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August 30, 2013

Bluegrass Lawyers Can’t Outrun Fraud Claims

Three Kentucky lawyers that bet they could defraud their clients have lost big – and been ordered to repay $42 million to a settlement fund.

The lawyers – William Gallion, Shirley Cunningham Jr., and Melbourne Mills – represented a group of fen-phen users in a $200 million settlement.  But they kept more than 63 percent of it for themselves, even using part of the ill gotten fees to buy a racehorse that ended up winning the Preakness Stakes.

On Thursday, the Kentucky Supreme Court ordered the lawyers to repay $42 million of the settlement, reports the Associated Press:

Special Judge William Wehr awarded the former clients $42 million in 2007, saying the evidence supported their claims that the attorneys raided a $200 million settlement. Wehr found that Gallion, Cunningham and Mills kept $126 million, more than 63 percent of the settlement, for themselves and took another $20 million in “excess funds.” The men distributed about $74 million to their clients, who were never told about the total amount of the settlement or the fees kept by the lawyers.

The Kentucky Court of Appeals overturned the judgment in 2011. The ruling Thursday reinstated the damages award.

All three lawyers were disbarred for their roles in the scheme to bilk money from their clients, and two are serving sentences in federal prison.

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