by Glynn Wilson

U.S. Attorney General Eric Holder was lobbied to drop the case against former Alabama Governor Don Siegelman during his trip to Birmingham Thursday for the swearing in of Joyce White Vance as U.S. attorney for the state’s northern district, sources say.

Several people, including Alabama Democratic Party officials, spoke to Holder on behalf of Siegelman, and about firing U.S. Attorney Leura Canary — the prosecutor married to Karl Rove’s political ally Bill Canary of the conservative Business Council of Alabama — according to sources present for the swearing in.

Barry Ragsdale, an attorney who is a friend of the Vances and has been associated with the Over the Mountain Democrats in the past, acted as master of ceremonies for the swearing in. Apparently he is a funny guy, and made several jokes, including poking fun at Chief U.S. District Judge Mark E. Fuller of Alabama’s middle district, the federal judge who presided in the controversial case against Siegelman and his co-defendant Richard Scrushy.

“I’m glad Karl Rove gave you permission to be here,” Ragsdale quipped, according to the Birmingham News account of the swearing in.

Rove, of course, was the chief political adviser to President George W. Bush, who recently testified in an investigation of the U.S. House Judiciary Committee on political prosecutions and political firings of U.S. attorneys.

Read the rest of this entry »

Editor’s Note: In any other state in the country with a functioning watchdog press, this story would have generated howls about a conflict of interest on the part of the governor’s son. Yet not one word about this has been published in a single Alabama newspaper. We are now pursuing funding from investigative journalism sources to begin shedding light on all the political shenanigans being conducted in the dark in this state, and teaming up with other reporters such as Roger Shuler to try and build the new Web Press infrastructure here. This story only scratches the surface of what we can accomplish. If you want to help, get in touch.

by Roger Shuler

Alabama attorney Rob Riley, who has a curious history of cashing in on the Don Siegelman prosecution, recently announced a $109-million settlement in a fraud lawsuit involving HealthSouth Corporation. But sources tell Legal Schnauzer that Riley himself is involved in a company that faces allegations it practices health-care fraud.

Riley, the son of Alabama governor and former Siegelman opponent Bob Riley, announced that HealthSouth investors had reached a settlement with the accounting firm Ernst and Young. The suit alleged that Ernst and Young failed to detect a fraud that almost destroyed Birmingham-based HealthSouth.

“We think it is a good settlement for the shareholders, many of whom thought they would never see any return on their investment,” Riley told The Birmingham News.

Riley is a curious choice to be lead counsel in a lawsuit alleging health-care fraud. That’s because, according to our sources, he is an officer in a company that appears to have engaged in health-care fraud–and perhaps still is.

Sources tell Legal Schnauzer that Riley is an owner and officer in a Birmingham-based company that provides physical-therapy services. The company is facing allegations that it has repeatedly defrauded federal health-care programs.

Alice Martin, U.S. attorney for the Northern District of Alabama, has received extensive information about the alleged fraud scheme involving Riley’s company, sources say. But Martin, a George W. Bush appointee and a long-time ally of Bob Riley, has refused to intervene in the case.

As we reported back in January, Martin has a history of providing favorable treatment to politically connected parties who have allegedly engaged in health-care fraud. She appears to be doing that again with the case involving Rob Riley’s company.

Riley’s connections to the HealthSouth lawsuit first came to light in April 2008, thanks to some expert reporting by Sam Stein, of Huffington Post.

Let’s review some of the key points from the Stein article:

* Months before Siegelman was charged, court documents show, Riley knew an indictment was coming and former HealthSouth CEO Richard Scrushy would be drawn into it;

* In what appears to be a case of legal-political “insider trading,” Riley managed to maneuver himself into a hugely profitable role as lead local counsel in a massive lawsuit against Scrushy, HealthSouth, Ernst and Young, and others;

* Riley snagged the lead counsel role even though most of his legal experience was in the area of medical malpractice. He had little or no experience in complex securities litigation;

* When the HealthSouth litigation began in 2003, Riley’s name was nowhere to be found. He joined the fray in January 2005, representing the New Mexico State Investment Council, a relatively new player in the case;

* Why did Riley rise to play a central role in the HealthSouth lawsuit? Almost certainly it was because of his ties to U.S. District Judge Mark Fuller, whom Riley knew held a grudge against Siegelman and would be the perfect hanging judge in the criminal case;

* Riley surely knew that his ties to Fuller would pay off in the civil case. That apparently happened in May 2006 when an investment banker testifying in the criminal case said HealthSouth had pressured him to come up with $250,000 for Siegelman’s education lottery fund;

* Shortly after this revelation in the criminal case, HealthSouth agreed to pay $445 million to settle its portion of the civil case. It was one of the largest settlements in securities-litigation history. And it appears that Rob Riley engineered it.

