Tag Archive for 'fen-phen'

Fen-phen jury: Gallion and Cunningham guilty on all counts

- bmusgrave@herald-leader.com

FRANKFORT — After deliberating for two days, seven women and five men convicted William Gallion and Shirley Cunningham Jr. of conspiracy and eight counts of wire fraud.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

This is the second trial for Gallion and Cunningham on charges that they took millions of dollars from 440 former clients in a 2001 fen-phen settlement. Their first trial ended in a mistrial after the jury deliberated for eight days but could not reach a verdict. Melbourne Mills Jr., who was originally charged with Gallion and Cunningham, was acquitted by the same jury.

Prosecutors say Gallion and Cunningham lied and deliberately told half-truths about what happened to the $200 million settlement so all of the lawyers on the case could keep the bulk of the settlement.

Defense attorneys said that Gallion and Cunningham knew little about class-action law at the time the case was settled. If mistakes were made ,those mistakes were unintentional, they argued.

Stephen Dobson, a lawyer for Cunningham, said there was little evidence or testimony that showed that Cunningham was directly involved in the negotiations of the settlement or how the money was disbursed after the case was settled.

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Closing arguments to begin in fen-phen trial

- bmusgrave@herald-leader.com

FRANKFORT — Closing arguments are likely to begin Wednesday in the retrial of two disbarred Lexington-area lawyers accused of taking $94 million from their former clients in a diet-drug settlement.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

This is the second trial on wire fraud and other charges for William Gallion and Shirley Cunningham Jr., and it’s just the latest chapter in the legal saga over what happened to a $200 million settlement in Boone Circuit Court.

In July, a federal judge declared a mistrial after a jury in Covington deadlocked on whether Cunningham and Gallion were guilty of wire fraud. Melbourne Mills Jr., a third lawyer who also was part of the $220 million settlement, was acquitted by the same jury.

Prosecutors say Gallion and Cunningham refused to disclose the amount of the total settlement to their clients, paid them less than they were supposed to and falsely told them that they would go to jail if they told anyone how much they received from the settlement. Gallion and Cunningham, under their contracts with their clients, were to receive approximately a third of the settlement, but they took more than half, prosecutors say.

Defense lawyers say Gallion and Cunningham were inexperienced with mass-tort or class-action law and that any mistakes were unintentional. The former lawyers were following the advice of famed Cincinnati trial lawyer Stanley Chesley and the original judge on the case, they have argued.

The retrial, which began Feb. 19 in federal court in Frankfort, nearly ended in a mistrial for Gallion after his lawyer suffered health problems during the trial. But O. Hale Almand, a Georgia attorney who has represented Gallion in both trials, was able to return to court, saving his client from a possible third trial.

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Attorney’s illness causes concern, delays in fen-phen case

- bortiz@herald-leader.com

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

FRANKFORT — The retrial of two former lawyers accused of taking millions of dollars from their clients has been postponed until Thursday morning because a defense attorney is ill.

Georgia lawyer O. Hale Almand, who represents William Gallion, became dizzy about 4 p.m. Monday in U.S. District Court. Testimony ended early for the day.

It was the third time the trial has been postponed due to Almand’s health. The trial was delayed for a week the first week in March.

Almand’s health triggered concerns that U.S. District Judge Danny Reeves might have to declare a second mistrial. But Almand told a lawyer who is temporarily representing Gallion that he just needs rest and expects to be ready for trial Thursday.

Almand has an ear infection that affects his balance, Reeves said.

Cunningham and Gallion are accused of taking $94 million that should gone to former fen-phen diet-drug users in the 2001 settlement of a $200 million lawsuit.

Federal prosecutors and Cunningham’s lawyer, Stephen Dobson, told Reeves they want to avoid a mistrial. The judge said he would research whether he can declare a mistrial for Gallion but continue the case for Cunningham.

Coffey was ordered to report back on Almand’s condition by Wednesday afternoon. Reeves was to conduct a hearing at 4 p.m. if Almand is not feeling better.

