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Federal judge: Chesley's attorneys tricked me

Posted: 3:55 PM, Feb 18, 2016
Updated: 2016-02-18 17:36:04-05

CINCINNATI -- The woes don't seem to be ending anytime soon for Stan Chesley.

A federal judge is now saying he feels duped by attorneys for Chesley, the once-prominent rainmaker known as the "Master of Disaster" for his success in winning billions of dollars for thousands of clients over the course of five decades.

U.S. District Judge James G. Carr ordered Chesley and his attorneys to appear next month and explain why he shouldn't find they committed fraud on the court. Carr says in court documents that Chesley and his attorneys designed a scheme to avoid paying former clients who successfully sued him because he took far too much compensation in attorney's fees.

Carr's ire stems from a lawsuit Chesley's firm — Waite, Schneider, Bayless and Chesley — filed against a former client, Allen Davis. The law firm was trying to collect fees from Davis, and the case went to a jury trial in late August in Carr's court. Because it looked like the jury might be deadlocked, he suggested the firm and Davis reach a settlement, Carr wrote. They did, the terms of which were confidential, and both the firm and Davis agreed to dismiss the case in late September.

But another former client, Mary Lou White-Lynch, said Chesley's firm should turn over the money from the Davis settlement to her attorney. She's among a group of people who successfully sued Chesley for taking $7.5 million more in attorney's fees than his contract allowed as part of a 2001 class-action lawsuit against the maker of diet drug Fen-Phen.

And while Chesley argued he didn’t realize he had been overpaid, the Kentucky Supreme Court didn’t believe him, and he was eventually disbarred in March 2013 amid findings of professional unethical conduct.

Less than a month later, in April 2013, Chesley executed an agreement to leave his law firm and retired from practicing law in Ohio.

Two years later — and about two months before the firm's lawsuit against Davis went to trial — the Boone County Circuit Court ordered that all payments from Chesley's interest in his former firm be turned over to the Fen-Phen plaintiffs, and that if "for any reason, including ... any action by another court in other jurisdiction, monetary payment(s) is/are made to Chesley from his interest in (the law firm), Chesley and his attorney shall immediately turn over said payment(s)" to the Fen-Phen plaintiffs.

Even more, the Boone County Circuit Court found in late September that the wrap-up agreement transferring Chesley's shares in his namesake law firm to a trustee was a "sham" and that "Chesley continues to control and direct" the firm, Carr wrote, citing the Boone County Circuit Court:

"'Chesley is utilizing [the law firm] and its existence during what is supposed to be a wind-up period, to prevent (the Fen-Phen plaintiffs) ... from executing on their Judgment. The Court finds he is taking action to render himself insolvent while directing assets to (the law firm), including fees from (litigation), and the transfer of $59 million from his personal accounts to (the law firm).'"

Carr wrote he was unaware of the Boone County Circuit Court's findings when he suggested the law firm settle with Davis. Chesley appeared at the Davis trial as the law firm's representative, "(and, I assumed, appeared as its principal)," Carr wrote.

Chesley even took the stand in the Davis case, and he had three prominent character witnesses — Xavier University President Michael Graham, former Cincinnati mayor Mark Mallory and now-former Hamilton County Common Pleas Judge Norbert Nadel — testify on his behalf, though Carr wrote one of them appeared to be unaware of the circumstances surrounding Chesley's disbarrment.

Had he known "but a fraction" of the circumstances from the Boone County Circuit Court, Carr wrote he would never have "accepted a settlement that enabled Chesley — or others acting on his behalf or in concert with him — to evade the obligation to pay over the settlement proceeds" to the Fen-Phen plaintiffs.

"I feel tricked, complicit, albeit unwittingly so, in chicanery, duplicity, and mendacity. No judge should ever find himself in that situation," Carr wrote.

The judge wrote "there is reason to believed that a fraud has been perpetrated on this court" because Chesley's attorneys knew or should have know about the Boone County Circuit Court's findings but failed to disclose that information in the Davis case.

Adding to Chesley's woes, he and his wife, Judge Susan Dlott, were robbed at gunpoint in their Indian Hill home in December. Madeira police arrested three suspects after a traffic stop later the same day.

WCPO has reached out to Chesley's attorney, and is awaiting comment.