IS SECOND FEN PHEN SCANDAL BREWING? U.S. ATTORNEY SEEKS ACCOUNTING OF FUNDS SEIZED BY ANGELA FORD IN BEHALF OF FEN PHEN CLIENTS – Ford said by government to be “non-cooperative”.

 On June 22, 2011 the U.S. Attorney’s Office filed a motion seeking an accounting of funds collected by Attorney Angela Ford of Lexington in behalf of the victims of the original Fen Phen case.  

 The motion by the government says that:

  ”The government is concerned that funds collected in the state court case

could potentially be reclaimed by the defendants because the Boone Judgment has been

set aside. Moreover, Ford does not represent all of the victims of the defendants’ crimes

in the Boone Circuit Court matter.”

     Previously the U.S. Attorney’s office appeared in Jessamine Circuit Court to seek an order setting aside a judicial sale of the former home of defendant William Gallion.  The Herald-Leader reported that Ford purchased the Gallion home at a judicial sale.  The Master Commissioner of Jessamine County reported in an LawReader interview, that the U.S. Attorney’s office stated in their motion to set aside the Judicial Sale, that some of the money held in trust by Angela Ford, was subject to claims by parties who were not represented by Angela Ford.  The Jessamine Circuit Judge reportedly granted the U.S. Governments request.

In the governments motion they state: ” the government is generally aware of the amounts distributed to victims pursuant to the Boone Judgment”.

The government argues that the Ky.Court of Appeals set aside the summary judgment awarding some $42,000,000 to Ford’s clients and other Fen Phen plaintiffs not represented by Ford.  

Ford claims that the Court of Appeals decision setting aside the summary judgment is not effective until the Supreme Court considers the ruling of the Court of Appeals.   While the government says this issue is not clear they cite authorities to the court to the contrary. Their motion states:

“Of particular concern to the government is the import of the case of Marshall v. Goodwine, No. 2009–SC–000495–MR, 2010 WL 3374404, (Ky. August 26, 2010), which intimates that despite a motion for discretionary review pending before the Supreme Court, a judgment is reversed and the defendants may be entitled to a return of the money that was collected pursuant to that reversed judgment.”

It is not known how much money Ford has seized but the grounds for her holding the funds or distributing funds to her clients raise several critical legal questions.  If the government is correct in suggesting that  some of the money seized by Ford has been distributed “to victim(s)”, then   what is the legal justification for payments to her clients in light of the reversal by the Ky. Court of Appeals.  At the present her claims are not supported by any final judgment.

Ford argues that the original summary judgment issued by Judge Wehr of the Boone Circuit Court remains in effect until the Kentucky Supreme Court considers the reversal of the summary judgment by the Court of Appeals.

The U.S. Government’s motion for an accounting of funds held by Angela Ford details her lack of cooperation with the government,  The motion states:” On March 29, 2011, the last correspondence concerning an accounting, Ford drafted a letter that was once again unresponsive to the request for accounting.” 

Other statements in the government’s motion discuss other efforts where Ford’s office was not cooperative in providing information about the funds.  The government mentions an attempt to obtain information from Ford and they received an e-mail from her law firm that was unresponsive to the questions submitted by the government.

The government’s motion concludes, ” Despite the clarity of the government’s request”…”This email was not responsive to the government’s request.”

” While the distribution grids show, for  example, that Ford collected $13,277,216.00 in legal fees, no information was provided to the government regarding the continued existence of these funds or their location .”

This statement by the government in their motion raises the question;  Has attorney Ford paid herself $13,277,215 out of funds seized based only on a judgment set aside by the Court of Appeals?

The seizure of funds from Gallion, Cunningham, Mills and the Fund for Healthy Living Charitable Trust, may be justified since the defendant attorneys did not file a supercedas bond after Judge Wehr of the Boone Circuit Court granted a summary judgment.