Cunningham and Gallion’s first trial resulted in a mistrial after jurors could not reach a verdict. A third lawyer, Melbourne Mills Jr., was acquitted.

Cunningham and Gallion are charged with wire fraud and conspiracy.

Prosecutors were questioning their final witness on Monday. The former lawyers are expected to present their case after the last witness concludes his testimony.

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Judge delays Fen-phen retrial until Thursday

- slannen@herald-leader.com

The federal trial of two Lexington-area lawyers accused of bilking their clients out of millions of dollars in settlement money will resume on Thursday.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

Proceedings were suspended until 8:30 a.m. Thursday in U.S. District Court trial in Frankfort due to illness, according to an order filed Tuesday by U.S. District Judge Danny Reeves. The filing does not provide any details about the illness.

Shirley Cunningham Jr. and William Gallion are accused of cheating their former clients out of $94 million in a settlement of the fen-phen diet drug lawsuit. They are standing trial on charges of wire fraud and conspiracy.

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Arguments heard in fen-phen case

- bortiz@herald-leader.com

FRANKFORT — Opening statements were under way in the retrial of two Lexington area lawyers accused of taking $94 million that should have gone to 440 clients, who had sued the maker of the diet drug fen-phen.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

Lawyers for the federal government and the defendants, Shirley Cunningham Jr. and William Gallion, made small tweaks to their case from a trial last summer, which resulted in a hung jury and a mistrial. Another defendant, Melbourne Mills, was acquitted.

Cunningham and Gallion are accused of conspiracy and wire fraud over the 2001 settlement of a lawsuit against the maker of the fen-phen diet drug. fen-phen, which was recalled after some studies indicated it could cause heart damage. The lawsuit was settled for $200 million.

As they laid out their case Wednesday in U.S. District Court, prosecutors spent more time explaining class-action law — a subject that many lawyers find difficult to understand.

Prosecutors say Cunningham and Gallion — and their staff — disregarded ethics rules by refusing to disclose the gross amount of the settlement to their clients, paying them less than they were entitled to under the settlement, and falsely telling clients that they would go to jail if they told anyone what they received, Assistant U.S. Attorney Laura Voorhees.

The lawyers used the settlement-confidentiality clause to keep their clients in the dark, Voorhees said.

“They used this provision like it was a club,” she said.

Under their contracts with clients, Cunningham and Gallion were entitled to one-third of the settlement. They took nearly half of it, Voorhees said.

The lawyers also are accused of wrongfully diverting $20 million of the settlement into a charitable trust. During the first trial, the defense argued that that money was needed to pay future fen-phen victims who were not in the lawsuit. Defense attorneys said that, according to the settlement agreement, Cunningham and Gallion were personally liable for paying those clients.

But Voorhees, anticipating such arguments Wednesday, said the settlement agreement limited the lawyers’ liability to $7.5 million.

O. Hale Almand, an attorney for Gallion, said his client followed the advice and recommendations of well-known Cincinnati trial lawyer Stan Chesley, who negotiated the settlement. Almand also noted that the trial judge approved the attorneys fees.

Almand said the lawyers never intended to defraud their clients. The charitable trust was approved by an independent attorney who was hired by the court to write a legal opinion of it.

Cunningham’s lawyer was expected to make his opening statements at 1 p.m.

The trial could last six weeks.

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Jury selected for fen-phen trial

Herald-Leader Staff Report

A 12-person jury and four alternates were seated Tuesday in the second trial for two Central Kentucky attorneys accused of cheating their former clients out of $94 million.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

Opening statements will begin at 9 a.m. Wednesday in U.S. District Court in Frankfort in the trial of disbarred lawyers Shirley Cunningham Jr. and William Gallion, who are charged with wire fraud and conspiracy. Statements are expected to last four hours.

Federal prosecutors said they expected to call as many as four former clients in the afternoon. Cunningham and Gallion are accused of taking settlement money that should have gone to 440 clients, who had sued the maker of the diet drug fen-phen for heart defects. The suit settled for $200 million in 2001.

