Hood seeks to continue State Farm probe

Asks judge to remove prohibition
By ANITA LEE
January 24, 2008



Mississippi's current and former attorneys general are back on the offensive against State Farm insurance companies.

Attorney General Jim Hood is asking a federal judge to dissolve a court order that prevents him from continuing a criminal investigation involving State Farm. Hood said the investigation is not related to a 2006 criminal probe by his office into State Farm's handling of policyholders' Hurricane Katrina claims. Former Attorney General Mike Moore, a mentor to Hood, filed a sworn statement to back Hood's assertion that the 2006 investigation was not intended to coerce State Farm into a settlement of policyholder claims.

Court records indicate State Farm and Hood disagree over a subpoena for State Farm records Hood wants for his current criminal investigation. The investigation involves State Farm's handling of National Flood Insurance Program claims, also the subject of federal inquiries, according to a December letter State Farm wrote Hood objecting to the subpoena.

State Farm said the subpoena violates a January 2007 agreement with Hood to end a criminal investigation into the company's Katrina claims-handling practices in exchange for a global settlement with Coast policyholders.

Hood said the agreement applied to his 2006 investigation, but the company has no right to "blanket immunity from any criminal acts related to Hurricane Katrina."

U.S. District Judge David C. Bramlette III is expected to reconvene a hearing in Jackson to consider whether he should lift suspension of Hood's investigation.

State Farm has accused Hood of using the threat of criminal prosecution to coerce settlement of claims for policyholders represented by his political allies, including attorney Richard "Dickie" Scruggs and Moore.

Moore said in a sworn statement he and Hood did not use the threat of criminal prosecution to coerce State Farm into the proposed global settlement with policyholders in January 2007. Instead, Moore said, State Farm introduced the criminal investigation into settlement talks, not Hood. Moore said State Farm would agree to resolve policyholder claims only if the investigation ended.

Moore also has filed a separate document in a policyholders' lawsuit, describing his role as "facilitator and negotiator" between parties to the proposed global settlement. He said State Farm encouraged him to explain the settlement in a federal court hearing, after which U.S. District Judge L.T. Senter Jr. rejected the agreement. The Scruggs Katrina Group of attorneys already had reached a settlement with State Farm in November 2006 on behalf of 640 clients, which Moore says led to negotiations for a global settlement applying to all Coast policyholders.

Moore and Scruggs also worked together in the 1990s, while Moore was attorney general, to reach landmark settlement of a lawsuit they filed against tobacco companies on the state's behalf.

Scruggs and two other members of his Oxford law firm were indicted in late November on charges they conspired to bribe a state court judge in a dispute over legal fees earned from the 2006 settlement with State Farm. Jackson attorney John G. Jones filed the lawsuit in March, after his firm withdrew from SKG.

As a result of the federal indictment, the Scruggs attorneys also withdrew from SKG, which then changed its name to the Katrina Litigation Group.

State Farm has asked that Scruggs Katrina Group, and now the Katrina Litigation Group, be removed from policyholder cases, alleging ethical and legal improprieties. KLG also has denied any improprieties.

Senter, who is presiding over policyholder lawsuits filed in Gulfport, is expected to decide whether the KLG should be disqualified.

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