Federal authorities who have been investigating judicial bribery cases in Mississippi are interested in the trail of money that leads from tobacco settlement expenses.
Dickie Scruggs, who pleaded guilty in two judicial bribery schemes, is cooperating with federal authorities. He earned $1 billion as chief negotiator of the tobacco settlement.
Scruggs’ attorney, John Keker of San Francisco, denied federal authorities are exploring the matter.
Last week, a federal grand jury questioned witnesses regarding P.L. Blake, who earned $50 million from tobacco settlement expenses.
Five years ago, two attorneys, Alwyn Luckey and Bob Wilson, raised questions about some of those tobacco settlement expenses in their litigation against Scruggs, their former law partner.
Their attorney, Charlie Merkel of Clarksdale, said what they found in documents detailing the payments for tobacco settlement expenses was a veritable maze. “We tried to follow it and got dumb answers,” he said. “We couldn’t go much beyond that.”
Questioned under oath by Merkel, Scruggs said Blake was paid for his extensive political network “throughout the state and really throughout the country that would give us that heads-up information.”
Blake testified he earned the money by clipping newspapers and keeping his ear to the ground for Scruggs.
Scruggs has been quoted as saying some of the tobacco settlement expenses went to “people who are lobbyists, but they’re not really registered lobbyists. It’s really sort of the dark side of the force.”
In 1988, Blake pleaded no contest to a federal charge he offered bribes to Mississippi Bank officials in exchange for preferential treatment in securing loans. According to that indictment, he, his wife and their companies received $21 million in about 40 loans and renewals from the bank, which went belly up.
After he and other attorneys combed through documents, Merkel said, he questioned Scruggs regarding the various names they found.
“I was going through every name I could come up with that Scruggs had charged off to the tobacco litigation expense when there was no conceivable reason for that person to draw from that litigation,” Merkel said.
The reason he was quizzing Scruggs along those lines, he said, was if payments “were made for something that was not a legitimate expense,” those payments couldn’t be deducted from the legal fees that Scruggs owed his former partners.
Merkel said he got different answers, depending on whom he questioned.
Former State Auditor Steve Patterson was down as getting $80,000 a month from the settlement, despite the fact he is not listed to receive money from it. Patterson said recently in court he is now receiving $20,000 a month.
The handling of the tobacco settlement differed from the way “99 percent of all legitimate settlements are handled,” Merkel said. “Once the litigation is over, that’s the end of the litigating expenses. This stuff kept cropping up for months and years with big payments.”
Those expenses were handled every quarter, he said. “It was always a big figure - $1.3 (million) or $1.4 million of ‘unreimbursed tobacco litigation expense’ that was taken out of the quarterly payment, therefore reducing all those shares by whatever this was. A bunch of this had nothing to do with tobacco.”
Some of Scruggs’ financial transactions aside from the settlement have drawn scrutiny as well.
The Clarion-Ledger has obtained a copy of a Nov. 20, 2003, audit that flagged some of Scruggs’ wire transfers because they went through a branch of Union Planters Bank in Pascagoula instead of through the bank’s wire transfer department.
Between March and November 2003, auditors found Scruggs, his family and his Oxford law firm made a number of wire transfers to relatives, offshore accounts and assorted companies.
The regular bank audit discovered the branch, instead of keeping each wire transfer in order by date, compiled all of these wire transfers in a huge file.
One former bank employee familiar with the audit - who asked not to be named for fear of reprisal - said questions were raised after auditors found a wire transfer for about $1 million that went from Scruggs’ wife, Diane, to her sister, Tricia, who is married to former Sen. Trent Lott.
In violation of bank policy, some wire transfers were authorized without proper signatures, prompting auditors to conclude these transfers constituted a “systematic weakness in one or more key controls which could reduce the branch’s ability to prevent and detect irregularities.”
There was no indication that federal laws were violated.
Bank officials from then had no recollection of the matter, which wasn’t investigated at the time by the FBI.
Bret Boyles, a spokesman for Lott, said the $1 million transfer to Lott’s wife was a loan handled by attorneys and accountants. “It was totally legitimate,” he said. “Half of the loan has been paid back.”
Keker said none of these wire transfers is connected to what federal authorities are investigating now.
As for the offshore wire transfers, Keker said Scruggs bought a house in the Bahamas and now is trying to sell that house.