Disbarred lawyer sues former fen-phen clients

Former superstar lawyer Stan Chesley, who was disbarred for bilking former clients in Kentucky’s notorious fen-phen scandal, has sued five of them — and their lawyer — to try to avoid paying a $42 million judgment they won against him.

One of the ex-clients, Carol Boggs, of Ironton, Ohio, near Ashland, asked in a recent hearing why Chesley was suing her when he and other lawyers were found to have stolen money from her and other clients.

“I have done nothing personally to him, and we have a judgment against him in Kentucky,” Boggs testified Aug. 19.

In an interview, Boggs, a widow, broke into tears as she told how she was forced into bankruptcy and to sell her jewelry while waiting for her share of the judgment that Kentucky courts have ordered Chesley and disbarred lawyers Shirley Cunningham, Melbourne Mills and William Gallion to pay to her and more than 400 other ex-clients.

In the latest turn in the long fen-phen saga, Chesley, who was stripped of his license for taking $7.6 million in excessive fees, has sued Lexington lawyer Angela Ford, who now represents the former clients, to block her from trying to collect on the judgment in Ohio.

Chesley also has named Boggs and four other former Ohio clients as defendants in a move his lawyers admitted was designed to keep Ford from moving the suit to federal court — and keep it in the friendlier confines of an Ohio court in Cincinnati, Chesley’s hometown.

So far, a judge there has barred Ford from collecting the first penny against Chesley, who boasted of winning billions of dollars for victims of hotel fires, toxic spills and airplane crashes, and lives with his wife, a federal judge, in what has been described as Cincinnati’s biggest mansion.

In an unusual move, Ford has asked the Ohio Supreme Court to dismiss Chesley’s suit and remove the judge, Robert Ruehlman, whom she says has “demonstrated he does not recognize the jurisdiction of any other court, nor … the bounds of his own.”

Ford, through counsel, says in court papers filed Sept. 4, that Chesley's sole purpose in filing the suit last January is to delay collection so he can continue to receive millions of dollars from his former law firm and “dissipate his assets so that his judgment creditors cannot collect.”

Chesley did not return phone calls seeking comment, and his lawyers, Sheryl Snyder and Vince Maurer of Frost Brown Todd, declined to comment. Ruehlman said through a clerk that he couldn’t comment on a pending case, while Ford also said she couldn’t comment while her petition for a writ against the judge in the case is pending before the Ohio high court.

In his suit, Chesley sought and won a restraining order barring Ford from starting collection on the grounds that he doesn’t know exactly who is owed money and how much they are owed, or how much Ford has collected so far. He says that some of the former clients in the 2001 fen-phen settlement are probably dead.

But Ford says in court papers that Chesley is feigning ignorance and already has all the information he's seeking, including a list of every former client, how much they are due — and that she so far has collected $17 million from ex-Lexington lawyers Cunningham, Mills and Gallion.

Ruehlman was scheduled to conduct a hearing Sept. 30 on Chesley’s motion to permanently block Ford from registering the judgment in Ohio, which is the first step in collecting it. But on Thursday, the Ohio Supreme Court granted Ford a temporary stay while it considers her petition for a writ against the judge.

Scott Bauries, who teaches civil procedure at the University of Kentucky law school, said collecting on a judgment in another state is usually routine and that if Chesley wants more details about the judgment, he should go back to the Kentucky court that issued it to ask for them.

“He is not in the right court to make his argument,” Bauries said.

He also said if Chesley sued clients in Ohio for the sole purpose of blocking the case from being removed to federal court, that would constitute fraud.

The tortured case began when Chesley negotiated a $200 million settlement in 2001 with the manufacturer of fen-phen, a diet drug combination that was pulled from the market after it was shown to cause heart damage.

Under their fee contracts, Cunningham, Gallion and Mills should have been paid about $60 million and Chesley about $14 million.

Instead, they took $94.6 million for themselves and others, including Chesley, and put $20 million into a foundation that Cunningham, Gallion and others paid themselves to manage.

Disbarring Chesley, the Kentucky high court found that he collected a $20.5 million fee, about $7.6 million more than he should have gotten, and orchestrated a scheme to cover up the other lawyers’ misdeeds.

Chesley testified in the criminal trials of the other counsel and was never prosecuted, while Gallion and Cunningham were convicted of fraud and sentenced to prison terms, which they are serving. Mills said he was too drunk to have knowingly participated and was acquitted.

Ford sued the lawyers and won the $42 million judgment against them that was affirmed in 2013 by the Supreme Court  against Gallion, Cunningham and Mills and last year by Boone Circuit Court Judge James Schrand against Chesley.

The four lawyers are on the hook for that amount jointly and severally, meaning it can be collected from any of them, making the affluent Chesley the best source for the balance.

Chesley has appealed Schrand’s ruling but didn’t post an appeal bond, meaning Ford should have been able to start collecting on the judgment almost immediately in Ohio.

Schrand also ordered that Chesley’s interest in his former law firm —  into which he transferred $59 million in personal assets — be turned over to Ford’s clients.

But Chesley has halted collection efforts through his lawsuit against Ford.

Meanwhile, Boggs, 72, one of the former clients sued by Chesley, said she is still trying to figure out why he sued her and why she hasn’t been paid all of the roughly $160,000 she says is owed her from the settlement.

She told how she has lost her truck and struggled to keep her house. “If I had gotten my due that was awarded to me, I would not have to go through all that,” she said.

Ruehlman assured her she was sued solely “as a procedural thing” — that Chesley wasn’t trying to take any of her money.

But Boggs wasn't mollified.

“Why is he allowed to do this?” she asked.

Reporter Andrew Wolfson can be reached at (502) 582-7189 or at awolfson@courier-journal.com