So what is the current status of the HealthSouth lawsuit? The $109 million payment from Ernst and Young appears to be set. An appeal issue has delayed disbursement of the $445 million from the 2006 settlement involving HealthSouth and several former officers and directors. Riley says a shareholder lawsuit still is pending against Scrushy and investment bank UBS AG.

Let’s do a little quick Schnauzer math. At least $554 million is waiting to be dispersed to multiple shareholders and plaintiffs’ attorneys. How massive is this litigation? The case file includes almost 1,600 documents, and roughly 150 plaintiffs’ lawyers have been involved.

Out of all of these attorneys, representing powerhouse firms from both coasts and some of the most prominent firms in Alabama, who was designated as “liaison counsel for shareholder lead plaintiff”?

Whose name was front and center on a motion for settlement filed on March 23, 2009? Why, none other than Rob Riley, who just happened to have all kinds of connections to the Siegelman/Scrushy criminal case.

Here are a couple of questions to ponder:

* Did any of the 150-plus lawyers who apparently allowed Riley to take a lead position in the HealthSouth lawsuit ever wonder if he might have more than a few conflicts of interest in the case? Were they concerned about the appearance of impropriety caused by Riley’s connections to the Siegelman criminal case? Or were they simply interested in the fact that Riley could help rake in big bucks — for them and for himself?

* Did any of these lawyers know — or did they even care — that Riley was an officer in a company that itself appeared to be engaged in health-care fraud? Would any of these 150 plaintiffs’ lawyers–or perhaps the numerous defense attorneys — think it relevant that lead counsel in the HealthSouth fraud litigation was himself an apparent actor in a fraud case connected to the delivery of health-care services?

* Aside from alleged fraud committed by Riley’s company, consider the conflict Riley appears to have in the HealthSouth case. Riley is an owner in a company that provides rehabilitation services. That’s the same area of medicine in which HealthSouth has made its name. If HealthSouth is greatly weakened in the rehabilitation field, do Riley and his business partners stand to profit?

Would some of these multimillion-dollar settlements fall apart if it is shown that Rob Riley has a massive conflict of interest — and is an owner in a company that allegedly engaged in health-care fraud while he purported to be fighting for victims of health-care fraud?

Stay tuned to Legal Schnauzer. We are going to be looking into all of these questions — and providing details about the case against Rob Riley’s company.

Originally published by the Legal Schnauzer. Republished here with permission. Roger Shuler is an experienced journalist who formerly wrote for the Birmingham Post-Herald, now defunct.

WP

Bob Luskin and his famous client, Karl Rove

by Glynn Wilson

Dancing the Potomac Two-Step

Karl Rove’s attorney is very good at the Washington two-step. They say Robert Luskin is an earring-wearing, motorcycle-riding, bald-hippie liberal lawyer from Harvard. The only common thread we might find between these two men could be their cocktail preferences, or their drugs.

Otherwise, it seems odd that they would find themselves together at the epicenter of the biggest political coverup since Watergate, or maybe Iran-Contra. Or, there was that CIA agent, Valerie Plame-Wilson, Rove helped to out, in spite of Luskin’s denials that kept Rove from facing prosecution in that case. I. Scooter Libby, Dick Cheney’s chief of staff, took the fall for that one. Bush commuted his sentence almost instantly — after lying and saying he would fire anyone involved in the leak.

There has been much speculation over the Internets about whether Bush might have signed a pocket pardon for Rove and the others in his administration facing investigations. Nothing has popped out of that pigeon hole yet, and probably won’t.

It’s all about running out the clock. The statute of limitations clock.

On Monday, Luskin leaked a tidbit to his old pal Murray Waas from the Plame investigation days, side-stepping the House Judiciary Committee investigation where Rove faces a subpoena, and said his client was cooperating in a separate investigation being run by the Justice Department. Since Eric Holder is now instituted at Justice, sworn in today, there is some worry about what he and President Obama are going to determine about “executive privilege.”

The so-called separate investigation is a Bush Justice Department backshop job run by his old OPR unit, the so-called Office of Professional Responsibility, where everything was political – uh, not all about ethics.

