Zach Scruggs claims new evidence clears him

OXFORD – Zach Scruggs says new evidence and legal developments show he’s innocent of federal charges that sent him to prison in a judicial bribery scandal that rocked Mississippi’s legal world.

Scruggs, 36, of Oxford today filed a request the U.S. District Court to give him a hearing to prove his innocence and to throw out his 2008 conviction. He said a recent U.S. Supreme Court decision wipes away the crime to which he insists he had no choice but to plead guilty.

In March 2008, Scruggs pleaded guilty to not reporting that he knew about a crime, which was an illegal conversation with the judge in a legal-fees lawsuit over Hurricane Katrina insurance cases. The government said the chat led to a scheme to deprive the public of Circuit Judge Henry Lackey’s “honest services.”

Recently, the U.S. Supreme Court narrowed the honest services law to pertain only to bribery and kickbacks, which Scruggs and others say is not what he pleaded guilty to.

In the new court filing, which will be posted electronically Thursday, he also accuses:

– Tony Farese, prominent Ashland lawyer, of secretly negotiating a plea bargain with prosecutors for then-Booneville plaintiffs attorney Joey Langston’s cooperation against Zach and his father, Richard Scruggs, while Farese was Zach’s attorney in late 2007.

– The U.S. government and the FBI of creating the judicial bribery scheme, which led to indictments against him, his father, a law partner and two others Nov. 28, 2007. And prosecutors, who allegedly lied to the court that Zach Scruggs was part of another judicial bribery accusation involving Judge Bobby DeLaughter of Hinds County.

– Judge Henry Lackey of Calhoun City of allowing himself to be used by the government for months to set up the attempted bribery, rather than deciding whether the lawsuit against Scruggs and others should go to arbitration or let another judge decide.

Zach Scruggs “committed no federal crime,” the motion states. “Indeed, as will be explained, he is actually innocent of all charges.”

Senior U.S. District Judge Neal B. Biggers Jr., who presided over the case called Scruggs 1, will decide the merits of the new request.

Farese strongly denied the allegations against him and expressed concerns that they are public while the focus of a confidential complaint to the Mississippi Bar Association.

“I deny the allegations made against me by Zach Scuggs in the bar complaint,” Farese wrote in a statement to the Daily Journal. “Zach Scruggs is a young man who had everything, but is now a convicted felon who cannot accept responsibility for his own criminal conduct. He has nothing but time and money to try to blame others for his unethical and illegal acts.”

Farese also insists he acted ethically “at all times” as attorney for Zach Scruggs and Langston.

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In the mid-1980s, Richard F. “Dickie” Scruggs began his rise to become one of the country’s most famous litigators for his national lawsuits against the asbestos, tobacco and insurance industries. Tobacco whistleblower Jeffrey Wygand was the focus of the movie “The Insider,” in which an actor played the part of Richard Scruggs.

After Hurricane Katrina devastated his home and offices on the Gulf Coast in August 2005, Scruggs moved to Oxford in practice with his son.

A major focus of their business by 2007 was homeowner lawsuits to recover Katrina losses they insisted insurance policies covered.

But one member of the Scruggs Katrina Group – attorney Johnny Jones of Jackson – wasn’t satisfied with his share of the legal fees and sued in the Circuit Court of Lafayette County. It was filed in mid-March 2007.

Circuit Judge Henry L. Lackey of Calhoun City presided over the case.

A few days later, at The Scruggs Law Firm’s office overlooking the square, a conversation took place about the lawsuit. At the meeting with the two Scruggses were their law partner Sidney Backstrom, and attorney Timothy Balducci and his business partner, former state auditor Steven Patterson, both of New Albany.

On Patterson’s suggestion, the group agreed Balducci would go to his old friend Lackey and find out what he thought about the case. They wanted to avoid court and send it to arbitration, which is a binding decision made outside of court by an unbiased third party.

Balducci spoke with Lackey about the case, and in the same conversation offered the judge a position at his firm after the elderly Lackey retired. Later, the judge became concerned about the legality of Balducci’s words. When he told the U.S. Attorney’s Office about it, he agreed to help with an investigation about whether it could be a bribe offer.