But that summary judgment was timely appealed to the Court of Appeals and was not final.  So if any funds or attorney fees were paid to Ford or her clients, there is the continued possibility that the Supreme Court could uphold the Ct. of Appeals and then there will be no court order justifying distribution of funds supported by a judgment.  

The reversal ruling  by the Ct. of Appeals in February 2011, ordered a retrial, and a final decision may be years in the future.  According to the governments motion, Ford argues that the Ct. of Appeals judgment has no effect on her continued reliance on the original summary judgment.

If the end result is that Ford has seized funds and distributed them to her clients and has paid herself $13 million in attorney fees, and future court rulings go against her, will the government or the defendants be able to obtain the refund of the monies seized by Ford?

There are several issues which could be raised in the future and which could deny Angela Ford the right to collect an attorney’s fee even if the judgment is upheld.

First, on retrial, a jury may find in favor of Gallion, Cunningham and Mills.

Second, in the criminal trial in which Gallion and Cunningham were convicted, the Federal Judge ordered restitution to the original Fen Phen plaintiffs.  If this restitution is based on the criminal conviction and the Federal Court’s order, why should Ford’s clients have to pay her $13 million dollars for work done by the U.S. government?

The criminal conviction of Gallion and Cunningham is on appeal to the Sixth Circuit Court of Appeals.  Credible legal arguments have been presented to the Federal Appellate court on the trial ruling of U.S. District Judge Danny Reeves  to not allow the defendants to present documents and other evidence which provide a defense to the allegations against them.  During the first trial Federal Judge Bertlesman allowed that same evidence to be introduced by the defendants.

The Third argument against Ford is hypothetical.  But under this possible legal theory, Ford could be denied the right to receive any attorneys fee at all.  This legal theory  may exist by reason of a Kentucky Supreme Court Rule:

 “SCR 3.130(7.10) Waiver and forfeiture of fees for prohibited solicitation

If a lawyer illegally or unethically solicited a client for which compensation is paid or payable, all fees arising from such transaction shall be deemed waived and forfeited and shall be returned to the client. A civil action for recovery of such fees may be brought in a court of competent jurisdiction.”

It is reported to LawReader that a deposition exists in which an original plaintiff testified that she was solicited by Angela Ford to join her lawsuit against Gallion, Cunningham and Mills. We have not seen that deposition.  We do not state that this deposition alleges any illegal or unethical violation by Angela Ford. 

Other documents exist which purport to be copies of letters sent to potential clients by Angela Ford.   These documents have been flying around for years.  One letter is dated February 4, 2005, another is dated March 16, 2005. (As a lawyer the author cannot further discuss this issue…due to the Supreme Court Rules which may or may not apply.)  

 If the media was doing its job, and if the media is really concerned about the original plaintiff’s being fairly treated, then perhaps they should be digging into this issue in order to confirm what really happened. Non-lawyers are not subject to Supreme Court Rules.

If the Kentucky Bar Association Counsel were to investigate and prosecute Ford for “unethical solicitation” of clients, and if a violation of SCR 3.130(7.10) is found, then the Supreme Court could order that all of the  $13 million in attorney fees claimed by Ford could be ordered to be paid to her clients. 

We only mention this as a possibility, but in light of the clear language of the Supreme Court Rule, it could result in an order for Angela Ford to return the $13 million dollars in attorney fees that she claims according to the governments motion.  We do not suggest that Angela Ford has violated any law or ethical rule.  We only suggest in light of all possible justifications for a denial to Ford of any attorney fees, that this is a possible issue that may or may not ever be raised.

A strong argument can be made that even if the civil judgment in Boone Circuit Court is disposed of in favor of the defendants, that the Restitution Order in the Federal Criminal Action would still apply, and that is the argument made by the government is seeking an accounting of funds handled by Ford. 

Again we point out that the criminal convictions of  Gallion and Cunningham are on appeal.   Even if the conviction of  Gallion and Cunninghan are upheld,  the question of funds seized from Melbourne Mills presents an interesting issue.  Surely the federal criminal court cannot order restitution against Mills since he was acquitted.

