A Northern District of Alabama judge recently asked federal prosecutors to charge Mississippi plaintiff's attorney Richard "Dickie" Scruggs with criminal contempt. It is alleged that Scruggs violated a preliminary injunction issued in December 2006, which ordered him to turn over all documents secretly copied by two whistleblowers, Kerri and Cori Moran. The Moran sisters, both former employees of E.A. Renfroe and Co., Inc., claim to have uncovered evidence that State Farm and E.A. Renfroe committed fraud to deny claims following Hurricane Katrina.

Instead of returning the documents to E.A. Renfroe as ordered by the judge, Scruggs gave the documents to Mississippi Attorney General Jim Hood. Meanwhile Scruggs contends that he did not violate the judge's order which required him to turn over the documents to law enforcement, which is what Scruggs claims to have done. As a result of his actions, State Farm filed a motion in at least one Katrina-related insurance case, seeking to have Scruggs and his firm disqualified from representing the policyholders.

In the meantime, however, on Wednesday, June 20, Scruggs filed a civil action against State Farm, alleging that State Farm violated the federal Racketeer Influenced Corrupt Organization Act (RICO), and cheated policyholders out of $3.6 million in insurance payments. The Scruggs firm claims to have proof that State Farm pressured its engineers to manipulate engineering reports on Katrina-related damage so water could be blamed for the damage rather than wind, and State Farm could deny claims under policy exclusions for water damage. The suit was filed on behalf of 21 policyholders against State Farm, E.A. Renfroe and Forensic Analysis & Engineering of Raleigh.

Click here to view a copy of the RICO action.