In a 29-page report issued on Feb. 22, Trial Commissioner William Graham concluded that Chesley and his co-counsel unlawfully took attorney fees totaling 49% of settlement funds in a class-action against diet-drug maker American Home Products in a Kentucky state court. Chesley collected about $20 million in fees.
“His callous subordination of the interests of his clients to his own greed is both shocking and reprehensible,” Graham wrote.
Chesley was not immediately available for comment.
The Kentucky Supreme Court ultimately will decide the matter.
The trial commissioner wrote that Chesley, of Cincinnati, violated attorney ethics rules pertaining to unreasonable fees, notification of fees, making false statements to the court and more.
In addition to recommending permanent disbarment, he called for Chesley to pay back more than $7.5 million.
The report stems from a $200 million class action settlement in 2000. A jury in April 2009 found other attorneys on the case, William Gallion and Shirley Cunningham, guilty of one count of conspiracy to commit wire fraud and eight counts of wire fraud. Prosecutors said they kept about two-thirds of the settlement with American Home — about twice what they could lawfully collect. Gallion was sentenced to 25 years in prison. Cunningham was sentenced to 20 years.
The state judge presiding over the class action, Joseph Bamberger, resigned from the bench following an ethics inquiry.
Earlier this month, the Kentucky Court of Appeals vacated a $42 million summary judgment in favor of the 431 fen-phen plaintiffs against Chesley, Cunningham, Gallion and another attorney in the case. The court said that the lawyers had presented an issue of triable fact regarding their handling of legal fees. The decision came after Kenneth Feinberg retracted an affidavit supporting the attorneys’ position. Feinberg is the attorney presiding over the BP oil spill settlements.
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