The Fall of the House of Zeus (16 page)

D
espite the riches that came with the tobacco settlement, Scruggs seemed afflicted with a sequence of vexing problems that began to engulf him.

His share of the tobacco settlements gave him an annual income projected at $20 million over a twenty-five-year period. But the good life it should have brought him was spoiled by contentious events that took place outside the courts of law.

He had been exceedingly generous to his hometown of Pascagoula, providing local charities with large gifts. Yet his most visible donation, the purchase and restoration of the antebellum Longfellow House for use as a community reception hall on the beach, had become the source of a squabble almost comic in its ferocity. Scruggs had bought the 150-year-old mansion for $200,000 in 1993 with money he had accumulated in asbestos litigation, and during the decade he spent another $1.2 million to have it renovated. His wife, Diane, personally supervised the work of craftsmen as they installed expensive woodwork and fine glass to return the building to its former grandeur.

Instead of winning gratitude, however, the project aroused resentment among neighbors of the Longfellow House. Foremost among the opponents were Joe Colingo, a Pascagoula lawyer who had been retained by R.J. Reynolds during the tobacco battle, and Terry Carter, the head of the local chamber of commerce. Colingo bore a particular
dislike for Scruggs. Eight years older than Scruggs, he was part of the Singing River crowd that had once frolicked on boozy weekends. But they had become rivals in the tobacco case, and there was another reason for antipathy. Colingo’s wife, Johnette, had grown up in the beachfront home that the Scruggs family now occupied, and it was annoying to see Scruggs ensconced there. Carter, meanwhile, served as the voice for business interests in Pascagoula; thus, he had obvious motivation for his animosity toward the anti-business trial lawyer.

After the old house was reopened in 1997, objections by Colingo, Carter, and others led the Pascagoula City Council to impose limits on outdoor functions at the site. Scruggs not only challenged the legality of the decision, but also chose other ways to get even. He bought a home in the upscale neighborhood where his opponents lived and encouraged a rumor that he intended to move his housekeeper into it. He also built a concrete wall, nine feet high, in the rear of the Longfellow House property, which blocked his adversaries’ view of the Mississippi Sound.

The spat, which festered for more than a year, reached a critical mass in the spring of 1999 upon the occasion of the wedding of Scruggs’s niece Tyler Lott, the daughter of Senator Lott. One afternoon, as workmen prepared outside lighting for the reception, they were startled by the landing of several dog turds that had been pitched over the wall. Peering over the obstruction, workers saw Carter, the chief of the chamber of commerce.

“What in the hell do you think you’re doing?” one of them shouted.

“Fuck you!” Carter retorted, and shoveled another load of dog shit over the wall.

The workers reported the incident to Scruggs, who filed charges against Carter. In response, Carter claimed it was an accident, that he had meant to fling the considerable droppings of his St. Bernard elsewhere. He was fined $170 for malicious mischief and forced to write a note of apology to Scruggs: “I deeply regret and sincerely apologize,” he said, “for the unfortunate incident involving the dog poop shoveled from my yard … My conduct was inappropriate as a good neighbor.”

But the shenanigans didn’t end there. Two days after the dog shit episode, electricians at the Longfellow House experienced a visitation. A Jeep Cherokee with several passengers drove onto the property and an argument ensued about noise from a radio being used by the workers. During the verbal exchange, the driver of the Cherokee pulled a pistol and, according to one of the workmen, threatened “to kill every
fucking one of you.” As workers cringed behind trees, the foreman used his pickup for cover and feverishly punched digits on his phone. First 911; then Scruggs’s number.

“Mr. Scruggs,” he wailed, “I’m running out of trees to hide behind.”

The driver of the Jeep was identified as Colingo. The passengers included his wife and his son-in-law, Dr. Mark Lyell, whose home had lost its water view when Scruggs built the wall.

The electricians filed charges against Colingo. In a countermove, Colingo pressed charges against the workers, claiming that their menacing behavior had put him “in fear of imminent serious bodily harm.” Scruggs threw his weight behind the electricians, hiring an acoustics technician to determine if the radio had really been a nuisance and a private investigator to look into Colingo’s record. He also asked for an injunction to prevent Colingo from coming to the Longfellow House, and underscored this action by placing armed guards on the grounds.

