Federal appeals court hears Ky. diet drug pair

CINCINNATI (AP) — Two former attorneys serving prison time for scamming their clients of $94.6 million from a $200 million settlement over the diet drug fen-phen may have a valid point about the trial judge making an error, but “it looks wrong” that they took the bulk of the settlement for themselves, a federal appeals court judge said Tuesday.

Judge Ronnie Lee Gilman of the U.S. 6th Circuit Court of Appeals in Cincinnati told attorneys that the way 60-year-old William Gallion and 57-year-old Shirley Cunningham Jr. handled the 2001 settlement, including distributing only $40 million to clients initially, doesn’t help their cause.

“They lawyers are getting 75 percent of the settlement and the clients are getting 25 percent,” Gilman said.

Gallion and Cunningham were convicted of scamming more than 400 clients out of millions they had won against American Home Products. Fen-phen was pulled from the market after users had heart problems related to the drug. Prosecutors say they illegally kept the bulk of the settlement, but made more money available to their clients after the federal government began a criminal investigation.

The panel took the case under advisement and did not issue an immediate ruling.

Cunningham’s attorney, Clifton Harviel, told the judges that U.S. District Judge Danny C. Reeves made multiple errors during the trial, depriving the men of a fair trial.

Gallion’s attorney, Louis Sirkin, told the panel that Reeves allowed jurors to see 22 findings made by the Kentucky Supreme Court against Gallion and Cunningham, even though the high court never held a hearing.

“It changed the whole dynamic,” Sirkin said. “It made these people look like bad guys.”

Judge Eric Clay wasn’t impressed with the argument.

“You go on and on, but we’re not hearing any legal authorities,” Clay said.

“We’re doing the best we can,” Sirkin replied.

Vijay Shanker, an attorney with the U.S. Department of Justice, recounted some of the evidence in the case, including how Gallion and Cunningham instructed employees not to tell clients the full details of the settlement and offer them less than they were initially allocated. Shanker also told the panel how Cunningham funneled $153 million into the attorneys’ accounts, then put $59 million back into the settlement after the federal government issued subpoenas as part of an investigation.

“The evidence in this case was, in a word, overwhelming,” Shanker said.

Shanker also noted that jurors saw only a few of the findings by the Kentucky Supreme Court and were later instructed to disregard what they had been shown.

“The full list of allegations was never shown to the jury,” Shanker said.

The case has swallowed not only the careers of Gallion and Cunningham, who were prominent attorneys in Lexington and one-time owners of champion racehorse Curlin, but also of Melbourne Mills, who was acquitted at trial, but later disbarred for his role in the case. The Kentucky Supreme Court also has disbarred former state judge Joseph P. “Jay” Bamberger, who oversaw the settlement and later profited from it, as well as David Helmers, a former legal associate of Gallion.

The Kentucky Supreme Court is also weighing the future of class-action specialist Stanley Chesley of Cincinnati. Chesley avoided criminal prosecution, but faces multiple ethics charges that could result in his being disbarred.

Gallion and Cunningham are also being pursued by their former clients in civil court. In a lawsuit, a judge awarded the former clients $42 million, but the Kentucky Court of Appeals overturned the decision and the case is pending with the Kentucky Supreme Court.

A related civil case against Chesley is pending.

Gallion is not scheduled to be released from federal prison until 2029; Cunningham won’t get out until 2025.

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Associated Press reporter Brett Barrouquere is on Twitter: http://twitter.com/BBarrouquereAP