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.

by Roger Shuler

George W. Bush might no longer be our president, but the political prosecutions that started under his watch are continuing — particularly here in Karl Rove’s Alabama.

Insurance executive John W. Goff is on trial this week in U.S. District Court in Montgomery, Alabama, charged with 26 counts of fraud, embezzlement, and conspiracy. The trial is expected to last two to three weeks, and when it is over, America could have a new political prisoner.

The case involves possible wrongdoing by GOP officials at the very top of Alabama government, and it has received a fair amount of national attention. But based on my research, it appears that no major Alabama newspaper is covering the trial.

Curious isn’t it, considering the case’s myriad connections to disgraced Republican lobbyist Jack Abramoff?

How did Goff get in trouble? He filed a lawsuit against Governor Bob Riley and other Republicans, claiming they had conspired to ruin his lucrative business. Goff’s lawsuit contained allegations that the governor and his son, Rob Riley, had wrongfully laundered Mississippi casino money into the 2002 Alabama gubernatorial campaign, using Riley’s connections to Abramoff and his partner, Michael Scanlon.

Desperate to keep the Goff lawsuit from reaching the discovery stage, Riley asked U.S. Attorney Leura Canary (who oversaw the Don Siegelman prosecution) to help make it “go away.” Canary, whose husband Bill Canary had assisted with Riley’s campaigns, was more than happy to help.

She hit Goff with criminal charges that mirror those that were settled in March 2005 in an administrative-law case brought by the Alabama Department of Insurance. At that time, 59 of 60 charges against Goff were dismissed, with him pleading guilty to one charge and paying a fine.

“I thought, until now, this whole matter was settled,” Goff said. And he had good reason to think that. Language in the 2005 settlement agreement says Goff was released from “any and all claims, demands, charges (and) prosecutions . . . related to the subject matter” in the administrative-law case.

The Goff case does not involve the prosecution of a high-profile former governor. But in many ways, it might smell worse than the Don Siegelman case.

Consider the timeline:
Read the rest of this entry »

Guest Column
by Roger Shuler

As we await the appointment of new U.S. attorneys by the Barack Obama administration, perhaps we should ask this question: Just how important are these appointments?

The answer is “very.” And Alabama is Exhibit A when it comes to evidence that illustrates the ways corrupt U.S. attorneys can harm the cause of justice.

Experience and research have taught me that federal criminal statutes are very broadly written–frighteningly so. Clarity about federal law usually comes from the case law, and a U.S. attorney must have both the intellectual ability and the moral clarity to accurately determine what is a crime and what is not.

That process has been butchered in Alabama under the George W. Bush Justice Department From Hell.

Consider two cases, both involving Alabama governors:

* We all know about the saga of former Democratic Governor Don Siegelman and former HealthSouth CEO Richard Scrushy. Siegelman accepted a $500,000 donation for his lottery campaign and appointed Scrushy to a hospital-oversight board to which he already had served under three previous governors. Despite law and fact to the contrary, U.S. Attorney Leura Canary determined this activity constituted a crime.

* Current Alabama Governor Bob Riley, a Republican, packed Alabama’s Joint Patriotic Immigration Commission with his own major donors. Four of the appointees gave at least $390,000 to the Riley campaign.

How are Riley’s actions different from Siegelman’s actions? Answer: They aren’t. So why was Siegelman investigated and prosecuted, while Teflon Bob Riley never drew scrutiny from law enforcement? Answer: That’s what happens when you appoint political hacks as federal prosecutors.

It’s clear that Siegelman and Scrushy did not commit a crime, and I would suggest that Riley probably did not commit a crime with his appointments to the immigration commission.

But I would further suggest that it’s time for someone to look past Riley’s Teflon coating and examine some of his other activities, particularly his associations with corrupt GOP politicos Jack Abramoff and Michael Scanlon and the ties that Riley and his associates have to the gambling industry.

For good measure, and hitting close to home, it might be time for someone to look into connections that Riley associates have to my unlawful termination at UAB and the broader corruption of Alabama higher education.

Will Alabama’s new U.S. attorneys, appointed by an Obama administration, be up to the task? I would suggest that citizens should do more than just hope on that issue. We should do everything we can to hold their feet to the fire.

Originally published on Shuler’s Legal Schnauzer blog.

Also, we are told this story out today in the New York Times regional newspapers is due for a correction–the part where Leura Canary is applying to stay on.

Obama to Fill Federal Posts in Alabama

And we would add that folks might want to put a little pressure on the committees making the recommendations, including the state party panel and the Davis panel. You can bet corporate pressure is involved.