Kentucky Fen Phen Case Continues To Ensnare Folks, This Time The Feds Turn Their Attention To Lawyer Angela Ford.

Lawyer for fen-phen clients ordered to account for multi-million-dollar judgment
Written by Andrew Wolfson

Lexington lawyer Angela Ford was hailed for helping expose one of the biggest legal scandals in U.S. history — the theft of tens of millions of dollars from Kentuckians injured by the diet drug fen-phen.

Her efforts culminated in the sentencing of Kentucky lawyers Shirley Cunningham Jr. and William Gallion to long prison terms for fraud, and a court order requiring them to pay restitution of $127 million to their former clients, most of whom she now represents.

But federal prosecutors have now turned their attention to Ford, in what they say is an effort to protect the fen-phen victims after a $42 million civil judgment that she won for her clients was reversed.

The U.S. attorney's office in Lexington has won a court order requiring Ford to account for the money she's collected and hasn't passed on to clients — including $13.5 million she's been paid in legal fees.

Though prosecutors don't suggest in their court filing that she's done anything wrong, Ford, a sole practitioner, says in court papers that the government intends to try to garnishee her fees, presumably to hold for safekeeping.

Prosecutors say they fear that Cunningham and Gallion — while still behind bars — will try to get their hands on the money in the wake of a Kentucky Court of Appeals ruling in February reversing the $42 million judgment. The court ruled 3-0 that the judgment was improperly issued without a trial.

“The government's sole desire is to obtain a complete and accurate picture of funds that could possibly be returned” to Cunningham and Gallion, prosecutors said last month in a motion. U.S. District Judge Danny Reeves agreed that the matter was so urgent that, without giving Ford a chance to respond, he ordered her to comply within 10 days.

The U.S. attorney's office declined to elaborate, saying in a statement only that “we will continue to pursue all appropriate means for recovering restitution for the victims in this case.”

It also declined to confirm Ford's statement that it intends to garnishee her fees.

In court papers filed last week, Ford said the government's fears are unfounded — that the chances are “zero” that a judge in the civil case would return money to two “convicted criminals” who were found guilty of stealing it from their clients.

She said the government already has detailed information about the $41 million she's collected from Gallion and Cunningham, including her fees.

In an interview, she said the government and Reeves have no right to know where she is keeping her payments, which represent one-third of what she has collected. And in an email, she asked: “How much has the government found on its own? Oh, I think it's zero.”

Ford said she objects to disclosing the information on principle and because it's not in her clients' best interests. She said the government's motion plays into the hands of Cunningham and Gallion by suggesting they have a right to the money.

But she complied Monday, after Reeves said she could file her accounting under seal.

Even so, her resistance to the request represents an interesting turnabout in a case that began in 2004 when Cunningham, Gallion and co-counsel Melbourne Mills Jr. refused to give Ford and their former clients an accounting of what they'd done with the $200 million they recovered from fen-phen's manufacturer.

The diet pills were withdrawn from the market after they were shown to cause heart valve damage.

“It is ironic,” said Lexington lawyer Jim Shuffett, the criminal defense attorney for Mills, who was acquitted on federal criminal fraud charges after he argued that he was too drunk to have conspired with Cunningham and Gallion.

Gallion and Cunningham were convicted of fraud in 2009 for paying themselves and others about two-thirds of the settlement and putting $20 million more into a foundation they paid themselves to manage. Gallion was sentenced to 25 years and Cunningham to 20, and they were jointly ordered to pay restitution of $127,678,834.

But long before that verdict, Ford had started collecting on the $42 million judgment she'd won in 2006 in Boone Circuit Court against all three attorneys, who a judge summarily found had violated their fiduciary duties to their clients. The court also ordered them to surrender $20 million they'd put in the foundation, which they called the Kentucky Fund for Healthy Living.

Ford and federal prosecutors had generally worked in harmony as she played the lead role in attaching the lawyers' assets — including the stake that Cunningham and Gallion owned in the thoroughbred champion Curlin.

In fact, at a hearing in January, Assistant U.S. Attorney Wade Napier said, “We acknowledge the tremendous amount of work that she's done on behalf of her clients.”

But since the Court of Appeals reversed the civil judgment Feb. 4, prosecutors say Ford has rebuffed their efforts to pinpoint the money.

And they say Cunningham and Gallion already are knocking at the door to collect it: Their lawyers appeared May 25 in Boone Circuit Court to argue it should be returned to them, in light of the reversal.

“The government must stand ready to collect funds for the benefit of the victims,” Napier and prosecutor Cheryl Morgan said in a motion filed June 22.

But Ford's lawyers, Kenyon Meyer and Stephen Mattingly of Louisville, say in pleadings that the government's concerns are premature and unfounded.

They noted that the Court of Appeals ruling isn't final until the Kentucky Supreme Court decides whether to hear the case. And even if that court affirms the reversal and sends back the case to Boone Circuit Court, Ford's lawyers said court is likely to rule against Cunningham and Gallion again.

This time, no trial would be required, Ford's lawyers say, because an expert who originally defended Gallion and Cunningham has recanted his affidavit supporting them, saying it was based on misinformation provided by Gallion and that he would have thrown it “in the waste basket” if he had known the truth about the diet-drug settlement.

Given their status as felons and disbarred lawyers, it is “highly unlikely” that a judge would make their former clients — or Ford — return any money to them, Ford's response says.

She said Cunningham and Gallion would have to sue each former client and it is unlikely they would prevail.

The government acknowledges that even if Cunningham and Gallion do win an order for the return of the money “such action could be rebuffed by the existence of the restitution judgment in the criminal case.” But prosecutors say in court papers that the government “may be required to take action ... in order to protect these funds.”

In an interview, one of Ford's 382 clients, Connie Centers of Lawrenceburg, said she doesn't understand the government and court's actions against her lawyer.

“She has done all she can” for us, Centers said.