New Evidence In Siegelman Case Points To Republican Cabal
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http://www.alternet.org/democracy/79645/
March 13, 2008.
A new review of evidence suggests that an aligned group of Republican
interests were pressing for -- and seeking to profit financially from
-- the trial of former Alabama Gov. Don Siegelman on charges of
bribery.
According to court documents and official testimony, months before
Siegelman was charged, Rob Riley, the son of the state's governor,
expressed confidence that an indictment would occur and that
Siegelman's political financier, Richard Scrushy, would be drawn into
case.
Around the same time, moreover, Riley managed to maneuver himself into
an extremely profitable position: lead local counsel on a separate,
massive civil suit against Scrushy and his company, HealthSouth.
How he received the assignment aroused some suspicion.
Riley had limited experience in securities litigation. And, for
critics, his appointment gave of the appearance of legal-political
insider trading: the governor's son, cognizant that Scrushy would be
dragged into Siegelman's case, saw the benefits to be had from the
civil suit against Scrushy's company, and positioned himself to
profit.
Riley denied these charges in an interview with the Huffington Post,
saying that he had no prior knowledge of Siegelman's forthcoming
indictment and arguing that he had been recruited to come on board the
HealthSouth case, not the other way around.
What is agreed upon, however, is that Riley earned big money from his
work. Ten months after he signed onto the HealthSouth suit, Siegelman
was indicted. Less than a year after that, the former governor was
convicted of bribery along with Scrushy. And months later, Health
South settled for $445 million one of the largest settlements in
securities litigation history.
* * *
In the early days of 2005, HealthSouth and Scrushy were in the midst
of a long-waged battle over whether the company had "perpetrated an
elaborate scheme to deceive HealthSouth's investors." The case alleged
that the company, and its financial supporters, had "committed
deceptive acts whose primary purpose and effect was to create a false
appearance" of good financial results and future prospects. There were
no connections to Siegelman.
On January 13, Rob Riley, a lawyer for the firm Riley & Jackson P.C.
and the son of the state's governor, was abruptly added as local
counsel to the New Mexico State Investment Council, a relatively new
plaintiff in the case against HealthSouth. It was an interesting move.
Riley, who specialized in medical malpractice law, had little history
in complex securities litigation. Co-plaintiffs complained, as they
often do, that his presence would simply drive up the cost of the case
and cut into the pot of any settlement. But their appeal was denied.
Why did Riley come on board? According to him, it was a product of
local stature and a bit of luck.
"A guy in New Mexico said, 'Hey, we are trying to get involved in this
case,'" Riley recalled. "At that point, it was pretty well out in the
papers that there had been fraud at HealthSouth. So I felt like it was
probably a good case. I didn't know what chance we had at being lead
counsel."
Another official with knowledge of the case said Riley was chosen
primarily for his political connections.
But around that time, Jill Simpson, an Alabama Republican official and
opposition researcher, told the House Judiciary Committee that Riley
called her and said the state's legal apparatus was gearing up to re-
investigate Don Siegelman. Moreover, Simpson recalled Riley as saying
that Republicans would tie the former governor with Scrushy, "a
reviled figure in Alabama."
Less than a year earlier, Siegelman had been indicted for conspiracy
and Medicaid fraud but his trial -- which seemed politically motivated
-- fell apart within a day in court.
On this new go-around, the prosecution had a more favorable judge.
Mark Fuller, who had been appointed by President Bush to the U.S.
District Court in the Middle District of Alabama, was well connected
in Republican circles and, according to local Alabama journalist Glynn
Wilson, had personal ties to Rob Riley.
Ten months after Riley signed onto the HealthSouth case, Siegelman and
Scrushy were indicted on charges of political bribery. At the center
of the charge was a $500,000 donation Scrushy made to the former
governor's 1999 campaign. The money had gone to the state's education
lottery and in exchange Scrushy got a position on a hospital
regulatory board.
The connection, critics claim, was weak and prejudiced. Scrushy had
been appointed to the board under several governors and his firm had
no interests under the board's purview. But the trial, which began ion
April 2006, reverberated throughout Alabama's political and legal
circles. Siegelman's bid to become governor again was snuffed out. And
the civil trial against HealthSouth was altered.
"[Riley] very aggressively he thrust himself into that suit as a late
comer," said Scott Horton, a law professor at Columbia University who
has written extensively on these issues for Harper's magazine. "He
knew that Fuller had made statements suggesting that he felt he had
once been a target of a politically motivated attack by Siegelman. He
knew that this would make someone predisposed against Siegelman and
perfect hanging judge. And he would reap the benefit of the class
action suit on the side."
* * *
As the criminal case against Siegelman proceeded, so too did the suit
against HealthSouth. And in the spring and summer of 2006, the two
cases intersected.
According to the Associated Press, in May 2006, William McGahan, an
official at UBS, one of HealthSouth's investment bankers, testified in
the Siegelman case that he had been pressured to pony up $250,000 for
the donations to the state's education lottery. The testimony had
limited relevance to the class action suit. But, over objections, it
found its way into the court record. McGahan, the document read, was
eager to please Scrushy and "arranged for UBS to be the source of the
funds for the bribe."
What affect this, and Scrushy's ongoing criminal trial, had on the
proceedings is a subject of debate. Riley, pointing to earlier
HealthSouth executives who had pleaded guilty to fraud, said he saw no
tangible cross-over between the two cases.
"I don't believe that had anything to do with the settlement," he
said. "I don't think that it aided it at all."
Two other lawyers who served with other plaintiffs on the class action
suit against HealthSouth, however, offered different opinions.
"It is not common that you have criminal trials of corporate executive
at the same time that a class action suit is taking place involving
the same individual," said Louis Mallone, an attorney for O'Donoghue &
O'Donoghue LLP and liaison counsel on the case. "It certainly didn't
hurt the prospects of the [class action case]."
A second official, who declined to speak on the record, said that
while the HealthSouth case was a "slam dunk" even before the Scrushy-
Siegelman trial began, having Scrushy as a convicted felon "obviously
helped" the suit against HealthSouth.
In June 2006, both Siegelman and Scrushy were convicted on charges of
bribery. Siegelman was sentenced to seven years and four months in
federal prison. Scrushy was given six years and ten months.
Months later the HealthSouth case, after years of trial, was finally
settled. The company announced that it would pay a whopping $445
million. It was, said Malone, "one of the top fifteen or twenty
[settlements] of all time."
Riley declined to reveal what he made from the case, saying that the
amount was "evolving." But he did acknowledge that it was substantial.
"It was a very good settlement," he said. "But at the same time there
was a lot of work that went into it.
For critics, however, the message was clear. Riley knew Scrushy going
down in the criminal trial and saw a way to reap the benefits on the
separate civil suit. In other words: Good work, if you can get it.
"Rob Riley approved of the strategy of the dragging Scrushy into the
[criminal] case because it would have benefits for him in the class
action suit," said Horton. "It was clear that he was intently
following what was going on in Fuller's court and knew that the
conviction of Scrushy in that case would have strong benefits in the
class action suit."