With former super-lawyer Richard F. “Dickie” Scruggs now serving a federal prison term for conspiring to bribe one state judge, and a federal grand jury reportedly looking into whether he conspired to bribe a second one (see also here), State Farm’s lawyers have been relentlessly pursuing a parallel crusade to expose and civilly punish Scruggs for a long laundry list of other alleged wrongdoing.

State Farm’s accusations stem from how Scruggs allegedly conducted his last great litigation campaign, in which he accused State Farm and other insurers of improper claims-handling practices along the Mississippi Gulf coast in the wake of Hurricane Katrina. (Scruggs’s bribery conviction stems from an attempt to influence a lawsuit peripheral to that campaign. in which co-counsel were arguing over how to divvy up attorneys fees.)

My best effort to untangle Scruggs’s assault upon the insurers – which often seemed like a 15-ring circus — was contained in this feature story I wrote for Fortune in April.

But lots has happened since then, particularly over the last two months when I and, probably you, were on vacation. You may have already seen references to some of these developments — including two new depositions from two colleagues and social friends of the State Farm “insiders” who worked with Scruggs, Kerri and Cori Rigsbys –  on the invaluable Yall Politics and Insurance Coverage Blog sites, but I will try here to put that new evidence in some context, add some original reporting, and mention a few things that look important to me that haven’t been noted yet.

Since Internet publishing solons keep telling me that nobody reads more than 700 words at a stretch on the Web (a devastatingly ominous message for someone who does what I do for a living), I’ll try to break this update into palatable, bite-sized pieces, each dealing with a different issue.

In overview, in the unsettled remnants of the suits against State Farm that were originally brought by Scruggs (now being handled by other counsel, obviously), State Farm now alleges that Scruggs manufactured portions of his case against State Farm; induced State Farm insiders to violate their contractual duties; illegally broke into State Farm’s password-protected computer database; tampered with his own witnesses’ or clients’ computers to destroy evidence; compensated witnesses in unethical ways; violated one court’s injunction; and violated another court’s confidentiality orders.

Scruggs’s criminal counsel, John Keker, declined comment for this article, and Scruggs himself invoked his Fifth Amendment right to remain silent when asked about State Farm’s accusations at a civil deposition in July. (He also invoked the Fifth when asked for his date of birth, so his assertions of privilege in this context really should not be seen as admissions to the specific allegations State Farm is making.)

While one judge has already found Scruggs in civil contempt for violating an injunction (a ruling now on appeal) and another has found that he did, in fact, compensate witnesses unethically, most of State Farm’s other accusations remain far from proven.

I’ve broken this update into these six topics:

Part I: Key witness will finally testify

Part II: When Kerri met Dickie

Part III: Was there a third insider?

Part IV: Computer funny business

Part V: “Trailer Lawyers”

Part VI: Violating confidentiality orders

[This part of a series. See the introduction here.]

In a little noted filinglast week State Farm revealed that one of its claims-adjusting supervisors, Alexis (“Lecky”) King, is now available to testify in a handful of Hurricane Katrina-related civil suits that are still being waged against the insurer by plaintiffs originally represented by Dickie Scruggs.

Though King’s name may still be unfamiliar to many, she was a pivotal figure in Scruggs’ post-Hurricane Katrina assault upon State Farm and other insurers. Again, my earlier feature story explains this in greater detail, but the whirlwind summary is this:

Scruggs’ litigation began as an audacious, full-frontal attempt to simply nullify the insurers’ standard flood-exclusion language as “unconscionable.” That effort went nowhere in the courts.

In October 2005, however (about a month-and-a-half after the hurricane hit), Scruggs nimbly switched gears and his suits gained traction after a supervisor in State Farm’s Gulfport cat (for “catastrophe”) office ordered an engineering firm to re-inspect a number of Katrina-damaged homes. That supervisor was Lecky King.

While King told the engineering company that two of previous reports had been unconvincingly, if not incompetently, performed, two claims adjusters working in the cat office – sisters Kerri and Cori Rigsby – interpreted King’s order as sinister and began secretly working with Scruggs. Scruggs and the Rigsbys would later argue that the supervisor had really been ordering the engineers to redo reports in order to fraudulently mischaracterize wind damage, for which State Farm was liable, as flood damage, which was excluded from coverage and would be paid, if at all, only by the federal government’s National Flood Insurance Program. The Rigsbys, working as secret insiders at the State Farm cat office, eventually collected thousands of confidential State Farm documents which they gave to Scruggs, as well as to state attorney general Jim Hood and U.S. Attorney Dunn Lampton.

Whether or not State Farm played fair with its engineering reports, in almost all cases both the original and revised reports were preserved in State Farm’s files, with no one having made any attempt to destroy anything. The lone possible exception was the document that started the whole ball rolling – an October 12, 2005, engineering report performed on the property of one Thomas McIntosh.

