From the
Houston Chronicle:
June 28, 2007, 12:24AM
Local lawyer indicted in alleged kickbacks plot
Two insurance company workers on silicosis cases also face charges
By MIKE TOLSON
Copyright 2007 Houston Chronicle
A Houston plaintiff attorney and two insurance company employees were indicted by a federal grand jury Wednesday in connection with an alleged kickback scheme that involved millions of dollars in settlement proceeds from silicosis cases.
Warren Todd Hoeffner, 42, and two claims managers for The Hartford, a Connecticut insurance giant, were charged with 14 counts of conspiracy, mail and wire fraud and money laundering. The U.S. Attorney's Office also is seeking forfeiture of more than $8 million in fees and bribes allegedly collected by the trio.
Texas lawyers involved with silicosis litigation say Hoeffner once had an inventory of cases approaching 1,000 several years ago and decided to settle them all in bulk. Among the insurance companies he asked to meet with him in New Hampshire in February 2002 was The Hartford, which represented eight defendants named in his lawsuits, according to the indictment.
Hartford claims managers Rachel Rossow, 41, and John Prestage, 36, ultimately agreed to pay Hoeffner more than $34 million to settle all his cases. As part of the deal, however, Rossow and Prestage received a total of more than $3 million and each a new BMW automobile, the indictment alleges. Hoeffner collected more than $5.3 million in legal fees.
"There is a presumption of regularity and legality in the business of insurance litigation, which, when corrupted, damages our confidence in the integrity of the system," said local U.S. Attorney Don DeGabrielle. "These allegations ... represent a serious affront to the lawfulness we expect during the settlement of insurance claims."
The condition, controversy
Silicosis is a serious and occasionally fatal occupational lung disease caused by exposure to tiny airborne particles of silica, usually from industrial sandblasting operations. Because of enhanced safety precautions, the disease has been on the decline in recent decades and no longer represents the risk it once did to miners, sandblasters and foundry workers.
Hoeffner's silicosis cases, mostly in Texas, predated the mass filing of silicosis lawsuits in 2002 and 2003 in Mississippi that led to the discrediting of the lawyers who brought them. A federal judge in Corpus Christi, reviewing the 10,000-plus cases that landed temporarily in her court, found the entire enterprise laced with fraud and deceit.
Her 2005 ruling helped stall the progress of what plaintiff lawyers had hoped would be the successor to asbestos litigation, which was beginning to play out. Because of the corruption she exposed, along with tort-reform measures enacted by Texas and other states, the plaintiffs' strategy of filing so many lawsuits that defendants had no option but to settle no longer proved viable.
Hoeffner's settlements, however, took place in Texas before silicosis became a dirty word.
"I had cases with Todd, and it was like having cases with any other plaintiff lawyer," said Dallas defense attorney Steven Russell, who has represented asbestos and silica defendants for years. "It was always on the up and up. There was nothing ever suggested, no wink-wink here or there. So yes, I am surprised. This is almost like a John Grisham novel.
"I have heard of a plaintiff lawyers talking directly with the insurance company," Russell said. "But I've never heard of anyone ever paying kickbacks."
The allegations
Wednesday's indictment outlines an alleged scheme in which Hoeffner wrote a series of checks totaling more than $2.6 million to Rossow and more than $750,000 to Prestage, who were handling the silicosis claims for the companies they insured, and also wired $97,000 to a BMW dealership for a pair of 530i sedans. Hoeffner also is said to have paid for plane tickets for the two to Florida and California.
Hoeffner did not return calls from the Houston Chronicle. A spokesman for The Hartford could not be reached.
The backstory
Before plaintiff lawyers began to view silica as the next asbestos, silicosis lawsuits were limited to no more than 100 per year in Texas. Then a few big verdicts arose from a notorious East Texas foundry, and the idea of a broader mass tort took hold.
"Everybody took notice," Russell said, "and from 2000 on we saw this very rapid escalation of cases being filed. The escalation was part of the plan on the plaintiff bar side to overwhelm the defendants. There was a time when we had multiple cases set for trial every Monday."
Though few defendants are settling silicosis cases these days, at the time it was not an unreasonable solution to dispose of them, Russell said. The Hartford's settlement with Hoeffner likely would have had to be approved higher up but, given the volume of cases and the number of defendants, it might not have seemed out of line, Russell said.
Hoeffner, an attorney for 17 years, was arrested at his home in Tanglewood on Wednesday morning and later released on $250,000 bail. Rossow and Prestage appeared in federal court in Connecticut and were released on bail. The two are to travel here for arraignment.
Labels: Silicosis
