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The Wealthiest Prisoner in America?

Who is the wealthiest prisoner in the federal system?

It might just be Dickie Scruggs.

Scruggs sits in a federal prison in Montgomery, Alabama.

He’s serving year three of a seven year sentence.

Scruggs made his millions suing asbestos, tobacco and insurance companies.

What landed him in jail?

He pled guilty to bribing a Mississippi judge.

But it’s not that simple.

There’s a back story.

And that story is told beautifully and in great detail by former Boston Globe reporter Curtis Wilkie in The Fall of the House of Zeus: The
Rise and Ruin of America’s Most Powerful Trial Lawyer.

Wilkie is a friend of Dickie Scruggs and the Scruggs family.

He speaks with Dickie Scruggs on the phone periodically.

He e-mails him.

And soon, he will travel to Montgomery to visit him.

When Corporate Crime Reporter put out its Public Corruption in the United States report in 2007, it ranked the states from most corrupt to least corrupt.

Louisiana came in first as most corrupt.

Mississippi came in second.

There is a culture of corruption in Mississippi.

Some of the corruption is legal.

Some of it illegal.

The question for Mississippi power players is – can you do it without getting caught?

And the answer for Scruggs was – no.

Scruggs confronted some of the most powerful corporate interests in America.

And he also ran up against the old James Eastland political machine.

“Sometimes Dick worked with them, sometimes he worked against them,” Wilkie told Corporate Crime Reporter in an interview last week.

“He was playing both sides down here. He was at one time the biggest benefactor of the Democratic Party. Other times he was supportive of his brother-in-law, who is a very powerful Republican – Trent Lott.”

“He was playing both sides. But essentially, Dick is a progressive Democrat. And there are not a hell of a lot of them in Mississippi. There is no question that some of the prosecutors who went after Dick are very conservative people.”

“The judge who demanded the money – and helped trap Scruggs – is a very staunch conservative Republican. It’s clear from listening to the tapes that he hated Scruggs’ guts – before this ever started. He was clearly happy to be involved in this scheme to trap Scruggs.”

“There is no question that the government went after him. But that is not to excuse him from ultimately doing what he did,” Wilkie said.

“He would acknowledge that.”

“But it was not such an open and shut case.”

“The newspapers would say that Dick Scruggs offered a judge $40,000 to fix a case. That wasn’t the case at all.”

“The judge asked for the money. And another guy – who had been more or less deputized to seek a favor from the judge, paid the judge $40,000 in cash and then asked Dick to reimburse him, which Dick did. And that’s when Dick becomes culpable himself.”

“Dick has never professed his innocence in this, since he pleaded. He knows he screwed up. And it was incredibly stupid. And he was involved with some people that he probably shouldn’t have been doing business with who helped ensnare him in this case and in this problem.”

Scruggs was represented by John Keker from San Francisco.

“Dick’s son – Zach Scruggs – wanted to go to trial. But he wound up pleading after everyone else did,” Wilkie says.

“They all had this bravado at the beginning. They all pleaded not guilty. And they were prepared to go to trial. I thought my book would climax with this sensational trial – which never took place.”

“At the end, they caved in for several reasons. First, there was evidence. Dick was caught on a wiretap saying he would take care of a payment to the judge. He was quoted as saying ‘I’ll take care of it.’ They had the check from Scruggs to Timothy Balducci. They had that.”

“They also had a mock trial out of state before mock juries. And the juries all found against the defendants. And so, they began thinking – okay, how do we best handle it? And they came to the conclusion to plea bargain. And in the end, that is what happened.”

“Keker felt that his biggest problem was the recording of the conversation between Balducci and Scruggs on November 1, 2007 – which led to the raid on his office three or four weeks later.”

“The next day he was indicted. There was a feeling that that was the most damaging piece of information they had against him.”

All the lawyers who went to jail as a result of the Scruggs prosecution lost their law licenses.

But according to Wilkie, Zach Scruggs is challenging his conviction.

“Zach is the one who is challenging it. And Dick has filed a motion himself. Zach has challenged his conviction. He’s trying to clear his name.”

“There was a Supreme Court decision a year ago. It’s known as the honest services decision – U.S. v. Skilling. It narrows the description of a crime in a case like this. Zach already had a hearing this summer. He’s contending that the crime to which he pleaded guilty knowing about was never a crime, based on that Supreme Court decision.”

“During the hearing, Zach called a number of witnesses to try to essentially establish his innocence in the case altogether.”

“I don’t say it in the book – but I have said in public appearances when asked – I think Zach is innocent. If I were on a jury and knowing the evidence that the government has against him, I would vote to acquit Zach.”

Why didn’t Zach stick to his guns and take it to trial?

“He told me that he was overwhelmed by his family. They were afraid that if he went to trial and was convicted, he could get as much as 15 to 20 years. And his wife was pregnant at the time. His mother was not in good health at the time and she was looking at her husband going away for a number of years. Zach’s main lawyer at the time was Mike Moore – the former attorney general of Mississippi. Mike is like an uncle to Zach. Mike was essentially arguing that he should plead guilty.”

“Zach finally agreed to plea, but with the understanding that he would not have to do any time. The U.S. Attorney did recommend no time for Zach. But the judge gave him 14 months. So, Zach felt he was betrayed.”

How much time did he actually spend in prison?

“Between his time in prison and the halfway house – probably a little less than a year.

He’s very bitter about it. He feels like he was collateral damage in this whole case.”

We asked Wilkie – how much did Dickie Scruggs make off the tobacco settlement?

“He didn’t make as much as many people thought,” Wilkie said. “It is being paid out over a 25 year period.”

“But his total nut from tobacco – his alone – he stood to get $20 million a year for 25 years – or $500 million. That’s oversimplifying it because – they are still not even halfway through the deferred payment schedule.”

So, does a $20 million dollar check go every year to the federal prison in Montgomery?

“No,” Wilkie said. “He’s not getting that much now. The financial officer who still handles Dick’s finances says that now it’s fair to say that he gets several millions of dollars a year from the tobacco settlement.”

Dickie Scruggs was no Huey Long.

But he was challenging corporate power in the South as Long did.

“I liked Huey Long,” Wilkie said. “And my family admired Huey Long for the reason that he did take on the big corporate interests that controlled Louisiana and south Mississippi where I grew up – the oil and gas industry. And he took them on.”

“There is a lot of populism involved in what these trial lawyers have done,” Wilkie says. “What is ironic is they made so much money themselves that you kind of laugh when you think of them as populists. But when they go after asbestos or big tobacco or the insurance industry, there is a strong strain of populism there. And they would argue they represent the little man in these class action lawsuits.”

Left unanswered by Wilkie is the question of why Lott resigned from the U.S. Senate just a day before Scruggs was indicted.

“Lott announced on a Monday that he was leaving office. Scruggs office was raided on Tuesday. And Scruggs was indicted and arrested on Wednesday.”

That was a surprise resignation, right?

“Yes, it was.”

“So, was it just a coincidence?”

“It would have been an extraordinary coincidence,” Wilkie said. “But I came up with nothing that would indicate otherwise. Everyone immediately thought that when Scruggs was arrested two days later that there had to be a connection. I was not able to establish that. I am not going make any claims I can’t reinforce.”

[For the complete transcript of the Interview with Curtis Wilkie, see 25 Corporate Crime Reporter 31(11), August 1, 2011, print edition only.]

Russell Mokhiber edits the Corporate Crime Reporter.