Lecky King thought the McIntosh report reached such outlandish and unsupportable conclusions that she threatened to fire the engineering firm that had performed it. Its engineer had found no flood damage at all – only wind damage — even though experienced State Farm adjustors (including, ironically, Kerri Rigsby herself) had already documented in photographs extensive apparent flood damage there and had, accordingly, already okayed payment to McIntosh of the policy limits on his federal flood policy — $350,000.

Kerri had been in the process of routinely filing the McIntosh report away in the appropriate file cabinet when, she has testified, she noticed that it had a sticky-note on it saying “Put in Wind file. Do NOT pay bill. Do NOT discuss.” Kerri became suspicious that something fraudulent was going on. She has claimed that she then photocopied the document, took the original back to King, and said something like, “I guess I wasn’t supposed to see this.” According to Kerri, King allegedly responded, “No, you weren’t,” and took it.

The original of the report has never been located.

So, when (bigtime-Scruggs-campaign-fund-recipient) Mississippi attorney general Jim Hood commenced a criminal investigation (at Scruggs’ prompting) and issued a document subpoena to State Farm in March 2006, State Farm didn’t produce that McIntosh report, because it wasn’t in their files. Since Kerri and Scruggs had a photocopy of that original report, they could, and did, argue that State Farm was concealing and “shredding” documents in an apparent effort to criminally hide damning evidence.

State Farm has all along suggested that it didn’t produce the October 12 McIntosh report for the simple reason that Kerri Rigsby improperly took it (or “stole it”) rather than filing it away the way she was supposed to. State Farm has theorized that Scruggs knew this and, indeed, that this was the whole reason Scruggs seemed so preternaturally certain all along that State Farm wouldn’t produce the McIntosh report in response to subpoenas. It is true, for instance, that in April 2006, long before State Farm had had a chance to respond to Hood’s subpoenas, attorney general Hood seemed to anticipate that State Farm wouldn’t be able to produce it. In a court proceeding concerning that document subpoena he told a state judge, “See, we already have these documents. . . . We’re just going to see if they [State Farm] actually give us what is written on them and stuck to them and so forth.”

It does seem odd to me that Hood already suspected State Farm would fail to provide what he was nominally looking for. But State Farm’s never been able to substantiate its theory, in part because, once Hood commenced his grand jury investigation, Lecky King’s lawyers instructed her to invoke her Fifth Amendment privilege against self-incrimination rather than provide any testimony about any of the pertinent events.

Now it’s not unusual for criminal defense lawyers, out of an abundance of caution, to advise clients – regardless of innocence or guilt – to broadly invoke the Fifth if they are implicated in any way in a criminal inquiry. Scruggs’ own criminal lawyers are now instructing him to do exactly the same thing. At a depositionof Scruggs taken just last month by State Farm lawyer James Robie, Scruggs took the Fifth in response to every question except: What is your name?

But when King took the Fifth, things took a grim turn for State Farm, and the settlement value of Scruggs’ civil cases against State Farm skyrocketed. State Farm could not go before a jury and have a supervisor take the Fifth Amendment. A jury would assume the worst and hit the company with punitive damages. (Though invoking the Fifth can’t be used against you in a criminal case, it can be used against you in a civil case.)

Over the last month, State Farm finally got a speck of corroboration for its theory that the original McIntosh report disappeared because Kerri Rigsby took it, rather than because Lecky King deep-sixed it. In July it deposed two former Rigsby colleagues who were also close social friends of the Rigsbys as well: claims adjuster Tammy Hardison and her assistant, Dana Lee.

Lee testified that she remembered Kerri actually showing her the original McIntosh report, at Kerri’s or Cori’s home, with the original “yellow” sticky note still attached to it (thus, not a mere photocopy).

“She showed me . . . an engineer report,” Lee testified, “that had a sticky note on it. . . . And she said, well, what do you think of the note. And . . . I flipped it over and looked at the underside and I said, well, I don’t know who wrote it. They didn’t sign it. . . . I don’t think that’s unusual for a sticky note like that to be in the file.”

One of the Rigsbys’ current counsel, Scott Gilbert, declined to comment on any of the contents of the Hardison and Lee depositions (which I’ll be returning to in subsequent parts of this series) except to say that the Rigsbys “have a very different view” of events. Gilbert notes that his firm has just entered the case recently, so it is not fully prepared to comment, but also that, in any case, the firm “intends to try the case in front of [U.S. District Judge L.T. Senter , Jr.] instead of in the newspapers.” He also notes that the Rigsbys were not present or represented at the Hardison and Lee depositions and, accordingly, were unable to probe or challenge the deponents’ recollections. (Obviously, this represents a dramatic change in tack for the Rigsbys; Scruggs had had Kerri appear in a Scruggs Katrina Group television ad and had had both sisters star in a 10-minute ABC “20/20″ episode in August 2006 that very bluntly accused State Farm of systematically “cheating” Katrina victims out of millions of dollars due them.)

