged by the excitement of operating in the shadows while at the same time exploiting an opportunity to obtain an edge over his adversaries. Dealing with Williams represented a high-stakes gamble, but it could prove to be worth the risk.

Once ensconced back on the Mississippi coast, subsidized with “loans” from Scruggs and working in a job arranged by the Pascagoula lawyer, Williams told him of the documents stored months ago with a friend in Florida. In mid-April, a few weeks after their first encounter in Jackson, Scruggs used his plane to fly Williams to Orlando to pick up the contraband material. The documents were packed, like so much typing paper, in small boxes, about three reams in all.

Scruggs realized that he was engaged in activity that was probably illegal. He was indirectly paying for stolen property. Since the papers came from a law firm, it was privileged material that had been copied and sneaked out of the office. But he knew that his adversary in the coming conflict had deep resources and a record of disregarding rules, and he felt he needed all the ammunition available to him.

For the 1,500 pages Williams provided, Scruggs would eventually buy Williams a house and a car, and pay him more than $2 million.

    
The same spring that Scruggs obtained the Brown and Williamson documents, the state of Mississippi girded for battle with Big Tobacco. At least Attorney General Mike Moore did. The governor, a conservative Republican named Kirk Fordice, wanted nothing to do
with the lawsuit, and allied himself with the old political guard working to thwart Moore.

The attorney general’s coalition of trial lawyers was not blind to the political implications. Though the issue might be argued in a court of law, they knew politics would help determine the outcome. So they weighed a number of factors before deciding how to proceed.

Mississippi judges, from the county level to the state supreme court, are elected, and there are often sharp distinctions between those who frown on product liability suits and those who generally sympathize with plaintiffs in civil cases. To the Moore-Scruggs group, it became important to find the right venue. There was another consideration. If the pollster Dick Morris’s data indicated difficulty in winning a jury verdict, it would be better to submit the suit to a chancery court, where there are no juries and where judges rule on issues of law and equity.

In late May 1994, the case to recover damages from Big Tobacco
for Mississippi was filed in chancery court in Pascagoula, the home of Moore and Scruggs.

Later, the governor, who despised Moore and his cadre of trial lawyers, filed his own lawsuit before the state supreme court in an attempt to block the litigation.

Political war broke out over tobacco in Mississippi, and hostilities soon spread across the country as Scruggs and Moore lined up attorneys general in other states to turn the case into a national issue.

    For Mississippi, Moore would serve as the public official representing the state’s interests, while Scruggs would emerge as the principal voice for the plaintiffs. They worked in tandem, backed by the investments of others in the group. Ultimately, a dozen law firms, including those of Scruggs, Barrett, and Mike Lewis, who had conceived of the approach, signed on for a joint venture. They called themselves the “Health Advocates Litigation Team”—HALT for short. With 25 percent, Scruggs held the biggest share, followed by Ron Motley from the redoubtable South Carolina firm of Ness Motley, the only partner outside Mississippi. Other than Scruggs and Motley, no shareholder controlled more than 10 percent.

As the offensive began, it became clear that more infusions of cash would be needed. In their enthusiasm to take the battle across the country, Scruggs and Moore ran up budget-busting bills with their travel expenses. Scruggs also tended to take initiatives without informing
others in the partnership. His investment in Merrell Williams was one of them.

Scruggs’s practice of making lone decisions for the partnership annoyed some of his associates. His freewheeling style and his propensity to make secret side payments to people such as P. L. Blake also ate into his own resources.

For all of his fortune built on the ruins of asbestos, Scruggs was no longer able to keep up with expenses for this new venture, so he went to David Nutt, a prosperous attorney in Jackson, and made an arrangement to assign half of his prospective income from the HALT project to Nutt in exchange for a commitment of $2.5 million to support the litigation. Nutt would ultimately reap a staggering return on his investment. Even though Scruggs would negotiate Nutt’s share downward, Nutt would wind up getting $17 million a year for the next quarter-century from Scruggs’s allocation.

    
As Mississippi’s case against Big Tobacco moved forward in 1995, another Brown and Williamson whistleblower came to Scruggs’s attention. Jeffrey Wigand, a disaffected biochemist who had formerly been in charge of research and development at the company, was convinced that the tobacco industry was deliberately jacking up the impact of nicotine to hook consumers on their product. Fired earlier after a dispute with his boss at Brown and Williamson, Wigand remained dependent upon the company for health insurance and had signed a confidentiality agreement that posed a problem for him. But he harbored anger at the industry, and in the months after he left Brown and Williamson, a producer for CBS’s
60 Minutes
named Lowell Bergman began to draw information from him. Among Wigand’s allegations, he charged the company with deleting damning material from its own documents and he accused the chief executive officer of committing perjury in testimony before Congress.

By cooperating with the television network, Wigand exposed himself to retaliatory action by the company. He needed legal defense, so Scruggs was called upon. As in the Williams case, the unfolding drama and corporate warfare fascinated Scruggs. After meeting with Wigand that fall, he agreed to represent his interests at no charge.

Knuckling under to legal threats from Brown and Williamson, CBS killed its
60 Minutes
exposé featuring Wigand. Unhappy over the network’s decision, someone leaked the information to
The New York Times
and other newspapers. Wigand became a cause célèbre.

Scruggs not only offered Wigand his services pro bono, but he also spent thousands of dollars to hire a San Francisco private detective, Jack Palladino, to develop counterintelligence against Brown and Williamson after the company released a lengthy, unflattering dossier it had compiled on Wigand. Scruggs also developed a lasting friendship with Bergman, even though the
60 Minutes
piece remained unseen.

To ensure that Wigand’s critical remarks gained wide circulation, Scruggs called upon Wigand to give a pretrial deposition in connection with the Mississippi case. Wigand flew to Pascagoula and stayed at Scruggs’s beachfront home, where private guards were deployed to protect the star witness. In a circus-like atmosphere, Wigand appeared the next day in a courtroom filled with members of Moore’s Mississippi team and lawyers representing the tobacco industry. The deposition was punctuated by frequent legal spats, and Wigand’s testimony ratcheted up the offensive against tobacco.

(A few years later, director Michael Mann would turn the Wigand affair into a popular movie,
The Insider
. Al Pacino had the role of Lowell Bergman; Russell Crowe portrayed Wigand. Moore played himself. Scenes were shot at Scruggs’s beachfront mansion, but Scruggs’s voice was deemed insufficiently southern for Hollywood’s purposes. He speaks in a clear and precise manner, in the style of a newscaster who doesn’t betray a regional background. Scruggs’s part was given to Colm Feore, a Canadian actor who appeared in the film as a dashing aviator-attorney in dark glasses, speaking with a distinct southern accent.)

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