To save the dignity of the Lott wedding, one of Colingo’s law partners and Attorney General Mike Moore intervened. Colingo agreed to apologize, and the reception finally took place, amid great gaiety, without further interruption.

As a goodwill gesture, Scruggs invited Colingo and Carter to lunch. He dismissed the misunderstanding as an example of the unruly Gulf Coast life that a local editor, Ira Harkey, once described as conduct befitting “sons of the beach.” But Pascagoula was too small a place to mend a feud. And a long account of the incident in
The Wall Street Journal
, headlined “Mississippi Madness,” provoked snickers across the nation and did nothing to soothe hard feelings.

    Scruggs’s overreaction to the Longfellow House disagreement and his impulse to hire technicians, investigators, and security forces regardless of cost were typical of his freewheeling style. Faced with a problem, he tossed money at it. He gave away thousands of dollars to friends, with no thought of ever being repaid, and he became the most conspicuous of consumers, buying vacation homes and yachts and jets and fancy automobiles with the recklessness of a Saudi prince.

Much of his spending had commendable purposes, however, and a lot of it was done anonymously. After a childhood friend from Brookhaven asked for help in reducing his credit card bills, Scruggs dispatched an accountant to check on the situation. When it was found that the friend owed $90,000, Scruggs covered the debt.

He paid for field trips for schoolchildren and established scholarships for college students. He supported virtually every charitable organization in the area. Once, after hearing a tale of woe from a Pascagoula waitress, serving him lunch, he sent his secretary back that afternoon with a $1,000 check for her.

In a startling act of generosity, he telephoned his high school homeroom teacher, Robert Khayat, who had become chancellor of the University of Mississippi, and said, “Coach, Diane and I want to give you forty million dollars.”

Khayat was stunned by the offer, one of the largest gifts ever offered to the school. Scruggs left it to Khayat’s discretion to see how the money would be used. Khayat was pursuing a Phi Beta Kappa chapter for Ole Miss, so he recommended raising salaries for the liberal arts faculty. Scruggs agreed to send $1 million a year for the twenty-five-year life of the tobacco distribution, and he asked his friend David Nutt, who was sharing the tobacco wealth, to give another $5 million.

Scruggs admired Khayat, the son of the late Gulf Coast “Godfather.” He was pleased over Khayat’s stewardship of their alma mater, his ability to transcend political differences in the state in order to unify the school’s alumni base. He was also proud of Khayat’s eloquence in East Coast settings, where the chancellor defied the southern stereotype of bigotry and ignorance. His former coach seemed well on his way to restoring the school’s reputation, tattered by the desegregation crisis in 1962 and handicapped by the state’s poverty, and Scruggs wanted to help.

He created a $100,000 scholarship fund in honor of Diane’s cousin Andy Mullins, one of Khayat’s deputies. He set up another scholarship program for children of Ingalls’s employees stricken with asbestosis. He gave $1 million to the athletic association and served as chairman of a drive to raise funds to build an indoor practice facility for the football team and a similar building for basketball. He pledged another $5 million for the construction of a new law school. He even gave the school possession of Longfellow House, which was worth $3 million when it was sold for tax purposes.

Though Scruggs did not ask for the honor, Khayat unilaterally named the music department the Diane and Dick Scruggs Hall and renamed an adjacent building Nutt Auditorium.

During their talks about money and Ole Miss, Khayat became aware that Scruggs was effectively operating out of control. As happy as he
was over the gifts to Ole Miss, he was concerned for his friend. Scruggs seemed to be squandering his fortune, spending some of it rashly. Khayat thought he knew of just the man to rescue him.

    
Rex Deloach was a certified public accountant who had been Khayat’s savior at Ole Miss, helping the chancellor extricate the school from financial distress a few years earlier. Deloach was the same age as Khayat, but came from a different environment. He had grown up in the impoverished Delta community of New Africa and gone to college not at Ole Miss but at Delta State and Memphis State. Despite his lack of pedigree, Deloach became managing partner of the Memphis office of Arthur Andersen, a national accounting giant. He retired before the company’s ruination, and moved with his wife, Ruthann Ray, another accountant, to an estate of woods and rolling meadows outside Oxford. He had expected to spend his retirement years riding horses from his stable or traveling to faraway places—until Khayat implored him to come work at Ole Miss.