The Rigsbys mother, Pat Lobrano (whose role in the whole matter is discussed in Part II) is more outspoken in denouncing the Hardison and Lee depositions. “Obviously, State Farm put a great deal of pressure on them to deliberately misrepresent the truth under oath,” she says in an interview, suggesting that Hardison and Lee are afraid of losing their State Farm jobs if they don’t provide helpful testimony.

In any case, I frankly think that Lee’s testimony falls short of proving that Kerri took the originals of the McIntosh report. Though I don’t question her good faith, memory plays too many tricks on all of us, and it’s just too easy to misremember these sorts of then-insignificant, now-crucial details almost three years after the events took place.

Personally, I’d still rather hear from Lecky King than from Dana Lee. Fortunately, as State Farm revealed in that unheralded filing earlier this month, I’m going to get that opportunity, as will the rest of the world. (Presumably King’s lawyers think there’s no longer any realistic chance that either state or federal prosecutors would go forward with a criminal case.)

[This is part of a series. The introduction is here.]

The Rigsbys and Scruggs have always portrayed the Rigsbys’ secret photocopying of confidential State Farm documents (in arguable violation of confidentiality clauses in their contracts) as having been self-initiated, rather than directed by Scruggs. While it would probably be illegal for Scruggs to have directed the Rigsbys to use their inside position to collect confidential State Farm documents, it may have been defensible for the Rigsbys to collect those documents on their own, as the high-minded acts of whistleblowers whose primary intent was to turn them over to law enforcement to stop a crime in progress.

While the Rigsbys and Scruggs have always maintained that they did not meet until February 2006, well after the Rigsbys started collecting documents, State Farm theorizes that Scruggs actually struck some sort of unholy alliance with them much earlier. The deal allegedly had much to do with the predicament of the Rigsbys’ mother, Pat Lobrano. Lobrano’s own home in Ocean Springs, Mississippi, had been severely damaged by Katrina-related flooding, which was going to be excluded from coverage under her State Farm homeowners policy and that was inadequately insured under federal flood policies. (In an interview, Lobrano says her insurance agent had incorrectly advised her that she had the maximum insurance available.)

Hardison and Lee describe Lobrano and her husband (the Rigsbys’ stepfather) as being depressed and distraught immediately after the storm, but within a couple weeks the two underwent what Hardison and Lee describe as an abrupt change in mood. The Lobranos suddenly started hiring contractors to repair their home. (“You have to do that,” Lobrano says in an interview with me, or the house will deteriorate further and the policyholder will be responsible.) State Farm’s implication is that the turnaround may not merely have been a matter of mental resilience, but that some pecuniary assistance, or at least the prospect of it, had already arrived.

State Farm suggests that the Rigsbys, Lobrano, and Scruggs all pow-wowed much earlier than they have previously admitted. Mississippi’s deputy insurance commissioner has previously testified that at a meeting with Scruggs on December 15, 2005 – long before the Rigsbys and Scruggs have admitted meeting each other — Scruggs was already boasting that he had two State Farm “insiders” helping him and that he was going to “work it” (i.e., his attack upon the insurance industry) the same way he and Mike Moore had handled their celebrated attack upon Big Tobacco. (Scruggs’s use of insiders in the tobacco litigation was later chronicled in the movie, “The Insider.”)

Around Christmas 2005 or New Years 2006, Hardison and Lee remember being in Cori’s den when the Rigsbys were watching a DVD of “The Insider” and speculating about which actors would play each of them when the movie of their own exploits came out. (“Kerri kept saying that Sandra Bullock was going to play her,” Hardison testified.)

“We are going to get a book deal,” they’d say, according to Lee. “We’re going to make a movie. We’re going to be famous.”

Lobrano told the [Biloxi-Gulfport] Sun Herald, however, that she had recently verified with her video store that she checked out that movie for her girls on February 27, 2006, just after she has previously said that Scruggs came to see them for the first time. In an interview with Fortune, Lobrano adds that the meeting with him was “very secret,” and that there were “certainly no comments about Kerri being in a movie.” She says that she thinks the Sandra Bullock reference comes from someone’s blog comment shortly after the Rigsbys’ “20/20″ appearance.

Next, State Farm implies that Scruggs may have engineered the sudden sale of Kerri’s (undamaged) home under a contract signed in December or January, with the closing occurring in late February or March 1, 2006. Both Hardison and Lee testified that although Kerri’s house had not even been on the market, it was suddenly sold for about $600,000, which they say was about twice its purchase price.

The house was sold to a Robert H. Oswald, an eminent former judge in South Mississippi, and one of Scruggs’s co-counsel in Mississippi’s original Medicaid-reimbursement suit against the tobacco companies in 1994. (According to his office, Oswald was unavailable for comment for two weeks, and unreachable by e-mail.)