In a May 9, 2007 conversation recorded by the FBI, Lackey told Balducci that it looked to him as if both sides had agreed to arbitration.

Four months later, on FBI instructions, Lackey told Balducci he wanted money in exchange for ordering the lawsuit to arbitration. Balducci delivered $40,000 to the judge in installments, then was arrested Nov. 1 as he drove toward home from the final drop-off.

On Nov. 28, 2007, Richard and Zach Scruggs, Backstrom, Balducci and Patterson were indicted by a federal grand jury on six counts related to an alleged conspiracy to bribe Lackey.

Their arrests sent shock waves across the Internet and in blogs, especially on law- and insurance-related websites. News coverage of the story flashed around the world and was especially intense in Mississippi.

Even today, members of the Mississippi Bar say they still feel the ill effects of the shadow cast on them by the scandal.

In 2009, the Mississippi Supreme Court agreed that arbitration was the correct outcome in the dispute.

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The five defendants also were accused of honest services fraud. Ultimately, the six counts were dropped against Zach Scruggs and he pleaded guilty to a new charge, misprision of a felony.

By March 2008, all of them cut deals for guilty pleas to avoid jury trials, which could have yielded up to 75-year prison sentences and huge fines. While Zach Scruggs completed his 14-month prison term and Backstrom was released from prison last Sunday, the others are still in federal custody.

Judge Biggers also ordered Zach to pay a $250,000 fine and serve one year supervised release, which continues today.

If his conviction is legally erased, he could ask to recover his license to practice law, which was taken away by the Mississippi Supreme Court after his guilty plea. He’s also asking for his supervision to end and for refund of the money he was ordered to pay.

In asking the court to vacate or dismiss his conviction, he said the facts in the case “have changed” and that the U.S. Supreme Court’s recent decision in Skilling v. USA limited “honest services” crimes to only bribery or kickback schemes. What he pleaded guilty to is “earwigging,” he said.

Earwigging is a term used for a private, off-the-books conversation between a lawyer and a judge about a case that’s before the judge. Also called “ex parte,” it’s considered inappropriate and illegal. Various Mississippi rules of court and legal ethics specifically prohibit earwigging.

The new court motion even seeks support with quotes by Biggers, when he sentenced Zach in July 2008, saying his crime wasn’t “for part of the bribery.”

Throughout his legal proceedings and in related documents, Zach Scruggs insisted he was not guilty of the charges. At sentencing, when one of his attorneys, former state Attorney General Mike Moore, repeatedly tried to convince Biggers that his client had nothing to do with the alleged bribery, the judge told Moore that, “if I want you to say any more, Mr. Moore, I’ll ask for it.”

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In the new motion, Zach Scruggs’ attorneys – Edward D. Robertson Jr. of Missouri and Christopher T. Robertson of Arizona – write that he pleaded guilty out of fear that he could get a lengthy prison sentence, if a jury convicted him. He’s said that he looked at his pregnant wife, their two young children, his sick mother, his father’s looming imprisonment and the public firestorm around them and decided to cut his losses with a plea.

Chris Robertson, coincidentally, was a young attorney in The Scruggs Law Firm in Oxford when his employers were arrested and never was suggested as part of the scandal.

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Today’s legal push comes for two reasons – timing and coincidence, the motion notes.

As for timing, this type of appeal must occur while Zach Scruggs is still in federal custody. The clock is running out on that.

In the latter, his attorneys contend the legal landscape changed sharply when the U.S. Supreme Court ruled in the Skilling case – an appeal brought by former Enron CEO Jeffery Skilling – challenging the scope of the “honest services” crime for which Skilling was convicted.

For nearly 25 years, federal prosecutors pursued corruption cases with a broadly worded law interpreted to make it a crime to deprive the public of someone’s “honest services,” often an elected official.

