Lawyers Found Guilty of Diet Drug Scam

Lawyers Found Guilty of Diet Drug Scam
Photo: AP
William Gallion

A federal jury in Frankfort, Ky., convicted two disbarred lawyers of scamming their clients out of nearly $95 million in a diet-drug settlement April 3.

It was the second trial for Thoroughbred owners William Gallion and Shirley Cunningham. A federal jury in Covington last year was unable to reach a verdict for Gallion and Cunningham but acquitted a third defendant.

“I do think justice has been done finally,” said Connie Centers, who was represented by the Kentucky lawyers in the original class action lawsuit.

“We’re sick people and we don’t have long to live,” said Centers, who had to have a mitral valve replaced in her heart after taking the diet drug fen-phen for several months. “All they’re going to do is go to jail.”

Prosecutors charged Gallion and Cunningham with one count of conspiracy to commit wire fraud and eight counts of wire fraud, claiming they bilked some 440 clients who claimed they had been hurt by the fen-phen, which was withdrawn from the market after it was linked to heart valve problems.

The jury had been deliberating since early on April 2 following a trial that lasted several weeks. After reaching the verdict, jurors were instructed to deliberate whether Gallion and Cunningham will have to forfeit $94.6 million that prosecutors claim they bilked from their clients.

Steve Dobson, the attorney for Cunningham, said that he plans to appeal the jury’s guilty verdict.

“We really feel like there are a number of significant issues that are appealable,” he said.

Dobson said he has the utmost respect for Cunningham.

“He is truly a man of integrity based on everything I know about him,” Dobson said. “I am so disappointed for him and his family.”

Hale Almand, Gallion’s defense attorney, declined to comment after the verdict, as did federal prosecutor Laura Voorhees.

The case has earned attention both for the allegations of attorney misconduct and the complicated assets of the defendants, which include a 20% share of the Thoroughbred Horse of the Year  Curlin being held in a trust.

Almand claimed the two were simply following the advice of a nationally known class-action expert whom they had hired as a consultant for counsel in divvying up the $200 million settlement for 440 clients who claimed they had been hurt by the diet drug fen-phen.

Almand also argued that the evidence simply wasn’t sufficient to convict Gallion and Cunningham, and that the settlement was approved by a northern Kentucky judge.

“I think the government is raising an optical illusion almost,” he said in his closing argument.

Prosecutors painted a starkly different picture of “extraordinary greed” and “absolute arrogance” of two attorneys who were so intent on keeping most of the money for themselves that they refused even to inform their clients of the total amount of the settlement.

“I submit to you that these defendants got caught with their hand in the cookie jar,” federal prosecutor E.J. Walbourn told jurors who heard testimony during the trail which spanned seven-weeks with several breaks.

The criminal case against them was moved to Frankfort after a federal jury in Covington deadlocked last year on a verdict.

Prosecutors contend Gallion and Cunningham cheated their clients out of the $94.6 million and paid themselves and others about two-thirds of a 2001 settlement with the maker of the diet drug.

In the first criminal trial, jurors could not reach a unanimous verdict on the charges against Gallion and Cunningham and a judge declared a mistrial. A third defendant, Melbourne Mills of Lexington, was acquitted.

Although fen-phen was the subject of a massive national financial settlement, Gallion and Cunningham’s clients opted out of that agreement because their lawyers told them they could get more money pushing their claims on their own.

But prosecutors say the lawyers didn’t tell their clients, at least at first, that they were part of a group that settled en masse for $200 million, and that the lawyers—not the drug manufacturer—were deciding how to slice up the money.

“These clients deserved more … and they didn’t get it,” Walbourn said.

Gallion and Cunningham also have a $42 million judgment against them in a separate civil case brought by the former clients.
 

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