But, again, there may be less here than meets the eye. In an interview, Lobrano says that the idea of selling the house originated with Kerri’s real estate broker, Jerry Rimes of Ellis Branch Realty, and Rimes, in an interview, backs up Lobrano’s story. Rimes says that after Katrina, many people whose homes had been wrecked in the storm (as Judge Oswald’s had been) were searching for undamaged homes, and it was not unusual for Rimes to make cold calls to former clients to see if they’d be interested in selling. Rimes also says she’s “sure” the selling price was actually less than $500,000, contrary to Hardison and Lee’s testimony.  (By coincidence the house is on the market again right now, and can be viewed here; the current asking price is $495,000.)

(For historical context, I should note that Scruggs is known to have, years ago, arranged the purchase of a home for one of the insiders then helping him with his tobacco campaign, Merrill Williams. Scruggs admitted the Merrill Williams purchase, as well as about $2 million in other payments to Williams, in a 2004 deposition. (See pages 240-241 of the first volume of that deposition and page 479 of the second volume.)

Finally, Lee and Hardison also claim in their depositions that the Rigsbys improperly tried to influence the State Farm adjuster handling their mother’s claim, but the adjuster disqualified himself and sent the claim to an adjuster who didn’t know the sisters. In earlier testimony, the Rigsbys have denied trying to improperly influence their mother’s claim in any way.

[This is part of a series. The introduction is here.]

The newly available Tammy Hardison and Dana Lee depositions also shed light on an arcane question that I have posted on before, and that State Farm has been aggressively trying to answer: was there a third insider? The question stems from an isolated interview Scruggs gave to a Bloomberg reporter on March 30, 2006, in which he claimed to have made a trip to Bloomington, Illinois (State Farm’s headquarters) where he met with an insider and picked up a trove of incriminating documents that he was about to turn over to attorney general Hood. Scruggs never again referenced a Bloomington insider, leaving Scruggs-ologists to wonder: Had he just made this story up out of whole cloth and, if so, why?

Hardison and Lee said that, according to the Rigsbys and Lobrano at least, Scruggs did fabricate the story, and that he did so, indeed, with a gusto that even jaundiced Scruggs-watchers might not have imagined.

By March, Hardison said, colleagues at the Gulfport cat office were beginning to suspect the Rigsbys of being moles for either Scruggs or attorney general Hood. Accordingly, Hardison testified, Scruggs wanted to “throw suspicion off” the Rigsbys and send it, instead, to State Farm’s central office in Bloomington. Here’s what he allegedly did:

“So he either flew a jet, flew his jet out there,” Hardison testified, “hired some guy to meet him at the airport, called Bloomington and tipped them off and said that Dickie is there to meet somebody. And Pat [Lobrano] kept going, he loves all this. . . . And I was going, what was in the package? They were, like, oh, probably nothing. . . . They were laughing about it. . . . He loves cloak and dagger, you know.”

In an interview with me, Lobrano says she remembers “the whole Bloomington thing” but not any specifics of what was said. “I don’t know if [Scruggs] did that, if it was true. If he did, he would’ve been trying to protect the girls and we would’ve appreciated that.”

[This is part of a series. The introduction is here.]

Tammy Hardison and Dana Lee last met with Kerri and Cori Rigsby on about May 28, 2006, when they all were spending Memorial Day weekend at the beach in Pensacola, Fla. Both Hardison and Lee remember seeing that Kerri had her State Farm laptop in her truck, and Kerri telling them that she had to go because (in Hardison’s words) “Dickie wants me to meet a hacker who wants to hack into my computer. . . . He just wants . . . to see what he can find.” (Scruggs counsel John Keker declined comment. For a Rigsby lawyer’s general response to all the allegations contained in the Hardison and Lee depositions, see Part I.)

If Scruggs really rummaged around inside a computer full of confidential State Farm documents, that would look worse for him than simply receiving documents that had been provided to him after-the-fact by whistleblowers acting on their own and, in their minds, for altruistic purposes.

This conversation in Pensacola occurred just one weekend before the so-called “data dump,” when the Rigsbys spent a weekend down-loading and copying about 5,000 pages worth of documents from the State Farm database, providing copies to Scruggs, attorney general Jim Hood, and U.S. Attorney Dunn Lampton.

Still, it’s unclear to me precisely what the hacker would have done that might have facilitated the data dump in any way. The Rigsbys had been assigned State Farm passwords, so they didn’t need to hack into anything to gain the access they needed.

On the other hand, if Scruggs really did have a computer “hacker” that he turned to from time to time, it increases suspicions about some other funny business involving computers that has been alleged in these cases.