In response to Skilling, the nation’s highest court struck down the application of the “honest services” law to all cases except where the government can prove the defendant participated in a scheme of bribery or kickbacks.

Zach Scruggs’ new motion insists his guilty plea had nothing to do with either – just that he failed to report Balducci’s “earwigging” of Judge Lackey.

“When the Supreme Court strikes down or narrows the reach of a criminal statute, such that it no longer touches a defendant’s conduct,” the motion states, “justice requires that the conviction be set aside. This is true even for cases involving guilty pleas.”

But Matthew Hall, a University of Mississippi law professor, isn’t convinced, saying that “even someone on the edge of a larger conspiracy” dealing with bribery or kickbacks is subject to the honest services statute, despite its narrowed scope.

As for new evidence, Scruggs’ attorneys argue that sworn statements, attached to Tony Farese’s response to the Bar complaint, demonstrate that Zach Scruggs had no knowledge of any bribery scheme, contradicting earlier statements by the government to the U.S. District Court in Oxford.

Joey Langston and former federal prosecutor David Sanders, now a U.S. magistrate, provided two of the statements.

Sanders: “At no time did either Joey Langston or Tony Farese ever say anything to me that would have implicated Zach” in a case called Scruggs II, – a later case alleging that Richard Scruggs, Langston and others bribed Judge Bobby DeLaughter for help in another legal fees lawsuit, Wilson v. Scruggs.

Zach Scruggs’ new motion today quotes Langston’s sworn affidavit as saying his “statements and testimony exonerated Zach Scruggs in Scruggs II … as far as I knew he had no involvement” in the case.

They even claim to use Farese’s own words in his confidential complaint response to drive home their point: “Langston never implicated Zach Scruggs in that bribe,” they say he wrote to the Bar.

As for the claims against Farese, the motion uses retired U.S. prosecutor Tom Dawson’s own book, “King of Torts” published last December, to support their contentions that Farese worked for Langston’s plea deal in Scruggs II while he was Zach’s attorney.

Farese insists that’s not true – that the cases were always separate and distinct and that Zach signed a written conflict of interest waiver consenting to his representation of Langston.

Dec. 10, 2008, or 12 days after the arrest of the Scruggses and the others, Langston’s office was searched by the FBI. On Jan. 7, 2008, he pleaded guilty to his part in the Scruggs II-DeLaughter scheme to avoid a federal indictment, lengthy prison time and huge financial losses to the government.

Zach Scruggs says he unknowingly signed Farese’s waiver shortly after Langston’s secret plea in Oxford.

From an in-court agreement, Langston’s plea deal didn’t become public until Jan. 14.

When Langston pleaded guilty, he was still Richard Scruggs’ attorney. Biggers agreed to his withdrawal from the case the next day. One day later Zach apparently fired Farese, although it took several days to hire someone else. Then Biggers let Farese withdraw officially.

Dawson’s book states that the prosecution’s promise of Langston’s testimony that Zach Scruggs was involved with Scruggs II was the “turning point in the case” and “compelled” him to plead guilty in the face of potential consequences.

Zach Scruggs’ filing today tells the court, “respectfully,” that several of its central rulings in his case “were based on the inaccurate information provided to the court by the government.”

The Daily Journal is seeking comments from former U.S. Attorney Jim Greenlee and others involved in the cases.

Further, Zach Scruggs says he can prove his innocence, if the court will grant him a hearing.

The document also says that between the March 2007 meeting, when Patterson suggested Balducci speak with Lackey about the Jones lawsuit, and Sept. 20, when Lackey – helping the FBI – asked for the $40,000, no evidence exists of talk about bribe money until Lackey brought it up with Balducci. And that Balducci continued to insist that no one else, not even Richard Scruggs, knew anything about it and never would, until Balducci decided to tell him.

The new motion also challenges Balducci’s statements recorded during the fateful Nov. 1 meeting with Backstrom to go over Lackey’s arbitration order. Zach Scruggs was briefly present.

“We paid for this ruling; let’s be sure it says what we want,” the miked Balducci is quoted saying.