A ruling of the Kentucky Court of Appeals released on June 26th. set aside Mills transfer of his assets to his new wife (who was one of the original Fen Phen clients. 

Text of the motion filed by the U.S. Attorney on June 22, 2011:

 UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF KENTUCKY

NORTHERN DIVISION

 Case: 2:07-CR-00039

 CRIMINAL NO. 07-39-DCR

 UNITED STATES OF AMERICA PLAINTIFF

 V. MOTION FOR ORDER OF ACCOUNTING

 WILLIAM J. GALLION and

SHIRLEY A. CUNNINGHAM, JR. DEFENDANTS

* * * * *

The United States moves this Court to order an accounting of funds held by

Attorney Angela Ford (“Ford”) in connection with this matter, and in support states as

follows:

1. Some, but not all of the victims in this matter, filed suit against the

Defendants herein in the Boone Circuit Court, Action No. 05-CI-00436, Abbott, et al. v.

Chesley, et al., seeking damages for the conduct underlying this prosecution. The Boone

Circuit Court entered a summary judgment (“Boone Judgment”) on behalf of some, but

not all of the victims of the criminal activity underlying this case. This subset of victims

is represented by Ford, who also serves as crime victims’ advocate for all victims

pursuant to appointment by this Court.

2. The Boone Judgment awarded the Plaintiffs therein approximately

$42,000,000.00. The Defendants appealed, but did not supercede the Boone Judgment.

Ford, on behalf of her clients, has taken action to enforce the judgment and obtained

assets in partial satisfaction of the Boone Judgment.

3. On February 4, 2011, the Kentucky Court of Appeals entered an opinion

regarding issues appealed in the Boone Circuit Court Action. Exhibit A. The Court of

Appeals reversed and remanded the Boone Judgment, which had awarded partial

summary judgment in favor of the Abbott plaintiffs on their fiduciary duty claim. See

Opinion, Page 35. Further, the Court of Appeals noted, inter alia, that the portion of the

August 1, 2007 order that awarded the Abbott plaintiffs compensatory damages in the

sum of $42,000,000.00 was vacated. Id. The Abbott plaintiffs have petitioned the

Kentucky Supreme Court for Discretionary Review.

4. On February 16, 2011, the undersigned corresponded with Ford to request a

complete and immediate accounting of funds collected pursuant to the reversed judgment.

Exhibit B. The government is concerned that funds collected in the state court case

could potentially be reclaimed by the defendants because the Boone Judgment has been

set aside. Moreover, Ford does not represent all of the victims of the defendants’ crimes

in the Boone Circuit Court matter.

5. On February 17, 2011, Ford responded that she was out of the office until

March 1st and could discuss the matter upon her return. Exhibit C.

6. On March 16, 2011, the undersigned contacted Ford again to inquire as to

her response time to the government’s request for accounting. Ford responded on March

17th that a complete accounting of funds could be obtained by reviewing the documents

filed by the former third party fund administrator in the state case. Exhibit D.

Obviously, the government is generally aware of the amounts distributed to victims

pursuant to the Boone Judgment1

7. In an effort to be more specific, the undersigned sent a renewed request for

an accounting to Ford on March 23, 2011, citing Kentucky law regarding the potential

status of funds collected pursuant to a reversed and/or vacated judgment. Exhibit E.

 Of particular concern to the government is the import of the case of Marshall v. Goodwine, No. 2009–SC–000495–MR, 2010 WL 3374404, (Ky. August 26, 2010), which intimates that despite a motion for discretionary review pending before the Supreme Court, a judgment is reversed and the defendants may be entitled to a return of the money that was collected pursuant to that reversed judgment. The government believes that Kentucky law is unclear on this point. As stated in the letter to Ford, it is therefore imperative that the government account for all funds collected, “which includes any money collected or held by you.” (Emphasis in original). Despite the clarity of the government’s request, Ford’s paralegal responded via email on March 24, 2011, by providing the undersigned with copies of the spreadsheets used to calculate the state court distributions. This email was not responsive to the government’s request. While the distribution grids show, for  example, that Ford collected $13,277,216.00 in legal fees, no information was provided to the government regarding the continued existence of these funds or their location .