For instance, in September 2006, after the Rigsbys appeared in the episode of ABC’s “20/20″ that featured confidential State Farm documents, the Rigsbys’ former employer, E. A. Renfroe & Co. (an independent adjustor firm that provides supplemental adjustors to State Farm and other carriers during catastrophes) sued the Rigsbys for violating the confidentiality provisions of their employment contracts. (Technically, the Rigsbys were never employed directly by State Farm; they were employed by E.A. Renfroe.) In December 2006, U.S. District Judge William Acker, Jr. ordered the Rigsbys and their “agents” and “attorneys” to return to Renfroe all documents that the Rigsbys had clandestinely photocopied or taken while doing claims-adjusting for State Farm.

The Rigsbys did not turn over many documents in response to the Acker order, maintaining that they had previously turned over almost everything to Scruggs. Many months later, however, in fall 2007, State Farm subpoenaed Cori Rigsby’s home computer, to see if pertinent documents were stored there. (The Rigsbys had testified that they e-mailed some State Farm documents to Cori at her personal e-mail account, suggesting that documents might have been stored on her home computer.)

In October 2007, shortly after State Farm issued its subpoena to Cori, the Rigsbys attorneys notified the court that Cori’s home computer had “crashed” in early September 2007, and that she could no longer access any documents from it.

A federal magistrate judge then ordered that Cori turn over her computer to the court and he hired a technical expert to try to retrieve information. Some pertinent State Farm documents were, in fact, retrieved from the machine earlier this year, raising a question about why they had not previously been turned over to E.A. Renfroe in compliance with Judge Acker’s injunction. (Acker issued his injunction in December 2006, and Cori did not claim that her computer crashed until early September 2007.) Lawyers for the Rigsbys sought a protective order to prevent the recovered documents from being turned over to State Farm, but a federal magistrate denied the request last June. He wrote, “This Court will not enter a protective order to preclude State Farm from discovering the State Farm documents Rigsby stole.”

[This is part of a series. The introduction is here.]

The last bit of computer funny business alleged in these cases involves the so-called “Trailer Lawyers,” so dubbed by blogger and Scruggs chronicler David Rossmiller . The term refers to Scruggs’s co-counsel on the federal whistleblower suit that Scruggs filed for the Rigsbys in April 2006.

In that case, remember, the Rigsbys were alleging that State Farm had defrauded the National Flood Insurance Program by mischaracterizing wind damage as flood damage. Under the terms of the whistleblower law, the Rigsbys, if successful, stood to receive at least 15% to 25% of the hundreds of millions of dollars that they were alleging the government had fraudulently paid for wind-damage that should have been covered by private insurers. (Under his retainer agreement, Scruggs and his co-counsel would get 40% of the Rigsbys’s take.)

In April 2006, shortly before the whistleblower suit was filed, Scruggs and his co-counsel met with the Rigsbys in a trailer Scruggs owned, which was then parked on or near the property of Scruggs’s brother-in-law, then-Senator Trent Lott. Cori brought her State Farm laptop to one of the meetings, according to a deposition she gave in November 2007. At the meeting, Cori testified, “I let him in the computer, and I can’t speak after that.” By “him” Cori meant attorney Anthony L. DeWitt, who is an associate with Bartimus, Frickleton, Robertson & Gorny, a Jefferson City, Missouri, firm that was assisting Scruggs in the whistleblower case. When State Farm lawyers tried to inquire further of Cori about what she meant, a Scruggs lawyer present at her deposition (Sid Backstrom, later convicted as a co-defendant of Scruggs in the federal bribery prosecution) instructed her not to answer, citing attorney work-product privilege. State Farm was left with the impression that DeWitt and, perhaps, other lawyers present had asked Cori to log-in to the confidential State Farm database, and had then scooted in front of the monitor to have an illicit look around. Such a scenario, State Farm has argued, would violate federal law.

In April 2008, DeWitt submitted this affidavit saying that’s not what happened. According to him, Cori told the attorneys she had collected some e-mails pertinent to State Farm’s alleged fraud which she had previously set aside and stored on the hard drive of her State Farm laptop. Since there was no printer available, DeWitt inserted a USB drive (i.e., flash drive or memory stick) into the computer and then dragged the documents Cori was referring to into his USB drive. This procedure would not have involved his actively breaking into State Farm’s computer database or instructing her to do so; it would have simply involved receiving pertinent documents that the whistleblower had previously copied on her own initiative, believing that she was furthering the laudable goal of exposing fraud.

In recent months, the Scruggs law firm did turn over a group of internal State Farm e-mails that appear to have been printed out under a heading consisting of the initials “ALD” or, in one instance, “ALDewitt.” You can inspect them yourself here.

Although questions can be raised about whether these documents should have been turned over earlier — in response to Judge William Acker’s order of December 2006 requiring the Rigsbys and their “attorneys” and “agents” to turn over confidential documents they’d taken — I’m not sure that these documents otherwise add anything to what was already known. They strike me as consistent with DeWitt’s innocuous account of what happened — i.e., that he didn’t break into the computer network, but simply received some previously downloaded e-mails by dragging them into his flash drive.

