As you open this issue, Richard Scruggs' cell door is closing. He is getting acquainted inside a federal prison that will be his new home for the next five years. Scruggs was the lead attorney for policyholders affected by Hurricane Katrina and the most vocal critic of all things anti-concurrent causation, storm surge, and corporate greed (lest we forget tobacco, as well). But in late June 2008, he was brought down in stunning fashion, like so many others these days, for the very thing he purported to fight.

In many ways, Scruggs was convicted for acting in much the same immoral manner that he has accused insurers of doing. For those unfamiliar with his litigation, Scruggs alleged that insurance companies used doctored forensic and engineering reports to limit or eliminate claims paid after Katrina struck, a storm that is still very much alive in the newly built litigation wings of Big Insurance. He also alleged that insurers sought to shift claims to the National Flood Insurance Program by attributing losses to flood waters rather than hurricane winds, thereby limiting their own losses. It remains to be seen who will be handling these cases at press time.

In a word, what led to Scruggs' conviction was greed. It boiled down to a lawsuit about how $26.5 million in attorneys' fees should be divvied up between several firms who had joined together to form the Scruggs Katrina Group to fight the aforementioned insurance “devil.” Scruggs, in a bid to compel a favorable ruling — which would have resulted in more money for him, money he has admitted he didn't really need — arranged for a $50,000 bribe to be delivered to Judge Henry L. Lackey. But the only thing compelling Judge Lackey was the FBI, which had fitted him with a recording wire.

So let's review the facts. By offering the bribe, Scruggs attempted to manipulate facts, much in the way that he has accused insurers of doing with the wind-versus-water debate. He tried to shift money away from those who deserved it so that he could pad his own pockets. The parallels to the charges he was pursuing against insurers and the overarching theme of greed are just too obvious to resist. Judge Neal Biggers, who sentenced Scruggs, couldn't resist addressing it, either.

“When you [Scruggs] were approached with this scheme, I saw how easily and quickly you entered into it,” said Judge Biggers, in his sentencing verdict. “It made me think this, perhaps, is not the first time you've done it because you did it so easily. You didn't really take time to think about it. And there is evidence before the Court that you have done it before. You attempted to bribe Judge Lackey. You picked the wrong man to try to bribe. Another thing that doesn't make any sense — well, it makes your crime more reprehensible — is that the court system has made you a rich man. And yet you have attempted to corrupt it.”

It's not exactly vindication for insurers, as those unsettling charges about claim-handling practices post-Katrina haven't lost their legs yet. However, I imagine there were some insurance defense attorneys and company media contacts who were quietly relishing the self-destruction of one of their biggest nemeses, and one of the biggest names in the game. Before the sentencing, Scruggs expressed regret and said that the conviction would be a scar and a stain on his soul that would be there forever. Let's hope his example of greed is the only one exposed as Katrina litigation continues to take new turns toward new lows.

Special Reports /

Consequences of Greed

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