Two weeks ago, we published a story based on a 2nd District Appeals Court ruling that involved a fight between outside counsel that included allegations of RICO and kickbacks involving a firm regularly engaged by the state of Mississippi for outside litigation. The lower court documents that were the subject of the appellate decision have now been unsealed. The Clarion Ledger today published a follow up to that article. Though it was a good start, this matter is way too complex to completely dissect meaningfully in 639 words.
The unsealed complaint (also shown below) is a rare glimpse into how a very select group of ultra-high powered plaintiff’s lawyers control a toxic mix of political giving that directly or indirectly results in tens of millions of dollars in litigation fees from states Attorneys General around the country. Bernstein Litowitz and its partners have been among the most active campaign donors to Hood. A $15,000 contribution was just logged on 9/30/15. And there’s a lot more where that came from. Additionally, according to Open Secrets, the Democratic Attorneys General Association (DAGA) donated at least $1,800,000 to Jim Hood since he took office in 2004 and Bernstein Litowitz has donated $535,150 to DAGA since 2004.
In this particular case, MPERS was chosen as a lead plaintiff in the case. Being a lead plaintiff carries a lot of advantages for the attorneys involved. It imputes a sense of case control. The named plaintiff’s lawyers get to be the architect and decides, oftentimes, where millions of dollars of attorney’s fees go and how they’re allocated. MPERS has repeatedly been at the front of the line of lead plaintiffs and has been a go to for cases involving Bernstein. “On February 21, 2006, he chose the firm to represent the Mississippi Public Employees Retirement Fund in a securities class action against Delphi Corporation—just days after receiving $25,000 in donations from Bernstein Litowitz attorneys. The suit was eventually settled, and the lawyers on the case received $40.5 million in fees.”
The unsealed allegations of the whistleblower lawyer in this case, Bruce Bernstein, are remarkable. Among other things, here’s what he alleged.
• Outside counsel assigned tasks to undisclosed Mississippi lawyers (in this case Vaterria Martin) and distributed proceeds as a “quid pro quo for being repeatedly selected as counsel for a Mississippi pension fund”
• Bernstein was instructed to assign two “unnecessary legal research projects to Martin”
• Upon questioning the wisdom of doing that the complaint reads that BLBG Partner Singer said “What are you, a [expletive] idiot? That is the dumbest question I’ve ever heard. Come on, you were a partner at Milberg. Are you an idiot? Do you ever want us to work with George [Neville at the MS AG’s office] again? Do you ever want us to work with Mississippi again?” Incidentally, Milberg was the subject of federal indictment and pleaded guilty to judicial bribery at about the same time as tort baron Dickie Scruggs did the same.
• BLBG defended Martin’s shoddy work by saying that the Mississippi AG was under pressure to use “minority firms”.
• After pressing the matter further, Bernstein began to get threats from BLBG partners saying that they would essentially blackball him in the industry.
• Another BLBG associate confided in Bernstein that the Merck litigation that BLGB worked out had similar attributes of a kickback scheme. They believed that George Neville in Jim Hood’s office “asked Graziano to assign work on the Merck Litigation to a friend of Neville’s father”.
• Bernstein later ascertained that a former partner of the firm had raised similar ethical concerns and left in part because the firm “had pressured him to make political contributions to elected officials who controlled the selection of counsel in securities cases on behalf of pension funds.”
• Bernstein later split with the firm (Bernstein says he resigned – the firm says they fired him).
• Subsequently, Bernstein received two letters from Assistant Attorney General George Neville. In those letters (also shown below), Neville threatened Bernstein to keep quiet.
What is particularly troubling is that Neville at the time acknowledged that he knew Vaterria Martin was outside counsel. He said, “…it is a policy of the State of Mississippi and its agencies to engage local counsel in litigation and, in particular, a policy of this office to provide work to qualified minority attorneys such as the local counsel in the Saytam case.” Mrs. Martin was at the time and is still married to Deshun Martin, who was on staff with the Mississippi Attorney General’s office at both the time of the Satyam litigation and at the time that Neville penned the letters to Bernstein. This wasn’t some abstract local counsel hire. He knew who it was.
He went on.
“As counsel for the State of Mississippi, its agency MPERS, and on behalf of the State of Mississippi and its agency MPERS, I am directing Bruce not to disclose any confidential information he learned as counsel to Mississippi and its agency MPERS. It is highly likely others could (or will) attempt to use this information against Mississippi in future litigation or otherwise (emphasis added), just as Bruce is attempting to use it for his benefit in his threatened lawsuit. Please be advised that the foregoing direction to Bruce and you to preserve the confidentiality of all information Bruce learned in representing Mississippi and its agency MPERS comes from the State of Mississippi and MPERS itself.”
In other words, Neville knew how bad the fact pattern looked and it is apparent he wanted no one else to know.
Then, in a subsequent letter, the hammer came down from the AG’s office. “If you and your client disregard the instruction we have given, we will have no other choice but to hold you both accountable.”
While, the complaint is only one side of the story and the case was immediately settled, you can’t unring that bell. There are loads of corroborating documents and letters to the complaint in the documents, and the letters from Neville are just a small bit of that. More importantly, the optics for the AG’s office are awful. A huge campaign contributor (one of the largest he’s ever had) gets multimillion dollar fee deals and hires the wife of a staffer, which is subsequently not disclosed in fee agreements. In the best case, it’s political malpractice. Worst case, it could carry some criminal and/or ethics violations connotations. And George Neville knew at the time how it looked and moved heaven and earth to keep Bernstein from letting the cat out of the bag. And the silence from PERS at this point is deafening.
The Clarion Ledger did get Hood’s office to comment. Hood basically hung his hat on the fact that Bernstein has allegedly since recanted some of his RICO allegations. But, there are three things to keep in mind that are absolute fact (1) we would never have learned about the terms of Martin’s relationship but for the lawsuit and its subsequent unsealing (2) any Bruce Bernstein recanting doesn’t mitigate the overly cozy financial relationship between BLBG and Hood and (3) the fact that Hood’s office absolutely knew that a staffer’s spouse was essentially engaged to do “ridiculous” work at taxpayer expense by a huge campaign contributor. Keep in mind also that secrecy of the details was a condition of the suit staying settled, so Bruce Bernstein had a major financial incentive to make that sort of a statement as the record conclusively shows that the settlement was tenuous and at multiple points was threatened to unwind based on the case being unsealed.
Confidentiality is critical in a legal context. But using it specifically as a firewall to hide relevant details from taxpayers is something that it’s hard to believe there’s not more outrage in the press about. And this ain’t Hood’s first rodeo in that department. Y’allPolitics got that first hand when Hood’s office unsuccessfully tried to hide a settlement that he denied the existence of and filed motions to keep it under seal. Y’allPolitics and other media companies won that case.
I still maintain that if this case involved any other state officeholder other than Jim Hood that there would be above the fold headlines for days on end. Maybe there will be some editorial exclamation points behind the news story opining as to the impropriety of office holders having spouses of staffers work indirectly for major campaign donors or at the very least being aware that it was done and doing nothing about it. The silence of many from the rest of the old and the “new” new media remain conspicuous, but the Clarion Ledger article was a good start.