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ASSET BATTLE AIMS AT LAWYERS’ WALLETS The battle between the federal government and the white collar defense bar over frozen assets and the right to counsel in corporate fraud actions was at the forefront of two separate cases last week. In a federal court in Alabama, lawyers representing Richard Scrushy, the fired chairman of the HealthSouth Corp., asked Judge Inge Johnson to limit the federal government’s attempt to freeze Scrushy’s personal assets. The move comes after Johnson ruled that the Securities and Exchange Commission failed to present sufficient evidence that Scrushy was tied to the alleged scheme that inflated HealthSouth’s worth by more than $1 billion. In addition to lifting the temporary freeze on Scrushy’s personal assets, the judge on May 7 put the SEC civil action on hold until the Justice Department completed its criminal probe of Scrushy and HealthSouth. But that didn’t stop the government. U.S. Attorney Alice Martin of the Northern District of Alabama then gave notice that she would seek to freeze Scrushy’s money. According to a defense motion filed last week, a federal prosecutor on May 8 sent an e-mail letter to Scrushy’s defense team — including Jonathan Rose and Robert McDermott Jr. of the D.C. office of Jones Day — warning the team that “it is a crime to take action that interferes with seizure or forfeiture of property that is known to be subject to forfeiture.” Scrushy’s lawyers took the letter to mean they could be prosecuted for accepting payment for their work. Martin subsequently revoked the letter, stating “it was not meant as a ‘threat’ but was artlessly worded for our intention in this case,” according to another letter sent to defense counsel. In a separate matter further north, D.C. lawyer Thomas Green told a federal judge in New York on May 15 that he would not be representing D.C. businessman C. Gregory Earls, according to prosecutors. Earls is charged with defrauding investors in his company, U.S. Technologies Inc., out of $13.8 million. A week earlier, Green had persuaded U.S. District Judge James Robertson here in the District to allow the company to pay Earls $92,500 he said was owed to Earls, who remains the company’s chief executive. Green, a partner in the D.C. office of Sidley Austin Brown & Wood, argued that Earls, whose personal assets were frozen in March, needed the money to hire a defense lawyer for the criminal case in New York. Green did not return calls for comment. D.C. lawyer Barry Coburn of Coburn & Schertler says he is in discussions with Earls and that there’s a “good chance” he’ll take the case. Not so fast, the government says. Prosecutors told the New York judge that they were concerned there may be a possible conflict if Coburn were allowed to represent both U.S. Technologies and Earls, according to a spokesman for the U.S. Attorney’s Office for the Southern District of New York. Earls has until May 22 to find a lawyer. — Tom Schoenberg FILLING DINH’S SHOES Nearly two years after joining the Justice Department as head of the Office of Legal Policy, Viet Dinh announced plans last week to return to Georgetown University Law Center as a professor. According to two administration sources, Daniel Bryant, counsel to the attorney general, is being strongly considered to replace Dinh, 35. Bryant was the DOJ’s chief congressional liaison from May 2001 until December 2002 and previously served as majority chief counsel of the House Judiciary Crime Subcommittee. If chosen, Bryant, 38, would bring a heavy dose of political savvy to the office, which helps to shepherd judicial nominees through the confirmation process. Dinh, known for boundless energy and a brilliant intellect, sparked controversy for his role in drafting the USA Patriot Act. He says he is looking forward “to returning to commenting and reflecting on government actions, rather than taking government actions.” — Vanessa Blum IS OLSON HUNGARING TO MAKE HIRE? To hear Supreme Court practitioners tell it, Gibson, Dunn & Crutcher D.C. partner Thomas Hungar has been anointed as a deputy solicitor general, filling the spot left when Lawrence Wallace retired in January. Hungar, 41, declined comment, as did SG Theodore Olson, Hungar’s one-time boss at Gibson, Dunn. But a Justice Department source confirms Hungar is “one of several” finalists for the career position. Another person said to be in the running is Assistant to the Solicitor General Jeffrey Minear. Olson has told lawyers he plans to announce his pick before the end of the Court term next month. Hungar, who worked at the SG’s office in the early 1990s, co-chairs Gibson, Dunn’s appellate and constitutional law practice. He also worked with Olson on behalf of George W. Bush in the litigation over the 2000 election. — Tony Mauro HELLO, SEE YOU LATER Jamie Gorelick officially joins Wilmer, Cutler & Pickering on July 1, but the departing vice chair of Fannie Mae won’t be spending all of her time with her new colleagues. Gorelick, 53, says she will spend two days a week in her first year working as a member of the commission investigating the Sept. 11 attacks, and three days on firm business. In order to avoid any possible conflicts between her role on the 9/11 panel and the interests of Wilmer, Cutler’s clients — which include United Airlines — Gorelick will take her first-year compensation as a fixed dollar amount rather than one that varies depending on the bottom line. She will also not take an active role in questioning Wilmer clients that come before the commission. “This way, I’ll