FBI: Scruggs Paid 2 Men to Persuade Miss. A.G. not to Indict State Farm

February 28, 2008

A lawyer accused of trying to bribe a judge also paid two associates $500,000 to convince Mississippi Attorney General Jim Hood not to file criminal charges against an insurance company over its handling of Hurricane Katrina claims, according to an FBI report in court records.

Plaintiffs lawyer Richard “Dickie” Scruggs, who sued State Farm Fire and Casualty Cos. soon after the 2005 storm, was afraid the company “was not going to settle the civil cases” if the attorney general’s office filed criminal charges, according to an FBI report filed Monday in the bribery case.

At the time, Attorney General Jim Hood was pursuing a criminal investigation against State Farm over what he claimed was the company’s fraudulent practices in denying homeowners’ insurance claims.

Scruggs agreed to pay New Albany attorney Timothy Balducci and former State Auditor Steve Patterson “if they could get Hood to relent on indicting” State Farm, according to a report written by FBI Agent William Delaney on Nov. 2, 2007.

Hood would not answer questions Tuesday about the alleged meeting. However, he issued a statement through a spokeswoman saying he made the decision not to file criminal charges after three days of grand jury hearings.

“I made my decision that there was insufficient evidence to uphold a conviction of State Farm on evidence we had at the time, based upon the advice of a career prosecutor who started in this office in the early 1970s,” Hood said. “I am too hardheaded to be influenced by outside forces – I do what I think is right for the working people of Mississippi.”

The FBI report, entered into federal court records in the bribery case against Scruggs and two associates, is based on an interview with a confidential source, apparently Balducci. Balducci has pleaded guilty to conspiring to bribe a circuit court judge in a dispute over the $26.5 million in attorney fees that Scruggs and his associates eventually won in the lawsuit against State Farm.

Patterson has also pleaded guilty. He and Balducci are cooperating with the federal investigation. Scruggs, his son and law partner Zach, and Sidney Backstrom, another lawyer for the Scruggs Law Firm, have pleaded not guilty.

A judge on Tuesday ruled that he will allow evidence of prior bad acts, particularly that Scruggs allegedly tried to influence at least one other judge when the trial begins March 31. The judge denied defense requests to dismiss charges, move the trial out of Mississippi and separate the defendants’ cases.

The FBI document was filed as part of a defense motion introducing a potential witness. It says Balducci accompanied Patterson, who had a long-standing relationship with Hood, to a meeting in which they asked Hood not to charge State Farm.

“Hood later agreed not to indict,” the report said.

Patterson and Balducci were “paid a fee totaling $500,000 over a period of time to assist with the State Farm settlement,” said Patterson’s attorney, Hiram Eastland Jr., in an interview with The Associated Press.

However, Eastland could not confirm that Balducci and Patterson tried to persuade Hood to withhold criminal charges against State Farm.

Balducci later became concerned that Scruggs would not pay him and Patterson the balance of the $500,000 for talking to Hood if Balducci did not approach the judge in the fee dispute case, the report said.

Scruggs initially reneged on his offer to pay Balducci and Patterson, but later made the first payment of $100,000 in March 2007. It was also in March 2007 that Balducci, the Scruggses and Backstrom first discussed trying to influence the judge in the fee dispute, according to prosecutors.

Meanwhile, Hood had settled his lawsuit against State Farm in a January 2007 deal in which Hood agreed to end his criminal investigation. State Farm agreed to reopen and possibly pay thousands of more claims.

However, a federal judge rejected the terms of the agreement. State Farm sued Hood in September 2007, claiming Hood breached the agreement by reopening his criminal investigation. A judge ordered Hood to temporarily halt his probe.

When Hood testified earlier this month in the lawsuit filed against him, State Farm attorney Jim Robie asked Hood about meeting with Balducci and Patterson.

Robie suggested that Scruggs sent word with the two that he would support another candidate in the 2007 attorney general’s race if Hood did not back off the criminal investigation.

“If you’re asking me, ‘Did somebody come to me and threaten me?’ the answer is no,” Hood testified on Feb. 6.

Hood acknowledge having dinner with Balducci and Patterson, but testified that “they didn’t convey any threats to me about settling the case or anything like that.”

Scruggs, the brother-in-law of former Republican U.S. Sen. Trent Lott, donated $33,000 to Hood’s campaign last July. He also gave tens of thousands of dollars to the Democratic Attorneys General Association, which in turn contributed to Hood’s campaign. Hood, a Democrat, was easily re-elected to a second term in November 2007.

Hood and State Farm reached a settlement of the insurer’s lawsuit the same day Hood was forced to testify in federal court in Natchez. Neither side has disclosed the terms of the agreement.

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