Only in Mississippi

This is old news, but it is starting to freshen up a bit. The most recent developments involve ex-Senator Trent Lott, so perhaps this story is worth another look.

Emptywheel got me started on this one, so here's the best summary I can come up with:

In the months following hurricane Katrina, homeowners insurance claims were being denied en masse. Insurance companies justified this on the basis that the destruction of their homes had been attributed to flooding, which is not covered by homeowners insurance.

Incensed homeowners argued that their houses had been destroyed by wind as well as water. Surely, they argued, their insurance covered the portion of damage caused by things other than rising water?

What happened next is highly contentious – but the allegation is that insurers (most notably State Farm) pressured inspectors to rule water in and rule wind out in their damage assessments.

The result is that angry homeowners who had lost their homes became angrier still.
And then things get interesting.

I'll let the New Orleans Times Picayune do the talking here:

Mississippi suffered its greatest damage from Katrina in well-heeled sections of coastal communities where residents were most equipped to fight back. Sen. Trent Lott and Rep. Gene Taylor were among the plaintiffs in Mississippi, pushing Congress to repeal insurers' federal anti-trust exemption and investigate their post-storm claims practices before a national audience. Mississippi's legal system also allowed high-profile tobacco lawyer Dickie Scruggs, Sen. Trent Lott's brother-in-law, to threaten punitive damages, and allowed the state's attorney general, Jim Hood, to hire extra lawyers on contingency to press his criminal investigation.

So, now we have Dickie Scruggs, civil litigator extraordinaire, suing State Farm. Scruggs forms the Scruggs Katrina Group (SKG), a consortium of litigators to bring a massive suit against the insurers – to bring money back to aggrieved homeowners.

At this point, most of us are still cheering. "Yea! Get those no good insurance bums! Stick it to them!"

There's more:

Two whistleblowers enter the picture. (also via nola)

Hood's efforts were aided by Cori and Kerri Rigsby, two sisters from Ocean Springs, Miss., who worked for a State Farm contractor that managed teams of adjusters. The whistleblowers bolted with 150,000 pages of documents that they say shows that State Farm defrauded policyholders by manipulating engineering reports to deny claims. The Rigsbys turned them over to Scruggs, Hood and Dunn Lampton, the U.S. attorney in Mississippi.

So, the Rigby sisters claim to be appalled at what they are seeing, and flat out steal their employer's documents and hand them over to a litigator. Standard whistleblower M.O.

The Atty. Gen of Mississippi is investigating insurers in the state, and is also using these documents to bolster his case.

In January of 2007, State Farm agrees to settle. Checks are sent out to the homeowners.
In April, Nationwide Insurance agrees to settle.

Score one for the little guys!

Except… this is Mississippi.

A dispute between members of SKG over legal fees gets ugly and (gasp!) it ends up in court. Struggs is accused of bribing the judge to to rule in his favor.

The bribe was reportedly offered via an intermediary – an attorney named Timothy Balducci. Apparently, the judge reported the bribery attempt to authorities (genuine gasp!) and played along so that authorities could get their man.

They did. Balducci appears to have rolled over big time – as authorities have released transcripts of his comments (via the WSJ):

…it ain’t but three people in the world that know anything about this … and two of them are sitting here and the other one … the other one, uh, being Scruggs … he and I, um, how shall I say, for over the last five or six years there, there are bodies buried that, that you know, that he and I know where…

Transcripts that include words like "um" and "uh" indicate that the conversation was recorded. We know Balducci's not talking about literal bodies, but it can't be good news for Scruggs.

Neither can this (via Insurance Coverage Blog's David Rosmiller):

One thing that shocked me was one of the entries in the notes of Brian Ford, an engineer [whose engineering report has been advanced as evidence of State Farm's dismissal of reports that supported claim payments]

…Now I have seen some of Brian Ford's redacted notes before. ...But Judge Robert Walker on December 12 required Ford to turn over the unredacted notes, and wow, there was a lot of stuff missing from the redacted version.

[in the unreduced version] Ford's notes recount an apparent conversation between Special Assistant Attorney General Courtney Schloemer and an SKG attorney: "they agreed that a criminal conviction could help civil cases." If you don't believe me, you go read it for yourself, that's what it says!

An assistant to [Mississippi Atty. General] Jim Hood discussing with a private litigant the potential indictment and conviction of the other party and how that might aid that litigant. If the Ford notes accurately reflect what happened, that is outrageous.

So, you have SKG attorneys meeting with assistants to the state attorney general coordinating criminal prosecutions to benefit SKG.

As in "Hey, you threaten the insurance industry with jail if they don't settle. We'll hold the line on a deal so we get millions of dollars."

Hood's office even went so far as to claim Scruggs was a confidential informant for the AG in order to stop contempt charges against him (related to not turning over the Rigby documents).

Scruggs is in hot water, Atty. Gen. Hood is in the mix; isn't there anyone just doing the right thing?

Those principled Rigby sisters, perhaps?

Perhaps not. Via Rosmiller's blog

-they went to work immediately after leaving [the State Farm Adjuster firm] in June 2006 as "consultants" to Scruggs, with no specific duties, at annual salaries of $150,000 paid from SKG funds

We finally arrive at Trent Lott, brother in law to Dickie Scruggs.

Remember how he just sort of resigned from his job? No real reason. He just felt like one year into his six year term was the perfect time to do something else.

Looks like Trent was lighting up the phones about how mad he was at State Farm. This by itself is understandable. But when powerful people get angry, they are afforded options that you and I simply don't have.

I haven't seen enough information to know for certain that Mr. Lott was pulling strings for his now-indicted brother in law –but he was talking to Brian Ford. So much so, that Ford took down these notes (via folo):

9/25/06 TRENT LOTT CALLED
- CALLED TO THANK ME FOR MY HELP
- TRENT WANTED TO PUT A TEMPORARY PERSONAL TRAILER ON HIS LOT. CITY SAID - “RAISE 9′, PUT UP A RETAINING WALL, GET INSPECTIONS. VERY FRUSTRATING & RUNNING PEOPLE OFF. … SO THEY WILL JUST STAY IN DR. THOMPSON PLACE AFTER IT IS FIX UP. ONLY PROBLEM IS, DICKIE SCRUGGS STAYS THERE TOO.
- TRENT HAD JUST TALKED TO CARY [sic — Kerri?] RIGSBY - STATE FARM WHISTLE BLOWER …
- FEDERAL LAW EXEMPTS INS. CARRIERS FROM ANTI TRUST LAWS (THEY CAN COLLUDE). THEY GET TAX BREAKS. AS CHAIR OF THE SENATE INSURANCE COMMITTEE, I AM GOING TO CHANGE THAT.
. . .
- TRENT WOULD FORGO HIS $ TO GET S.F.

This by itself, is nothing. But Mr. Lott is talking to the Rigbys, talking to a key witness in the early litigation, is living with Scruggs – and he hates State Farm with a passion.

Ya s'pose he might have acted on those impulses?

Ya s'pose he might have left fingerprints when he did so?

I dunno either. But I gotta tell ya, I feel like getting some munchies and sitting down to watch what happens.