The trial could last six weeks. The lawyers’ first trial, last July, resulted in a hung jury. Another defendant, Melbourne Mills, was acquitted.

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Defense attorney in fen-phen case ready for February trial

- bortiz@herald-leader.com

After months of pleading with a federal judge to reschedule the trial of two Lexington-area lawyers accused of cheating their clients out of millions of dollars, a defense lawyer now says he will be able to participate in the trial.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

O. Hale Almand Jr. filed a notice Thursday that he’s withdrawing his motion to withdraw from the case. Almand said that a case he had in Georgia that was supposed to go to trial this week was dismissed. It was to last three to four weeks.

Another trial, slated to begin March 9 in Mississippi, was rescheduled so it would not conflict with Almand’s defense of William Gallion.

Gallion and Shirley Cunningham Jr., are scheduled for trial Feb. 17 on wire fraud charges. They’re accused of defrauding 440 clients out of $94 million in a lawsuit settlement with the company that made the diet drug fen-phen.

Almand had been trying to withdraw from the case because he said he did not have enough time to prepare a new defense for Gallion. U.S. District Judge Danny Reeves rejected numerous requests to reschedule the trial so it would not conflict with Almand’s two other cases.

Reach Brandon Ortiz at (859) 231-1443 or 1-800-950-6397, Ext. 1443.

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Harrodsburg Road Rite-Aid at center of federal investigation

By Steve Lannen and Bill Estep
slannen@herald-leader.combestep@herald-leader.com

A Rite Aid Corp. store in Lexington is responsible for more than three-quarters of the prescription-drug violations in a multi-state federal investigation.

Thousands of the Lexington prescriptions came from a doctor in Georgia, who no longer practiced in Kentucky.

The pharmacy chain and subsidiaries in eight states agreed to pay $5 million in penalties for violating rules about controlled substances.

The investigation revealed 16,000 violations in Kentucky and seven other states.

About 12,600 of the violations came from one Lexington Rite Aid from 2001 to August 2005, according to a Department of Justice news release. The store moved from 393 Waller Avenue to 1335 South Broadway.

Patients from the Bluegrass Weight Loss Center at 366 Waller Avenue came in droves to the pharmacy to acquire phentermine, a mild stimulant and diet drug and one part of the once-popular fen-phen.

“You could spit to the Rite Aid pharmacy. It was right next door,” said Bobby Otero, a diversions group supervisor with the Drug Enforcement Administration’s Louisville district office. People came from Eastern Kentucky and Louisville to the center seeking prescriptions, he said.

Justice Department officials said the DEA investigation found Rite Aid filled prescriptions that it knew were not issued for a legitimate medical reason.

According to federal law, a pharmacist is responsible for determining whether a prescription is legitimate.

Federal authorities refused to identify the doctor because the investigation remains open, but a doctor who operated the Bluegrass Weight Loss Center surrendered his license in 2005 after being accused of improperly prescribing phentermine, according to state records.

Dr. Efrim C. Moore moved to Georgia in 2000, but continued to operate the diet clinic on Waller Avenue where assistants called in prescriptions for phentermine to the Rite Aid, according to a disciplinary record at the state licensure board.

Chris Johnson, a state investigator, told the board in August 2004 he had gotten a complaint that Moore was inappropriately prescribing diet medication.

The investigation showed that Moore often didn’t see patients who got prescriptions. He made prescribing decisions from Georgia based on patients’ files and what employees at the clinic told him, according to the investigator.

Johnson talked to pharmacists at the Rite Aid, who said Moore’s patients got a discount because he sent so many of them in for diet medication, according to the licensure board’s findings.

Moore denied he committed any violation, but agreed the board could conclude he did. He agreed to give up his Kentucky license in lieu of having it revoked. He also agreed to take a course on prescribing and pay $10,000 to Georgia authorities, according to the Kentucky board’s order.

A call to the answering service for Moore’s pain clinic in Canton, Ga., was not returned.

