Ala. judge considers criminal contempt in Katrina records case

Published 6:39 pm Wednesday, March 21, 2007

An Alabama insurance firm asked a federal judge Tuesday to open a criminal inquiry into whether a prominent Mississippi attorney and two sisters violated a court order requiring them to return thousands of documents about State Farm Insurance Co. that the women secretly copied after Hurricane Katrina.

An attorney for the women said they were heroic in trying to expose alleged fraud by State Farm, and the federal judge questioned if prosecutors would want to pursue any criminal case over the missing documents.

But attorney Barbara Ellis Stanley said Mississippi trial lawyer Richard F. Scruggs and the sisters, Kerri and Cori Rigsby, have made only “meager efforts” to retrieve the records, which the women say they took to prove that State Farm was fraudulently denying claims after Katrina.

While the three returned some documents, Stanley said, they have yet to comply with a court order mandating the return of all the files, which could be key evidence in homeowner lawsuits over Katrina claims.

“How many more are out there? We don’t know,” said Stanley, representing E.A. Renfroe and Co. Inc., a claims adjusting firm that fired the Rigsbys after finding out they had taken internal documents. Renfroe and Co. worked for State Farm, and the sisters were heavily involved in processing claims for the insurance giant.

The insurance company previously sought a criminal inquiry in written documents, and it renewed the request Tuesday during closing arguments of a two-day hearing.

Attorneys for Scruggs and the Rigsbys denied withholding any documents and said there is no evidence to prove otherwise.

Greg Hawley, an attorney for the women, said the two were “heroes” for blowing the whistle on alleged wrongdoing by State Farm.

“I think it took a lot of courage to do that. They lost friends, and they lost their jobs,” he said.

U.S. District Judge William Acker said he would consider whether to launch a probe of possible criminal contempt by Scruggs and the sisters, but he expressed doubt that federal prosecutors in Alabama would pursue the case.

Acker said he could appoint a special prosecutor if the Justice Department declined to get involved, leading to a criminal trial that would cost taxpayers a lot and generate heavy publicity.

“I can’t avoid thinking about all that,” said Acker.

The judge’s comments came near the end of the hearing on a request by Renfroe and Co. to hold Scruggs and the Rigsbys in civil contempt to force them to hand over documents. While civil contempt generally involves fines, criminal contempt carries penalties including prison time.

The Rigsbys, from Ocean Springs, Miss., have admitted copying thousands of pages of records to back up their allegations that State Farm wrongly denied claims after Katrina. The sisters gave the documents to law enforcement agents and Scruggs, who signed them each to a $150,000-a-year consulting contract.

Scruggs, a highly successful plaintiffs’ lawyer who is the brother-in-law of U.S. Sen. Trent Lott, R-Miss., is suing State Farm on behalf of hundreds of Mississippi residents.

Thousands of documents already have been returned to Renfroe and Co., and Acker said he would have a clerk count them to determine the exact number. The sisters say they made about 15,000 copies — three sets of 5,000 separate records.