have no financial stake in anything that the commission does,” says Gorelick. She also says her salary will be three-fifths of what she would make if she were to work full-time. Gorelick and firm leaders decline to specify the amount. The former deputy attorney general says the firm’s strong securities group, especially co-chair William McLucas, was a “huge draw” for her. “As friends of mine were thinking about their career decisions over the years, I had counseled many to go to Wilmer, Cutler,” she says. “So for me, this was an easy choice.” Gorelick joins former Clinton DOJ officials Seth Waxman, Howard Shapiro, and Randolph Moss at Wilmer, Cutler. — Jonathan Groner $1 BILLION: THAT’S A LOT OF LEAF A large class of tobacco farmers has settled a major antitrust case against most of the nation’s cigarette manufacturers. In 2000, several hundred thousand farmers sued the cigarette makers in North Carolina federal court, alleging that the manufacturers conspired to fix the price of leaf tobacco sold at auctions. The May 16 settlement, valued at more than $1 billion in all, requires the cigarette companies to pay $200 million to the growers. Just as important, says plaintiffs lawyer Alan Wiseman of Howrey Simon Arnold & White, is a provision requiring the manufacturers to buy at least 405 million pounds of tobacco annually from domestic growers for 10 years. “Cigarette companies are buying more and more offshore, and farmers are going bankrupt,” says Wiseman. “This will help stop that hemorrhaging.” Also representing the growers was Alexander Pires of D.C.’s Conlon, Frantz, Phelan & Pires. Denise Keane, Philip Morris USA’s vice president and general counsel, said in a statement that the deal “allows us to put to rest this controversy and to begin to make progress on issues that tobacco manufacturers and growers have in common.” R.J. Reynolds did not settle. In a statement, it said it “has not engaged in the activities alleged in the complaint and remains confident that it will prevail at trial,” which is set for April 2004. — Jonathan Groner D.C.’S NEW CORPORATION COUNSEL It took nearly nine months, but D.C. Mayor Anthony Williams has finally selected someone to head the Office of Corporation Counsel. Last week, Williams nominated veteran D.C. federal prosecutor Robert Spagnoletti to run the 200-lawyer, $50 million legal shop. Spagnoletti, chief of the sex offense/domestic violence section in the U.S. Attorney’s Office, fills the slot left open by Robert Rigsby, who became a D.C. Superior Court judge last September. Spagnoletti says it’s an “honor and a challenge” to be selected for a job that “touches the lives of the people of the District of Columbia.” The 40-year-old Spagnoletti, a D.C. resident while a law school student at Georgetown University and since joining the U.S. Attorney’s Office in 1990, has his work cut out for him. For one, the agency has a hodgepodge of responsibilities: defending the city in civil matters, prosecuting all juvenile crime and simple misdemeanors, representing children in neglect matters, and filing civil fraud and consumer actions, to name a few. It has struggled to attract and keep talented lawyers willing to work for low pay. Spagnoletti, who must still win the approval of the D.C. Council, says his work with the criminal and child neglect areas gave him an inside view of the office. “There were extremely talented lawyers with lots of promise, but they needed support and additional training,” he says. — Tom Schoenberg YOU KNOW HOW TO WHISTLE, DON’T YOU? The two top-ranking government lawyers responsible for championing the rights of federal employee whistleblowers will leave their posts next month. Elaine Kaplan, who has been head of the U.S. Office of Special Counsel since 1998, will join D.C.’s Bernabei & Katz as of counsel, focusing on civil rights, employment law, and litigation. Kaplan’s experience on whistleblower matters will be critical to the 10-lawyer civil rights and employment firm, says name partner Debra Katz. “It’s a big decision in the life of a small firm,” Katz says of Kaplan’s hiring. During Kaplan’s tenure, the OSC introduced an alternative dispute resolution program and increased its staff. Kaplan, 47, says she worked to raise the agency’s profile and to gain more trust from the whistleblower community and federal employees. The agency’s No. 2, Deputy Special Counsel Timothy Hannapel, 43, will rejoin the National Treasury Employees Union general counsel’s office after five years at the OSC. President George W. Bush is expected to nominate a new special counsel soon. — Lily Henning DIVERSITY PUSH Kilpatrick Stockton is formalizing its diversity effort with a new council to tackle minority recruitment and retention issues. Atlanta partner W. Randy Eaddy heads the 12-member group, which reports to the 475-lawyer firm’s executive committee and has its own budget. “We recognized a few years back that in order to do diversity the right way, we need to approach it more systematically and comprehensively,” Eaddy says. Developing mentoring programs, beefing up minority retention efforts, and widening the scope of associate and lateral recruiting are some of the primary goals. Staffer Monica Jones will support the council and carry out the firm’s new program. D.C. partner and council member David Pickle says the council won’t take on hiring responsibilities, but has the blessing of the firm’s directors of recruiting and human resources to take an active role in shaping hiring strategies. — Lily Henning

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