On the other hand, he wasn’t dragging them from Cori’s home computer, but from her State Farm laptop. Should that make any difference?

I’m sure many readers have greater computer expertise than I do. What do readers think about this?

[Correction: Originally, I misidentified the state where DeWitt's firm is based. Correct state is Missouri. Regret the error.]

[This is the last of a series. The introduction is here.]

Earlier this month State Farm made public e-mails recently obtained from the Scruggs Law Firm that appear to show that Scruggs knowingly sent court documents that were then under seal to reporters at ABC News, CBS News, Associated Press, and The New York Times. Here’s an example.

The documents include an “evidentiary disclosure” and the “first amended complaint” in the Rigsbys’ whistleblower suit, which was filed under seal in April 2006 and not made public until August 2007. (Whistleblower suits are typically filed under seal to allow the Justice Department an opportunity to pursue an investigation without tipping off the alleged wrongdoer to the fact that he is already under suspicion.)

Obviously, as a reporter I’m all in favor of sources leaking sealed documents to reporters, so I’m having trouble working up much outrage over this particular transgression.

On the other hand, it is obvious that the reporters in this case were faced with a dilemma and, in some cases, the public was misled as a result. Once the reporters saw the legal caption on the papers they should have realized that the Rigsbys were not wholly disinterested Good Samaritans, but also plaintiffs who had an enormous pecuniary stake – potentially tens of millions of dollars in whistleblower recoveries (see Part V of this series) — in interpreting State Farm’s conduct in the worst conceivable light. While the reporter would want to disclose that potential source of bias to the reader, the fact that the case was sealed made it impossible to do so. (It would get the source, Scruggs, in trouble.) So reporters faced a quandary: either don’t use the source at all, or use the source without revealing the huge potential bias.

If I’m being honest with myself, in that situation I can imagine myself possibly going ahead and using the source without revealing the potential bias if I was otherwise confident in the source and story. (Of course, it would ultimately be my editors’ call, not mine.) Still, there’s no denying that going forward with the incomplete story would not be fully fair to the reader or State Farm.

I suspect many would disagree with me. Let me know your opinions.

Most of the reporters who wrote about the Rigsbys did, at least, appropriately mention that the Rigsbys were then being paid salaries by the Scruggs Law Firm. But even these accounts recited the Rigsbys’ unverifiable claim that their Scruggs salaries were less than what they’d been making as claims adjusters. Whether that assertion was really true has been difficult to check because, at least as of their November 2007 depositions, each Rigsby sister testified that she still hadn’t yet filed her 2006 tax return yet (i.e., that she’d gotten an extension).

Though I’m getting off on a tangent now, I will also note that filing tax returns at this point may present difficulties for the sisters, as State Farm has pointed out in its papers. For more than a year – from September 2006 at least until Scruggs was indicted in November 2007 – Scruggs’ firm and the Scruggs Katrina Group had generously paid for all the Rigsbys legal fees in defending the lawsuit brought against them by their employer, E.A. Renfroe & Co., a sum totaling more than $1.4 million in the case of just one of the three law firms representing the Rigsbys during that period (Zuckerman Spaeder, which is now suing Scruggs for reimbursement). If these fees are considered a taxable benefit to the Rigsbys, then the sisters might face a ruinous tax bill, unless, of course, Scruggs or some other Deus Ex Machina of the plaintiffs bar comes to the rescue and pays their tax bill, too.

I thought I would alert the hard-core, RSS-faithful that I have a short feature story in the latest issue of Fortune (spine-dated June 9, 2008 ) of possible interest. It’s about Columbia Law Professor William Simon’s controversial forthcoming article in the Stanford Law Review, provocatively entitled “The Market For Bad Legal Advice.”

In it, Simon attempts to diagnose the circumstances under which well-credentialed lawyers and law professors are most apt to render implausible legal opinions – e.g., blessing screwy Enron deals, outlandish tax shelters, or the torture of detainees in the war on terror - and he offers some practical suggestions on how to curb the phenomenon.

He comes down particularly hard on several academic legal ethics experts, whom he suggests may be facilitating “pernicious” practices in the course of pursuing lucrative private practices as expert witnesses evaluating the conduct of other lawyers. Professors Geoffrey Hazard of the University of Pennsylvania Law School and Charles Wolfram of Cornell University Law School are prominent among Simon’s targets.

Simon’s piece, due out possibly by mid-June, according to an editor, will appear in Volume 60, Number 6, of the law review. Professor Bruce Green of Fordham School of Law - criticized for one opinion he rendered – will have a nearly 35,000-word response (twice the length of Simon’s article) in the same issue, and Simon will have a short reply.

A draft of Simon’s piece as it looked in December is still available in the SSRN library here; I don’t think I’m authorized to publish a more recent draft, Green’s draft response, or Simon’s draft reply, which Simon and Green permitted me to read in preparation of my article. When Simon’s draft article first appeared online last year, it provoked some discussion on the Legal Ethics Forum blog, catalogued here. 