 The government is unaware of the existence, amount and location of collected funds that were retained by Ford and not distributed to her clients.

1 In the event that Defendants Gallion and Cunningham seek the return of monies

distributed to the victims in the state court case, the government is confident such action

could be rebuffed by the existence of the restitution judgment in the criminal case and

their rights pursuant to that judgment. However, the government may be required to take

action to enforce that judgment in order to protect these funds.

Under typical circumstances, the government is not concerned with such matters.

However, the reversal of the judgment presents an atypical circumstance. The

government’s sole desire is to obtain a complete and accurate picture of funds that could

possibly be returned to the Defendants or otherwise placed beyond the reach of the

government’s efforts to obtain restitution for all of the crime victims.

8. On March 29, 2011, the last correspondence concerning an accounting,

Ford drafted a letter that was once again unresponsive to the request for accounting.

Exhibit F. Ford apparently believes it is clear that her judgment remains in full force and

effect until the Supreme Court says otherwise2

2 Since this letter, the Court of Appeals denied Ms. Ford’s petition for rehearing on the matter. Exhibit

G.

. Although the United States believes that the law is unclear on the issue, such a dispute is a distraction from the more germane issue–an accounting of funds. At a May 25, 2011 hearing in the Boone Circuit Court, attorneys for the Defendants and Melissa Green argued that collected funds should be returned to them in light of the Court of Appeals reversal.

The state court judge took the matter under submission. If either the Boone Circuit Court orders a return of the funds or the Supreme Court denies Ford’s motion for discretionary review, the government must stand ready to collect funds for the benefit of the victims. It is appropriate and responsible for the government to have information regarding all funds. Moreover, it is incumbent on Ford, as the crime victims advocate in this criminal matter, to provide such an accounting. Failure to do so creates an unnecessary and avoidable risk to all victims in the criminal matter.

The government has requested the accounting through every avenue short of a motion to this Court.

9. On June 9, 2011, the undersigned had a lengthy telephone conference with

Ford, wherein issues related to the judgment reversal were discussed. As stated during

the phone conversation, and reiterated in this filing, a request for accounting and any

other mechanism employed to secure funds collected from defendants Gallion and

Cunningham are meant to protect the victims of Defendants’ crimes.

The government and Ford undoubtedly share an interest in protecting the interests of the crime victims in this matter, while acknowledging that our views on how best to meet this goal may differ.

WHEREFORE, the United States respectfully requests that the Court issue an

order requiring Attorney Ford to provide a complete accounting of all funds collected by

her in the Abbott matter and not distributed to the victims; such accounting to include the

location of said funds. A proposed order is tendered for the Court’s consideration.

Respectfully submitted,

KERRY B. HARVEY

UNITED STATES ATTORNEY

By: /s Cheryl Morgan

Cheryl Morgan

Assistant United States Attorney

260 West Vine Street, Suite 300

Lexington KY 40507

(859) 685-4870

Cheryl.Morgan@usdoj.gov

and

/s Wade Thomas Napier

Wade Thomas Napier

Assistant United States Attorney

260 West Vine Street, Suite 300

Lexington KY 40507

(859) 685-4896

Wade.Napier@usdoj.gov

CERTIFICATE OF SERVICE

On June 22, 2011, we electronically filed this document with the clerk of the court

by using the CM/ECF system which will send notice of the electronic filing to all parties

of record.

/s Cheryl Morgan

Assistant United States Attorney

s/ Wade Thomas Napier

Assistant United States Attorney

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