“Really,” today’s motion claims, “at most, this case hangs on a few words muttered by Balducci” while Zach Scruggs “was clearly leaving the room to answer a phone call.”

Contact Patsy R. Brumfield at (662) 678-1596 or patsy.brumfield@djournal.com.

Farese denies Scruggs claims of legal conflict

A state Bar association panel will consider the accusations.

By Patsy R. Brumfield
Daily Journal

ASHLAND – Longtime criminal defense attorney Anthony Farese vehemently denies he worked a generous plea deal for Joey Langston of Booneville to testify against the father of another client at the time, Zach Scruggs of Oxford.

Wednesday, some of the 36-year-old Scruggs’ official accusation about Farese to the Mississippi Bar Association became public in a lengthy request to the federal court that it throw out his 2008 guilty plea to knowing about a crime but not telling authorities.

The Bar complaint is expected to be considered by a peer committee this fall.

Scruggs and his father, Richard “Dickie” Scruggs, and three others were indicted Nov. 28, 2007, on six counts that they schemed to bribe Circuit Judge Henry Lackey to help them in a legal-fees lawsuit against the Scruggses and others.

Farese was Zach’s attorney shortly after their arrest.

On Dec. 10, 2007, Langston’s law office was raided by the FBI in a separate judicial bribery investigation included Dickie Scruggs, then early on Jan. 7, 2008, Langston secretly pleaded guilty to a deal that spared him lengthy prison time and safeguarded his financial assets in a second legal-fees dispute, Wilson v. Scruggs.

Shortly after Langston’s plea, Farese of Ashland secured Zach’s written waiver to represent both men. Langston’s plea became public record a week later and Zach fired Farese.

Zach Scruggs’ Bar complaint claims Farese negotiated Langston’s deal with a promise Langston would testify against Dickie Scruggs, if they went to trial. His son contends the testimony would have rubbed off on him, too – called 404(b) evidence or previous bad acts – and hurt his chances with a jury.

While Farese’s official Bar response to those allegations is believed to be lengthy, here is how he responded to the Daily Journal’s inquiry about Zach Scruggs’ accusations in his new motion to the court:

1. I acted ethically at all times in my representation of Zach Scruggs and Joey Langston.

2. Zach Scruggs gave me verbal consent to represent Joey Langston on Dec. 10, 2007, which was the day the search warrant was executed on the Langston Law office.

3. Zach Scruggs subsequently gave me a written waiver of any conflict of interest consenting to my representation of Joey Langston in Scruggs II [Wilson v. Scruggs].

4. It must be remembered that Zach Scruggs was an attorney at the time and was well aware of the implications of my representation of him and of Langston, the meaning and implications of the term “conflict,” and the meaning and implications of a waiver.

5. It must also be remembered that the cases of Scruggs I (Lackey) and Scruggs II (Wilson) were separate and distinct cases.

6. Scruggs I [the Lackey case] involved Zach Scruggs but did not involve Langston. Scruggs II [the Wilson case] involved Langston but did not involve Zach Scruggs. Zach Scruggs, Joey Langston and the Government all represented to me that there was no conflict of interest between Langston and Zach.

7. Joey Langston never incriminated Zach Scruggs in any illegal conduct in Scruggs II. There was no hint of any 404(b) evidence against Zach Scruggs until after I was no longer representing Zach Scruggs, and that evidence came from an email sent by Zach Scruggs to Johnny Jones, not from Joey Langston. Ultimately, Zach Scruggs decided not to exercise his right to a trial, but instead voluntarily pled guilty to misprision of a felony by a bill of information in Scruggs I (Lackey) while being represented and advised by four other attorneys.

8.I deny the allegations made against me by Zach Scruggs in the bar complaint. Zach Scruggs is a young man who had everything, but is now a convicted felon who cannot accept responsibility for his own criminal conduct. He has nothing but time and money to try to blame others for his unethical and illegal acts.

Click here for more at Patsy Brumfield’s blog including Scruggs filing PDF.

Patsy R. Brumfield/NEMS Daily Journal