Note for Scruggs-ologists: My article (or at least Simon’s) may have some added interest for Dickie Scruggs fanatics since Wolfram’s and Hazard’s names should be at least vaguely familiar to them. Hazard served as the Scruggs Katrina Group’s ethics expert when it unsuccessfully attempted to resist State Farm’s motion to disqualify it from hundreds of cases due to Scruggs’ alleged unethical conduct. Wolfram was State Farm’s expert.

In fairness to Hazard, his opinion defending Scruggs and his group was limited to defending their after-the-fact use of documents that may have been improperly obtained by their clients acting on their own. He did not purport to defend bribery of judges; “ear-wigging” of judges; hiring potential fact-witnesses as “consultants”; bullying the state insurance commissioner; bullying the state attorney general; or inducing clients and/or witnesses and/or employees to improperly obtain or photocopy confidential documents and/or gain access to a password-protected database – assuming, for the sake of argument, that any of those alleged activities may have actually occurred. See generally here.

As another shoe fell Monday in the saga of former tort king Dickie Scruggs – with a federal judge tossing two more of Scruggs’ co-counsel law firms from a case found to have been tainted by Scruggs’ misconduct (see the judge’s order and a previous blog item providing background) – Scruggs’ many nemeses continued to dog his heels, sniffing for still more improprieties and seeking yet more retribution.

Since Scruggs pleaded guilty in March to a federal charge of conspiring to bribe a state judge in Oxford, Miss., in 2007, the big question mark hovering over him has been, of course, the ongoing federal criminal inquiry surrounding whether he tried to bribe a second state judge in Jackson in 2006. (For background, here’s a feature story on the Scruggs affair.)

But in the meantime, State Farm and others for whom Scruggs made life Hell prior to his indictment continue to scour every rabbit trail searching for evidence of additional foul play on his part, large and small. Some of the searches get pretty arcane.

A discovery ruling by a federal magistrate judge on Thursday promises to shed some light on one of the most obscure mysteries that Scruggs-ologists have debated over the past two years: whether Scruggs ever had a third “insider.” (This issue is so obscure, that even Scruggs chronicler David Rossmiller admitted not previously having known about it, which is like Phil Schaap admitting that he’d never known about a surviving Charlie Parker acetate.)

In his post-Hurricane Katrina assault upon the insurance industry (again, for background, see here), Scruggs was famously assisted by two insiders working in State Farm’s Gulfport “cat” (for catastrophe) office, Cori and Kerri Rigsby. (A separate tempest rages about precisely when Scruggs began teaming up with the sisters – was it December 2005, as most Scruggs-ologists suspect, or was it not till February 2006 as the Rigsbys and Scruggs have steadfastly insisted – but we put that aside for another day.)

The notion that there may have been a third insider was born at 2:45 p.m. on April 5, 2006, when Bloomberg terminals around the country lit up with an otherwise unprepossessing story, co-bylined by Jesse Westbrook and Laurence Viele Davidson. It was about the grand jury investigation Mississippi attorney general Jim Hood had commenced to look into State Farm’s post-Katrina claims-handing practices. The ninth and tenth paragraphs (or tenth and eleventh paragraphs in the 5:30 p.m. update) read as follows:

“Scruggs said in an interview on March 30 [2006] that he plans to share [with Hood] documents from a ‘highly placed’ State Farm source. He had flown to Bloomington a week earlier to pick up a package from the source.

“‘They gave me a bunch of good stuff and I’m going through it now and turning it over to the attorney general,’ he said. State Farm’s [Fraser] Engerman declined to comment.”

The notion that Scruggs had a third insider located in Bloomington, Illinois – i.e., State Farm’s corporate headquarters – is one that Scruggs does not appear to have ever floated again in any context, be it media appearance or court filing. Scruggs-ologists have wondered, therefore: Had Scruggs just made this story up out of whole cloth, as some sort of psychological warfare gambit? Was he was hoping to psych State Farm out or to coax genuine potential whistleblowers to come out of the woodwork? Or had there really been a third insider? Or had there been static over the phone line, resulting in a reporter’s having simply misunderstood what Scruggs had been saying? (An email sent yesterday to Scruggs’ lead attorney John Keker was not returned, nor was one to Bloomberg reporter Westbrook; an email to Bloomberg reporter Davidson triggered an on-vacation auto-response.)

There is no question that Scruggs believed in psychological warfare. His Scruggs Katrina Group actually went so far as renting a billboard near State Farm’s headquarters in Bloomington, from May to July 2007, to carry the message that “Katrina only destroyed homes. Big insurance has destroyed hope.” (A story about the billboard was carried in the May 24, 2007, issue of the [Bloomington, Illinois] Pantograph, available for a fee at the Pantograph’s web site.)

