Judge Says Feds Can Seize $30 Million from Kentucky Diet Scam Lawyers

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Federal prosecutors may seize $30 million and three bank accounts from a pair of Kentucky lawyers convicted of bilking clients in a diet-drug settlement, a judge says.

U.S. District Judge Danny Reeves on Thursday granted the government’s request to take the funds from William Gallion and Shirley Cunningham Jr., the one-time owners of champion race horse Curlin. The bank accounts were empty, but Reeves said any funds that surface in them can be confiscated by federal authorities.

Reeves also granted a request for federal officials to seize other property, but suspended that part of the order while Gallion and Cunningham appeal it to the U.S. 6th Circuit Court of Appeals.

Reeves decision requiring the Lexington attorneys to pay the $94.6 million forfeiture stems from their conviction in April on charges they scammed their clients.

Gallion and Cunningham are also being pursued by their former clients in civil court. In the civil suit, a judge awarded 400-plus former clients $42 million.

Angela Ford, who represents the former clients of Gallion and Cunningham, said the money will help those hurt by the drug.

“Yes, the clients will be compensated but it will take time to liquidate assets and all of the assets have not yet been located,” Ford said.

David Davidson, an attorney for Cunningham, and Hale Almond, an attorney for Gallion, did not immediately return messages seeking comment.

Prosecutors contend Gallion and Cunningham cheated their clients out of the money and paid themselves and others about two-thirds of a 2001 settlement with the maker of the diet drug fen-phen.

In the first criminal trial, jurors could not reach an unanimous verdict on the charges against Gallion and Cunningham and a judge declared a mistrial. A third defendant, Melbourne Mills of Lexington, was acquitted.

The federal government ordered Wyeth to pull fen-phen from the market in 1997 after multiple cases of users being diagnosed with cardiac problems.

Although fen-phen, a combination of fenfluramine and phentermine, was the subject of a massive national financial settlement, Gallion and Cunningham’s clients opted out of that agreement because their lawyers told them they could get more money pushing their claims on their own.

But prosecutors say the lawyers didn’t tell their clients, at least at first, that they were part of a group that settled en masse for $200 million, and that the lawyers — not the drug manufacturer — were deciding how to slice up the money.

Gallion and Cunningham were the original owners of Curlin, having bought him for $57,000 in 2005 before selling an 80 percent interest in the horse to a group led by wine mogul Jess Jackson. Jackson later bought out the rest of the group.