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Ala. judge considers penalties against Katrina whistleblowers

A judge weighed possible contempt penalties Monday for two Mississippi sisters and a prominent lawyer over thousands of pages of State Farm Insurance Co. documents that were secretly copied as possible evidence in lawsuits stemming from homeowner claims after Hurricane Katrina.

U.S. District Judge William Acker considered whether to issue contempt citations against Cori and Kerri Rigsby of Ocean Springs, Miss., and attorney Richard Scruggs of Moss Point, Miss. After a daylong hearing, he ordered everyone back to court on Tuesday.

The sisters admitted copying thousands of pages of records to back up their claims that State Farm wrongly denied claims after Katrina. At the time they were working for Alabama-based E.A. Renfroe and Co. Inc., which was adjusting claims for State Farm in Mississippi.

The women delivered the papers to law enforcement agents and Scruggs, who signed them each to a $150,000-a-year consulting contract. He is suing State Farm on behalf of hundreds of Mississippi residents and testified that some documents provided by the women already have been used in lawsuits he filed.

Renfroe and Co. asked Acker to hold the sisters and Scruggs in contempt for their alleged failure to return all the records, which include engineering reports, e-mails and other claims information. The Rigsbys and Scruggs said they have returned all the records they had.

Acker said he would only consider civil penalties for now, but he held out the possibility of an inquiry into possible criminal contempt, which could include jail time. The judge said a key question is how the documents have been used and what lengths the woman and Scruggs used to retrieve the records in response to an order he issued in December.

“This is an interesting but very complicated inquiry because we are talking about 15,000 items,” Acker said.

Scruggs is the brother-in-law of U.S. Sen. Trent Lott, R-Miss.

Under questioning, Scruggs said he consulted with Mississippi Attorney General Jim Hood and decided to send Hood’s office some of the records rather than giving them to insurance attorneys. Scruggs said both he and Hood feared the documents could wind up in the hands of State Farm and help the company answer potential questions before a grand jury.

“Did you put the bee in his bonnet?” asked Acker.

“I did not put a bee in his bonnet, but we did share the same bee,” said Scruggs.

The sisters formerly handled claims for Renfroe and Co., which worked for State Farm after the storm. Renfroe filed suit in Birmingham seeking the return of the documents, but it was unclear during the hearing exactly how many records were missing.

Acker previously ordered the women to return all the documents, and Renfroe attorney Jack Held said the company has received about 8,000 pages. Some 15,000 copies were made, Held said.

“We don’t know what the other documents that were taken consist of, and we don’t know where they are,” said Held.

Cori Rigsby testified that she and her sister only copied about 5,000 different documents, but they made three sets of copies for 15,000 total copies.

Rigsby said she and her sister gave one set to federal prosecutors in southern Mississippi and a second to the Mississippi attorney general’s office. Attorneys said the third set is now back with Renfroe and Co. after a circuitous route that include Scruggs, Hood’s office and the women’s attorney.