Moore’s attorney, Thomas Miller, was not available for comment late Tuesday afternoon.

Authorities said several Rite Aid employees also knew about the arrangement.

The fact that so many prescriptions came from one office and that the Rite Aid store checked with the corporation about obtaining more phentermine were red flags that should have been heeded, said Robin Gwinn, an assistant U.S. attorney for the Eastern District of Kentucky.

A Rite Aid spokeswoman said she did not know specifically whether anyone had been disciplined or fired from the Lexington store. The company cooperated fully with law enforcement officials once it learned of the investigation in 2004 and has since taken steps to retrain pharmacy employees, said Sheryl Slavinsky, Rite Aid’s director of public relations.

U.S. Attorney James Zerhusen’s office said the doctor in the Rite Aid case is barred from practicing in Kentucky. In November, however, the Kentucky licensure board approved Moore’s request to reinstate his license here, albeit under two years’ probation.

As part of the settlement, Rite Aid also has agreed to a new compliance plan with the DEA for controlled substances, according to the Justice Department.

As of December, the Pennsylvania-based company operated 4,915 drugstores with 118 stores in Kentucky.

Associated Press contributed to this report.

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Two fen-phen lawyers disbarred

By Jim Warren
jwarren@herald-leader.com

Fen-phen lawyers William Gallion and Shirley Allen Cunningham Jr. have been permanently disbarred from legal practice by the Kentucky Supreme Court.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

The court entered orders Thursday afternoon disbarring both attorneys and, under terms of those orders, neither man can ever apply for reinstatement to the Kentucky Bar.

According to the orders, both Cunningham and Gallion had filed motions with the high court asking that they be disbarred.

And, under terms of the orders, both Gallion and Cunningham essentially admitted many of the ethical violations that federal prosecutors have alleged in an on-going case against them involving their handling of a $200-million fen-phen settlement.

Gallion, Cunningham and another attorney, Melborne Mills Jr., were tried on criminal mail fraud charges in federal court this summer. A federal jury at Covington acquitted Mills, but could not reach a verdict in the cases of Cunningham and Gallion.

They are scheduled for a retrial in federal court at Frankfort early next year.

Reach Jim Warren at 1-800-959-06397 Ext. 3255 or 859-231-3255

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Date set for fen-phen lawyers’ second trial

COVINGTON — Two Lexington-area lawyers accused of taking millions of dollars from their former clients in a diet drug settlement pleaded not guilty Thursday to eight new charges of wire fraud.

Last week, a federal grand jury indicted William Gallion and Shirley Cunningham Jr. on charges of conspiracy and eight new charges of wire fraud.

Shirley Cunningham Jr. (left), William Gallion (right)

Shirley Cunningham Jr. (left), William Gallion (right)

The men were charged in 2007 with one count each of conspiracy to commit wire fraud.

 

The two men were arraigned on the new charges Thursday morning in U.S. District Court.

Gallion signed paperwork for a $2.5 million property bond. He was released Thursday afternoon. Cunningham already had been released. Cunningham already had been released.

U.S. District Judge Danny Reeves set a trial date for Nov. 17.

A mistrial was declared in their first trial, in July, after a jury could not decide whether Gallion and Cunningham were guilty of conspiracy to commit wire fraud.

Gallion, Cunningham and a third lawyer, Melbourne Mills Jr., were charged with one count each of conspiracy to commit wire fraud in 2007.

A jury acquitted Mills of all charges in July. Cunningham was released from the Boone County Jail on bond on Aug. 27.

The lawyers sued fen-phen maker American Home Products in Boone Circuit Court and settled the case for $200 million in 2001. Federal prosecutors say Gallion and Cunningham took $94 million — an increase of nearly $30 million from the previous indictment — that should have gone to 440 former clients, according to the indictment.

The indictment outlines a series of monetary transactions between Cunningham’s and Gallion’s bank accounts and accounts designated solely for client money.

If convicted, Gallion and Cunningham could face a maximum of 180 years in prison. However, it is rare for someone to get the maximum sentence.

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