They have been talking to all kinds of people in North Alabama trying to dig up non-existent dirt on Dana Jill Simpson, rather than investigating Rove. So the smart political move on the part of the Obama Justice Department, not to mention the right move legally, would be to forestall that post-haste and insist that Rove appear before the House Judiciary Committee — or better yet, appoint a special prosecutor.

After all, Luskin said Rove was claiming no “privilege” as it relates to the case of Former Alabama Governor Don Siegelman. In other words, he is now saying Bush was not in the loop, so there’s no privilege. We’re not necessarily buying it, but we’ll dance along for now.

Luskin could not be reached for comment on deadline, but he told Waas this regarding Siegelman: “At no time has he or will he assert personal privilege in that matter.” While declining to discuss specifics of what Rove has told investigators regarding Siegelman, Luskin said: “What Karl has said [to investigators] is entirely consistent with what he has said publicly–that he absolutely (had) nothing to do with this.”

Rove Will Cooperate With DOJ Probes?

Ms. Simpson’s lawyer Priscilla Duncan in Montgomery said if you weave your way in and out of Luskin’s verbiage, when he says Rove doesn’t mind answering questions about Siegelman, “it is clear that Rove talked to the Bush Justice Department, not anyone from the new administration. He’s playing with us.”

Luskin then insists that Rove doesn’t know anything about the Siegelman prosecution, she said.

“Did he know about the preliminary discussions that led to it? Did he talk with Leura Canary, his former partner’s wife? Or Alice Martin? We don’t know whether they’ve been invited to testify or not, but the committee’s subpoenas are a long and tortured process.”

We already knew Bush never offered or suggested immunity of any kind for Rove in the Siegelman case, we find out.

“Lawyers are free to lie to the press, but can lose their license if they lie in court and get caught,” she said.

In all that cooperation Luskin says Bush and Rove are so eager to give, she adds, “there is not one hint that it will be 1) under oath or 2) recorded. In other words, it’s the same ‘poison whisper’ campaign he offered the Judiciary Committee last year.”

“Rove’s entire career is to plant juicy stories with pliant media to steer the coverage away from him by implying that they are missing a much bigger story,” she said.

For more, including the MSNBC video from today, hit the jump…

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BAR TALK: The Crusader
Has U.S. Attorney Alice Martin run amok? The government is investigating. The victims of her failed prosecutions believe they already know the answer.

The American Lawyer
by Scott Horton
July 01, 2008

In March 2007 the U.S. government charged Axion Corp., a small business in Huntsville, Alabama, with illegally giving technical drawings for a Blackhawk helicopter part to manufacturers in China. The prosecutors seized Axion’s assets and took away its government contract business. The company won an acquittal at trial a year later, but by that time, it was out of business.

Axion is the latest in a string of aggressive prosecutions brought by Birmingham U.S. attorney Alice Martin. Those prosecutions are marked by convictions overturned and innocent men wronged. Two judges have openly questioned whether she knowingly prosecuted innocent people. The American Lawyer has learned that the U.S. Department of Justice’s Office of Professional Responsibility has opened an investigation into allegations of misconduct that were made by Axion against Martin.

A Mississippi native, Martin was a federal prosecutor in Memphis and an Alabama state court judge. She has strong ties to the Republican establishment-her mentor is William Canary, a powerful Republican campaign consultant in Alabama who has close ties to former White House deputy chief of staff Karl Rove.

Her first step into the national spotlight came with the prosecution of a group of HealthSouth Corporation executives on fraud charges starting in 2003. Seventeen corporate officers were convicted, but CEO Richard Scrushy, on whom all eyes had been focused, walked out of court a free man.

Next, she drew notice for her wide-ranging investigation of corruption into Alabama’s two-year college system. In connection with the investigation, she dispatched U.S. marshals to Montgomery to serve subpoenas on Democratic lawmakers on the floor of the legislature-a move that was stopped when the legislators pointed out that it might be a crime.

But she is best known for her crusade against former Alabama governor Don Siegelman, a Democrat. Martin tried to prosecute Siegelman on corruption charges, but dropped the case the day after the trial began. She then passed the baton to her colleagues in Montgomery, who brought a second, successful case against Siegelman on the basis of allegedly improper campaign donations by Richard Scrushy. An appeal is pending.

The Siegelman prosecution has been widely criticized as a frame-up by Martin, and the prosecution is now the subject of a probe by the House Judiciary Committee, which is trying to determine if it was brought for political reasons.

