Law Firm Assets Frozen in Connection to Fraud Case

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Summary: A court ruling placed a freeze on the assets of a law firm after their attorney that was involved in a fraudulent scheme transferred their money into the law firm.

A group of lawyers who settled a class action lawsuit kept the settlement money and then one tried to transfer the remaining to a law firm. Of the group of lawyers, two have been convicted and three permanently disbarred. The law firm that received the money has now had their assets frozen by the U.S. Court of Appeals for the Sixth Circuit.

  

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Ohio firm Waite, Schneider, Bayless & Chesley L.P.A. is not allowed to transfer any property after one of the disbarred attorneys transferred millions of dollars to it in an attempt to render himself “judgment proof” from the original lawsuit’s $42 million award, according to Big Law Business.

The original lawsuit was brought by a class of plaintiffs in Kentucky. They were suing American Home Products for injuries they had received from using their diet drug “fen-phen.” Stanley M. Chesley, 82, was co-counsel in that suit. This suit settled in 2001 for over $200 million. The lawyers were awarded the settlement to split up between the class members. As Senior Judge Richard F. Suhrheinrich explained, “So the fraud began.”

The attorneys were to collect their contingency fee for a third of the settlement. They ended up keeping 63 percent, making “out like bandits,” Suhrheinrich said.

A Kentucky state judge was drawn into the scam by Chesley. The attorney convinced the judge, Joseph F. Bamberger, who has since been disbarred, to sign an order to change the fee agreement and to seal the record. They also created a charitable organization that the judge would serve as a paid director over. He was being paid $5,000 a month.

Once it was discovered what the attorneys had done, a judgment awarded the plaintiffs $42 million. The attorneys were also disbarred by the Kentucky Supreme Court. Two of them were also convicted of fraud. Chelsey was able to avoid prosecution by testifying against his fellow conspirators.

After this Chesley then handed control of the law firm to another lawyer and transferred $59 million of personal funds into the firm in order to keep the money out of the plaintiffs’ hands and to show “empty pockets to show his judgment creditors when they inevitably came knocking.”

Chesley is married to Judge Susan J. Dlott of the U.S. District Court for the Southern District of Ohio. The Cincinnati Business Courier claims the couple owns “the most expensive home for sale in Greater Cincinnati.” His transfer of money from his personal funds reduced the couple’s net worth from $29 in 2011 to $2 million in 2012.

The plaintiffs have now sued him in federal court to recover the funds. The court granted the injunction, stopping Waite, Schneider, Bayless & Chesley L.P.A. from moving assets until the $42 million judgment can be satisfied. Judges Julia Smith Gibbons and Raymond M. Kethledge joined the decision against the firm.

Waite, Schneider, Bayless & Chesley L.P.A. has retained Cohen, Todd, Kite & Stanford. The plaintiffs are represented by Dinsmore & Shohl LLP.

Do you think Chesley should be prosecuted criminally now? Should his wife’s career be affected by their actions to transfer their assets to his law firm? Share your thoughts with us in the comments below.

To learn more about other attorneys that kept settlement funds, read these articles:

• Gregory Stagliano Arrested for Stealing Client Settlement Funds
• Smithtown Attorney Vincent Trimarco Jr. Indicted for Stealing Settlement Money from Young Girl
• Greedy Ft Lauderdale Attorney Kept Clients’ Settlements

Photo: cincinnati.com