Acting as the university’s chief financial officer, Deloach became known to some departmental potentates as Doctor No. He did away with personal domains controlled by various bureaucrats and consolidated control of the school’s budget in the Lyceum, the administrative headquarters. The managers of campus stores and food services were replaced, and the businesses began to turn a profit. With construction stalled on a new business school, Deloach helped Khayat appeal to a prosperous donor for $16 million to ensure completion of the project.

Khayat regarded Deloach as a financial miracle worker. To repay Scruggs for his generosity to Ole Miss, the chancellor wanted to introduce the lawyer to Deloach, thinking he could stabilize Scruggs’s books.

Their first meeting was not a propitious one. Khayat invited Dick and Diane to dinner at the chancellor’s home with Deloach and his wife. However, the date was a Saturday night after a basketball game in Oxford between Ole Miss and Kentucky, and Scruggs changed his plans. He and his wife dropped by the Khayats’ for a half hour of cocktails and chitchat, then left to take Ashley Judd and her boyfriend to dinner at City Grocery, a fashionable restaurant on Oxford’s Square.

Scruggs had always been a bit starstruck. He had gotten to know Hollywood actors Al Pacino and Russell Crowe during the filming of
The Insider
at his Pascagoula home, and he became acquainted with Judd through his nephew Chet Lott, an investor in Kentucky pizza
parlors. Knowing the actress was a rabid Kentucky basketball fan, Scruggs sent his jet to Kentucky to bring her party to the game.

But he followed up Khayat’s suggestion later by inviting Deloach to Pascagoula to have a look at the operation of his law firm. When he arrived in the summer of 1999 the accountant was appalled by what he saw. Although Scruggs’s law partners were fixed for life with income from the tobacco settlement, the firm was hemorrhaging money with a payroll of more than fifty people—paralegals, secretaries, runners—all who had little to do. The excesses at Scruggs’s firm were so obvious that one partner joked about erecting a sign for passing motorists: “Honk If You Don’t Work for Dick Scruggs.” Some of the lawyers came in no earlier than noon, checked their messages, and departed early.

Scruggs had taken up a somewhat indolent lifestyle himself. He and Diane took frequent vacations to exotic locations. Deloach discovered that Scruggs owned a racing sailboat and three yachts, fully crewed, at far-flung ports around the world. The gem of Scruggs’s fleet was the 120-foot-long
Emerald Key
, recently refurbished at great expense and docked in the South Pacific, served by a crew of seven awaiting Scruggs and his guests for the America’s Cup competition off New Zealand. Scruggs also owned the 112-foot
Claire Elizabeth
, named for his daughter. The boat was based in the Bahamas, where Scruggs had bought a home to replace one he used to own in Key West. The smallest of his yachts was a mere ninety-one feet long. It was used for cruising the waters off Pascagoula and was valued at $6 million.

To get to his destinations, Scruggs owned one jet outright and held one third interest in two others.

While Deloach was in Pascagoula, inspecting Scruggs’s books, his host asked him to come to the Longfellow House. When the CPA arrived, he found Scruggs, decked out in a seersucker suit and a sporty straw hat of the type once fancied by southern gentleman, seated in a new Bentley convertible, sales price $300,000.

Scruggs was finding all sorts of ways to spend his millions.

    The law firm needed radical surgery, so Deloach recommended a form of triage: Scruggs should clean house, fire all of the unproductive lawyers and staff members, and pare the office down to a handful.

Characteristically, Scruggs did not want to deliver the bad news. For all of his litigation prowess and his recent tiff with Colingo and Carter, he often shrank from confrontation. Psychologists associate a childhood spent in stormy or broken households with an adult reluctance
to engage in unpleasant arguments. When Scruggs avoided personal clashes, as he often did, he seemed to fit the drugstore psychoanalysis of a “child of an alcoholic parent.” Whatever the reason, Scruggs went off to the South Pacific to follow the chase for America’s Cup on the high seas and left the dirty work to Deloach.

Among those who were there, it became known as the “Mardi Gras massacre,” and Deloach, tall, thin, and looking the part of a bloodless accountant, earned a new nickname, T-Rex the Grim Reaper.