Fen-phen fraud case ends in deadlock

Two lawyers accused of defrauding their clients in a diet-drug settlement of $65 million were sent back to jail Thursday after a jury deadlocked and a federal judge declared a mistrial.

The jury considered the case against suspended lawyers William Gallion and Shirley Cunningham Jr. for eight days, and twice in two days sent out notes saying it was stumped. A third defendant, Melbourne Mills Jr., was acquitted this week. All faced a single charge of conspiracy to commit wire fraud.

The lawyers were accused of keeping millions of dollars that should have gone to plaintiffs in a $200-million settlement of a class-action lawsuit over the diet drug fen-phen, made by American Home Products Corp., which was recalled after some studies showed it could cause heart damage.

The case has been closely watched in the horse racing industry because Gallion and Cunningham are part-owners of Curlin, 2007 Horse of the Year. Curlin won the Preakness and the Breeders’ Cup in 2007, and the Stephen Foster Handicap last month. The attorneys have since sold an 80% share of the horse.

Attorneys for Cunningham and Gallion asked U.S. District Judge William O. Bertelsman to free the two men pending a new trial, but Bertelsman ordered them back to jail. Gallion is being held on $52-million bond; Cunningham on $45-million bond. Prosecutors said they planned to request and then schedule a new trial in the next two months.

“The weight of the evidence is strong, nothing has changed in my mind,” Bertelsman said. “The risk to flee is even greater in my mind.”

Prosecutors said in closing arguments last week that the lawyers were motivated by greed when they took a $127- million payment when they should have been paid $60 million. Defense attorneys said the lawyers did not commit any crimes and that any mistakes in the settlement were unintentional.

Gallion’s lawyer, O. Hale Almand, called the mistrial a disappointment.

“We think the evidence is very clear,” he said.

Cunningham’s wife, Patricia, said her husband and Gallion should have been released from jail. Not only did the two men not commit a crime, they got a better settlement from American Home Products than any other attorney could have, she said.