Bloomberg News

Diet-Drug Lawyers’ Convictions for Fund Theft Upheld

May 01, 2012

Two disbarred Kentucky lawyers sentenced to prison for stealing from a $200 million fen-phen diet-drug settlement fund failed to persuade a federal appeals court to reverse their convictions.

“The evidence of the defendants’ guilt in this case was overwhelming,” the U.S. Court of Appeals in Cincinnati said today in upholding the 2009 convictions and sentences of William Gallion and Shirley Cunningham Jr.

Gallion was sentenced to 25 years and Cunningham to 20 years for their April 2009 conviction on nine criminal counts including wire fraud and conspiracy. The appeals court also upheld the trial judge’s order requiring the two men to pay more than $127 million to former clients who were victims of the fraud.

The criminal charges were connected to a $200 million settlement between American Home Products Corp. and Kentucky residents who claimed they were harmed by the once-popular fen- phen diet drug combination.

During the trial, prosecutors showed jurors evidence that Gallion and Cunningham had contracts entitling both men to fees of as much as one-third of the settlement. The lawyers tried to keep more than twice that amount, prosecutors said.

“Testimony revealed that Cunningham and Gallion directed their subordinates to conceal highly important information about the settlement from their clients (including the total amount of the settlement, the number of claimants sharing in it, and the method of allocation) and to offer each claimant substantially less than his or her properly calculated share,” the appeals court said.

‘Massive Scheme’

“The lawyers misled some of their clients into believing that there had been a successful renegotiation of their claims with AHP and that a breach of the settlement’s confidentiality clause could lead to jail time,” the appeals court said, citing trial testimony. “These misrepresentations support the conclusion that Cunningham and Gallion participated in a massive scheme to defraud their clients.”

Gallion will seek a hearing by the entire appellate court, his attorney, H. Louis Sirkin, said in a phone interview today. If that fails, Gallion will seek review by the U.S. Supreme Court, he said.

“We’re not done yet,” Sirkin said.

T. Clifton Harviel, Cunningham’s lawyer, said he was disappointed by the decision.

‘Considering Options’

“We’re considering our options,” Harviel said in a phone interview. “Most likely, the next move is asking for an en banc hearing.”

The convictions came in the former lawyers’ second trial. The first ended in a mistrial in July 2008 after jurors deadlocked 10-2 in favor of acquittal. The same jury acquitted a third attorney, Melbourne Mills, after his lawyer argued that he was too impaired by alcoholism to participate in the scheme.

The case is U.S. v. Cunningham, 09-5987/5988, U.S. Circuit Court of Appeals for the Sixth Circuit (Cincinnati).

To contact the reporter on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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