Scruggs Katrina Group File RICO Suit Against State Farm

Investigation shows pattern of corrupt behavior violating Federal law; policyholders were cheated out of claims payments

June 20, 2007

MOSS POINT, MS – The Scruggs Katrina Group (SKG) has today filed federal charges against State Farm, E.A. Renfroe Company, and Forensic Analysis and Engineering Company on behalf of 21 policyholders whose homes were destroyed in Hurricane Katrina. The suit has been filed in the US District Court for the Southern District of Mississippi under the federal Racketeer Influenced Corrupt Organization Act ("RICO").

"We have proof that State Farm and its partners conspired to cheat policyholders out of rightful payments worth millions of dollars," said SKG attorney Don Barrett. "They willfully caused victims of Hurricane Katrina extreme emotional and financial distress in their calculated strategy to falsify and conceal evidence, intimidate anyone who got in their way, and use their privileged position to pressure policyholders into accepting pitiful payments both before and during the mediation process."

The lawsuit is the result of a nearly two-year investigation that uncovered evidence – including e-mails, altered engineering reports, confessions, and other smoking guns – that tell the story of what State Farm and corrupt companions have done to the families of the Mississippi Gulf Coast after Hurricane Katrina.

It is a story of how State Farm and its web of surrogate companies conspired to deny claims that should be paid by State Farm and to shift liability to the federal-funded flood insurance program. Actions taken by State Farm and conspirators included:

• threatening experts who disagreed with their desired result
• concealing information that would work in the policyholder's favor
• destroying or falsifying reports
• placing pressure on engineers to use scientifically inaccurate and deceptive language
• firing engineers who refused to be corrupted
• inventing a new policy to exclude all hurricane damage
• using their strength and size to intimidate policyholders in the mediation process

Most disturbingly, the court submission tells of the cold and calculated way that State Farm orchestrated a coordinated strategy to accomplish their objectives. Even before Hurricane Katrina hit, State Farm began holding strategy "meetings of the minds" at corporate headquarters to devise ways to avoid paying claims. A few days following the hurricane, a claims "council" continued to meet to develop a strategy for maximizing payment of national flood policy claims. Later, State Farm and Renfroe employees met to participate in "mock mediations" during which they practiced scripted dialogue designed to demoralize policyholders.

The investigation has shown that there are potentially hundreds or more policyholders who have been victims of the corrupt enterprise. It also reveals not just how State Farm treated the 21 clients initiating this lawsuit, but how State Farm treated all their policyholders who lost their homes. This consolidated lawsuit is the first of its kind on the Mississippi Coast.

Former Mississippi Attorney General Mike Moore added: "Thousands of State Farm policyholders looked forward with great hope and expectation to the day when the supposedly independent adjuster and objective engineer would inspect their property and make a fair and honest assessment of their loss. Little did these victims know that the deck was stacked against them. There would be no fair dealing. The fix was on and State Farm had already pre-written the reports to deny the claims."

For more information, visit www.scruggskatrinagroup.com on the web.

About the Scruggs Katrina Group
The Scruggs Katrina Group is a legal team consisting of Mississippi attorneys from the following firms: Don Barrett and Marshall Smith of the Barrett Law Office; Dewitt Lovelace of the Lovelace Law Firm; David Nutt, Meg McAlister, and Derek Wyatt of Nutt & McAlister, PLLC, and Richard Scruggs, Sid Backstrom, and Zach Scruggs of the Scruggs Law Firm. For more information go to scruggskatrinagroup.com

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The court submission and an indexed summary can be found at www.scruggskatrinagroup.com.