She most recently gained notoriety for the failed prosecution of Axion, a company started by Alexander Nooredin Latifi, an intense and amiable entrepreneur who emigrated from Iran as a young man in the 1970s. He learned engineering, and slowly built the company. At its peak, the business had 60 employees and was estimated by a federal court to be worth $50 million.

In March 2007 the government charged the company and its owner with violating the Arms Export Control Act (AECA) by sending technical drawings for a Blackhawk helicopter part to a Chinese manufacturer. The prosecutors in Birmingham, led by Martin, sought forfeiture of Latifis assets and obtained an order that wrought havoc with the company’s government contract business.

After the government secured the asset freeze, no charges were brought against Latifi or the company until March 2007. Then Axion’s defense counsel-Henry Frohsin and James Barger, Jr., of Baker, Donelson, Bearman, Caldwell & Berkowitz’s Birmingham’s office-made a tactical call to waive Axion’s right to a jury trial. Frohsin and Barger were concerned that Latifi’s connections to Iran would be played against him. “At the time of the indictment, the White House was beating the drums for possible conflict with Iran. Since the case would be tried in northern Alabama, where the defense industry and Army are colocated, we felt that we should avoid the possibility of xenophobia,” says Frohsin.

After the trial started in October, the government’s case collapsed quickly. What Axion had attempted to have made in China was nothing more than a tungsten blank, from which Axion intended to mill the actual part. The government was forced to acknowledge that the drawings furnished to Axion by its contractor had not been labeled “restricted,” but instead were given a legend of “noncritical” and “uncontrolled,” meaning that Axion had no way of knowing that their use was restricted. Moreover, the drawings had long been accessible on the Internet.

As the case progressed, the government’s own witnesses were forced to concede that Blackhawk helicopters, equipped with the part in question, had actually been sold to China with U.S. government approval, demolishing the government’s claim of a breach of secrecy. Not only that, but the prosecution was aware of these sales before the case was ever brought.

Still, the prosecution would not withdraw the case. It was ultimately dismissed by Judge Inge Johnson of the federal district court in Birmingham, who wrote, “Evidence was received . . . that at least raises the possibility in the eyes of the district court that the government continued to investigate and prosecute the defendants even after uncovering evidence demonstrating that the defendants were not guilty.”

Another failed case, another investigation. A Justice spokesman says that the Department’s Office of Professional Responsibility, which investigates allegations of misconduct by Justice attorneys, is investigating Martin for “allegations of political prosecution involving both the Northern and Middle Districts of Alabama, arising out of the prosecution of former Governor Siegelman and other matters.”

Knowing what she did, why did the Martin bring the case? She declined to comment for this article. But for a prosecutor, the appeal of a national security case involving arms sales to China is obvious. Or it could be, as Henry Frohsin believes, that “the fact that Alex Latifi was Iranian American was more than tempting for the Department of Justice to try to create a poster child for their arms export control activism.”

Once the case was battered, why did the government persist? The answer, say defense counsel, is that the prosecutors were convinced they could convert an asset freeze and the threat of substantial prison time into a plea bargain. And the Justice Department has made a great show of prosecuting AECA cases.

Having won the case, Baker, Donelson then put the government on the defensive. The firm filed a motion, arguing that the case was not brought in good faith and that the government should compensate Axion and Latifi for legal costs. Judge Johnson agreed. She wrote that the AECA “framework allows the government to effectively shut down an accused business regardless of whether the business is later acquitted at criminal trial. This result is unfair to potential defendants and, in this case as a practical matter, ruined Axion’s business.” She awarded $363,000 in costs, attorneys fees, and interest to Axion.

Alice Martin has not directly addressed the outcome in the Axion case. She issued a press release on May 30, indicating that the government will have to reconsider the way it approaches asset forfeiture cases, or at least be prepared to pay the target’s attorneys fees if it loses. Martin is also fighting the award of attorneys’ fees on procedural grounds, claiming that the freeze orders against Axion and the decertification of the company as a government contractor had in no way harmed the business. Her crusade continues.

The Crusader Has U.S. Attorney Alice Martin run amok? The government is investigating. The victims of her failed prosecutions believe they already know the answer. By Scott Horton From the Axion decision: “Evidence was received [indicating that] the government continued to investigate and prosecute the defendants even after uncovering evidence [that they] were not guilty.”

Scott Horton teaches at Columbia Law School.