Fen-Phen Lawsuit Judge Resigns
By Beth Musgrave
Lexington Herald-Leader [Kentucky]
February 28, 2006
A judge at the center of a controversial $200 million diet drug settlement has resigned rather than face disciplinary action for profiting from the settlement and increasing fees and expenses for lawyers and a friend involved in the case.
Joseph "Jay" Bamberger resigned from his position as senior status judge Friday, according to the Kentucky Judicial Conduct Commission, which released a public reprimand of Bamberger yesterday.
Bamberger's actions, mostly involving a settlement over the diet drug fen-phen, "shocked the conscience of the Commission," the reprimand said.
Bamberger oversaw a 1998 lawsuit involving people who said fen-phen damaged their hearts. During the lawsuit, Bamberger approved fees and expenses that paid the lawyers on the case more than the plaintiffs, the commission said in its reprimand.
"The attorney fees approved were at least $86 million and perhaps as much as $104 million," the reprimand said. That's more than the $74 million that was split and awarded to 431 claimants, the order said.
Bamberger approved attorney fees and expenses that were approximately 49 percent of the settlement, even though the attorneys' contracts with their clients called for fees of only 30 and 331/3 percent. Bamberger told the commission that the attorneys did not tell him their contracts called for a lower percentage, the reprimand said.
Bamberger also created a non-profit from the fen-phen settlement and later served on its board of directors -- making $45,000 as a director before he resigned. Judges are not allowed to benefit from their orders or judicial actions.
Bamberger ordered $20 million from the fen-phen settlement to be placed in a charitable fund called the Kentucky Fund for Healthy Living, which is now the subject of a lawsuit in Boone Circuit Court. The fen-phen plaintiffs are suing their former lawyers -- William Gallion, Shirley Cunningham and Melbourne Mills, all of Lexington, and Cincinnati-area lawyer Stanley Chesley as well as the fund -- saying they want a full accounting of how the settlement money was disbursed. They say they were never told that a non-profit would be created.
Bamberger appointed Gallion, Cunningham, Mills, and Mark Modlin, a trial consultant who is Bamberger's friend and also worked on the fen-phen case, to the fund's board of directors. Modlin, as president of the fund, received a $6,500 monthly stipend and $1,000 monthly expense allowance. He received $2 million for his work on the fen-phen case, according to the reprimand. Other board members received a $5,000 monthly stipend and a $350 expense allowance.
Bamberger later sealed all documents related to the settlement.
The first meeting of the Kentucky Fund for Healthy Living was in Bamberger's chambers and he was frequently present at the fund's meetings, court records in Boone Circuit show. On Dec. 29, 2003, a week before he retired, Bamberger entered an order relinquishing the court's oversight of the fund.
Then in June 2004, Bamberger was named a director. He received a $5,000 monthly stipend and $350 for expenses. Because of the Dec. 29 order relinquishing court oversight, Bamberger's involvement in the fund went undetected until the former fen-phen clients filed their lawsuit, court records show.
Bamberger, in a handwritten note, resigned from the board on April 15, 2005, just days after Chief Senior Status Judge William Wehr appointed himself to oversee the Boone Circuit Court fen-phen litigation. Bamberger wrote the fund a check for $45,000 and returned a $5,350 check for April's stipend and expenses, according to Boone Circuit Court documents.
This is not the first time Bamberger's connection to Modlin has been questioned. Each time the relationship came under scrutiny, Bamberger stepped down from the case before an investigation could be completed.
In 2003 lawyers for the Diocese of Covington asked that Bamberger be removed from a high-profile priest sexual abuse case because of his relationship with Modlin, who was a consultant for Chesley, who represented the victims. Bamberger retired before the state Supreme Court issued a decision in the matter.
He later became a senior status judge, receiving money on top of his retirement to preside over cases by appointment. Bamberger presided over a Pike County case in which lawyers found a fax sent by Modlin to Bamberger in November 2004. The fax was a draft of a motion, which was never filed, to stop attorney Angela Ford from talking to the 431 clients. Ford now represents some of those clients in the case against the former attorneys.
Lawyers in the Pike County case asked for Bamberger to be removed, citing the improper relationship between Modlin and Bamberger. Bamberger recused himself before the complaint could be investigated.
In the public reprimand issued yesterday, Bamberger was chided for his actions in the diocese and Pike County cases. Bamberger said he told both sides in the Pike County case that he and Modlin were friends.
But the commission said Bamberger never disclosed that he and Modlin were co-owners of a property or that he was a fellow director of the Kentucky Fund for Healthy Living. Bamberger and Modlin started a non-profit called Panoply in 2002, according to Secretary of State records. That non-profit, which had other investors besides Bamberger and Modlin, purchased real estate in Gallatin County.
Bamberger and Modlin could not be reached for comment yesterday. Bamberger became a Boone Circuit Judge in 1992 and retired Jan. 5, 2004. He was a senior status judge until he resigned Friday.
William Johnson, who represents Gallion, Cunningham and Mills, said he could not comment on the allegations in the order that the lawyers increased their expenses and failed to disclose their agreements with their clients. Wehr has issued a gag order to the attorneys.
A lawyer for Chesley said he, too, could not comment, citing Wehr's order.
Chesley, who is not a Kentucky Fund for Healthy Living board member, has argued in court documents that he served more as a lead negotiator and had no direct contact with clients.
Bob Sanders, a lawyer who represents the Fund for Healthy Living, said he did not think yesterday's reprimand would affect the civil case in Boone Circuit Court.
Sanders defended the $60,000-a-year pay to the attorneys as fund directors, saying that the fund had no full-time staff and therefore the work of the board fell mostly on Modlin, Gallion, Cunningham and Mills. According to court documents, the fund has given more than $1.5 million in grants since it incorporated in 2003. But most of those grants were awarded after March 25, 2005, after the lawsuit was filed against the fund, court documents show.
Sanders said the fund became more active in 2005 not because of the lawsuit but because it took time to get the fund established.
Chief Justice Joseph Lambert is expected to announce today whether Bamberger will continue to receive senior status retirement benefits. It is unclear if other cases Bamberger presided over will be examined by the Judicial Conduct Commission or other regulatory authorities.
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