Back in January, in one of the policyholder cases that Scruggs had filed against State Farm prior his indictment, State Farm issued subpoenas to Scruggs seeking a variety of documents in his possession, including those that he had referenced in the Bloomberg interview of March 30, 2006. Scruggs initially refused to provide them, objecting on relevance and attorney-client privilege grounds “to the extent that they were provided by individuals who are [his] clients or former clients.”

On Thursday, however, a federal magistrate rejected Scruggs’s arguments and ordered any documents responsive to the request to be produced. So Scruggs-ologists may yet be getting an answer shortly to this admittedly less-than-earthshaking, yet tantalizing, little mystery.

Famed tort lawyer Richard F. “Dickie” Scruggs finally got some good news. Though special prosecutors in Birmingham, Ala., planned to appeal a federal judge’s February dismissal of their criminal contempt charge against Scruggs, they inadvertently let the deadline pass for doing so.

Last week a federal judge denied the special prosecutors’ request for a retroactive extension of time in which to file their appeal. U.S. District Judge Roger Vinson concluded that their slip-up did not constitute the sort of “excusable neglect” for which such allowances could be made.

Amid Scruggs’ many legal problems at the moment – including his federal guilty plea last month to conspiring to bribe one Mississippi state judge and his ongoing federal scrutiny in connection with similar accusations involving a second one – the criminal contempt charge has understandably taken a backseat in the public eye. Nevertheless, the episode that prompted the charge is of interest for the light it sheds both on Scruggs’ push-the-envelope approach to litigation and his snug relationship with Mississippi Attorney General Jim Hood. (For background, see my recent feature story about Scruggs’ assault on State Farm Insurance Company.)

The criminal contempt charge had arisen from Scruggs’ circumvention of a federal court order issued in December 2006 by U.S. District Judge William Acker, Jr., of Birmingham. In that case, a firm called E.A. Renfroe & Company, which contracts out claims adjusters to major insurance carriers, had sued two of its former employees, Cori and Kerri Rigsbys, who had become “insiders” working with Scruggs on his suits against insurers over their post-Hurricane Katrina claims-processing policies. In December 2006 Judge Acker ordered the Rigsbys to return thousands of pages of State Farm documents they had secretly copied. Rather than let the Rigsbys turn over those documents to Renfroe’s counsel, as Judge Acker had contemplated, Scruggs asked Attorney General Hood to have his office request the documents from Scruggs (even though Hood’s office already had a set). Hood’s office did so, and Scruggs then sent the documents there instead of to Renfroe’s lawyers, theorizing that doing so would then be allowed under a “law enforcement exception” contained in Judge Acker’s order.

Judge Acker disagreed with Scruggs’ interpretation of his order, and in June 2007 he recommended that criminal contempt charges be brought against him. Birmingham’s U.S. Attorney, Alice Martin, declined to prosecute, prompting Acker to appoint three private attorneys to act as special prosecutors: Charles E. Sharp, Jr., and Joel Williams, both of Birmingham’s Sadler Sullivan, and former federal prosecutor Michael Rasmussen. Those three filed a formal criminal contempt charge against Scruggs last August.

On February 29, however, Judge Vinson dismissed that charge, concluding that Judge Acker’s order – which was directed only to the Rigsbys and their “agents” and “attorneys” – did not reach Scruggs, because he had never formally entered an appearance on the Rigsbys’ behalf in the Renfroe case. (This was so, in Vinson’s view, even though Scruggs represented the Rigsbys in other cases, had hired their lawyers in the Renfroe case, and was paying those lawyers. Indeed, he had also pledged to indemnify the Rigsbys if they were ordered to pay any damages in the Renfroe case. Basically, he was the master puppeteer behind everything.)

As a fallback grounds for dismissal, Judge Vinson also found that, “while there is a cloud of impropriety surrounding what Scruggs did,” his conduct, nevertheless, did fit within the literal terms of Acker’s order.

The special prosecutors had planned to appeal both of Judge Vinson’s rulings, and originally thought that they had until yesterday, April 29, to do so. But their deadline actually ran out in late March. As he admitted in a motion filed April 15, special prosecutor Sharp had simply looked at the wrong provision of the Federal Rules of Appellate Procedure – the one for civil appeals, which affords the government 60 days, rather than the one for criminal appeals, which affords it just 30 days. He did not realize his mistake until it was too late.

In an interview, special prosecutor Michael V. Rasmussen – the only special prosecutor with experience as a federal prosecutor – notes that he had only worked as a trial prosecutor, that “the government seldom filed appeals, and it had an appellate section which usually handled that.” Special prosecutor Sharp did not immediately respond to a call or e-mail seeking comment.

Below are all the key documents. Read ‘em and weep.

Special Prosecutors Motion to Extend Time

Scruggs Opposition to Extension of Time

Judge Vinson Order Denying Extension of Time to Appeal