Editor’s note: Desi Canela, a former Express-News journalist, is in Gulfport, Miss., for the federal fraud trial of San Antonio attorney Mikal Watts and six co-defendants. She is blogging as an unpaid observer who supports Watts and his team. Look for daily updates at www.mikalcwatts.com.
The second week of the federal fraud trial of San Antonio plaintiffs attorney Mikal Watts and six co-defendants in Gulfport, Miss. saw the defendants openly turn on one another, a development anticipated earlier in the proceedings when Watts, who is representing himself, told jurors he had been “ripped off” by individuals his law firm paid $10 million in investigative fees and expenses.
Public defender John Weber, who represents Thi Houng “Kristy” Le, filed a motion to sever, seeking a separate trial for his client. Weber said he did not know before the trial opened that his client would be accused of wrongdoing by any of the other defendants.
Watts, Le, and co-defendants David Watts, Wynter Lee, Eloy Guerra, Gregory P. Warren, and Thi Hoang “Abbie” Nguyen were indicted in October 2015 on 95 counts of conspiring to invent and submit 40,000 false claims of individuals who suffered financial losses stemming from British Petroleum’s 2010 Deepwater Horizon oil spill disaster in the Gulf of Mexico off the coast of Louisiana.
U.S. District Judge Louis Guirola Jr. dismissed 22 of the charges on the first day of the trial.
The BP oil spill was the worst environmental disaster in U.S. history. Five million barrels of crude oil poured into the Gulf of Mexico, devastating environmentally sensitive shorelines, shutting down the seafood industry, and killing 11 oil rig workers. The spill has cost BP an estimate $62 billion in losses.
Watts, part of a larger team of lawyers set to try the civil lawsuit against BP on behalf of tens of thousands of individuals and businesses financially harmed by the oil spill, conducted several pre-trail depositions of senior BP executives. BP accused Watts of presenting falsified claims in 2013, and days before the trial was set to open, a phalanx of 80 U.S. Secret Service agents raided Watts’ San Antonio law offices, leading him to withdraw from the trial team.
Weber’s motion was made early in last week’s proceedings after Le became the focus of the defenses of the co-defendants.
“I was not under the impression that Ms. Le would become the target of the defenses of one, two, three, four, if not five co-defendants,” Weber said. “This became very clear from the minute that Mikal Watts stood up to address the jury in voir dire (jury selection) when he said, ‘I’ve been ripped off. Has anyone else been ripped off?’
“More specifically directed at Ms. Le were the comments of Mr. (Chip) Lewis who represents Eloy Guerra,” Weber continued. “Mr. Lewis said that the proof in this case will reveal massive amounts of fraud, and it will be us, Mr. Guerra’s team, who will reveal the real fraud.”
Watts and his firm claim they were duped by Le, Warren, and Guerra after they paid them $10 million to work on their behalf to register and verify claimants. Instead, the defense asserted in their opening statement that Le and other contractors spent the money on various personal items, including clothes, strip clubs, casinos, Vegas hotel rooms – $14,000 a night spent by Le alone – condos, restaurants, bars, and even cigars.
Judge Guirola was unconvinced by Weber’s argument and denied the motion.
“From what I can see, from what very little evidence has been provided, and of course, I cannot anticipate what the remainder of the government’s case will show, but from what I see so far, the jury could very well believe that the Watts Guerra firm and all the defendants that have been charged with identity theft, in fact, relied in good faith on materials that had been provided to them,” Guirola said.
“Under the circumstances, you (Weber) must have known well in advance of the trial that Mr. Watts, both David and Mikal, as well as some of the other defendants up the line, were not simply going to sit back without at least arguing to this jury that they relied on the documents that were being sent to them,” Guirola said.
The jury heard from 33 government witnesses over the course of the trial’s first week of testimony. Half of those witnesses were Vietnamese immigrants who work in the coastal seafood industry and who testified in their native language through a court interpreter. Most were questioned by prosecutors about their names, addresses, and other personal identification to establish they did not seek out the services of Watts or his law firm. Jurors seemed disinterested in the monotonous exchanges extended by in-court translation. Some appeared to fall asleep.
On Wednesday, prosecutors led by Assistant U.S. Attorney Jerry Rushing, presented 12 of the nearly 3.5 million documents obtained during the raid of Watts’ San Antonio offices to make its case during 90 minutes of testimony by trial lawyer John Cracken.
Prosecutors allege Watts and his co-defendants fabricated the names of more than 40,000 clients in order to gain a potentially profitable spot on the Plaintiffs’ Steering Committee, an entity made up of 15 lawyers who will lead the BP multi-district litigation when the civil trail finally proceeds.
Cracken, a highly regarded lawyer who litigated some of the largest mass torts in American history, including TransUnion, has worked with Watts on several mass torts including the litigation against BP.
Cracken is currently working together with Watts on litigation against Syngenta, a multi-district mass tort representing more than 50,000 U.S. corn farmers affected by the contamination of U.S. corn crops in 2011-2012.
In his testimony, Cracken said the government’s lead witness, Kenneth Feinberg, expressed concerns about Cracken and Watts getting involved in the Gulf Coast Claims Facility (GCCF) with a client base of more than 40,000 clients. At the time, Feinberg was spearheading the GCCF, the official entity created to distribute emergency relief money to BP victims.
“He had a number of concerns,” Cracken said of Feinberg. “Number one, I think that his whole view was really colored by the fact that he didn’t think there were 40,000 Vietnamese commercial fishermen in the Gulf, and therefore he was very concerned about the integrity of the claims.”
He testified that Watts instructed him to request the GCCF to place 25,000 emergency claims on hold until the firm could collect more documents to confirm they were valid.
Cracken also said the Watts field team, led by fellow co-defendants Guerra, Warren, and Le, could have been more diligent about gathering information from potential plaintiffs.
“It was just skeletal data about names and addresses,” Cracken said of issues he saw with the Watts client docket. “Everybody was a deckhand like that’s the only job in the Gulf of Mexico. One word, deckhand.
“I lost faith in Eloy Guerra and Kristy Le and Greg Warren,” he said. “I just lost faith personally in their ability to manage the process of collecting data that would actually be useful to these victims and getting them paid.”
Cracken testified the Watts firm elicited help from a team of ethics consultants, including recently retired U.S. Rep. Joseph Cao (R-LA), a New Orleans lawyer. The firm disclosed to Cao the numerous problems the field team was having with gathering supplemental information from plaintiffs.
Watts, who has chosen to represent himself, asked Cracken during cross-examination if there is any financial incentive in conjuring up a plan to intentionally file suit for 40,000 fictitious clients in order to try to gain a spot on the Plaintiffs Steering Committee. Cracken said there was no such incentive.
“It’s like exposing yourself to Ebola. It’s just ridiculous. Nobody would do it,” replied Cracken.
The judge abruptly excused the jury for the day after attorney Chip Lewis, representing Eloy Guerra, asked Cracken on cross-examination if he was aware that “Kristy” Le and Warren were having an “intimate relationship.”
Judge Guirola struck the question and instructed the jury to disregard it.
The second week ended with testimony from former employees of the Watts firm, including Krystal Cox, who handled mail.
Week three begins Monday. The government has indicated that it will rest its case by Tuesday, Aug. 9, with a possibility of ending as early as next week. Watts’ defense is expected to begin with a lengthy narrative statement he intends to deliver from the witness box on Wednesday, Aug. 10.
Top image: (From left:) State District Judge Sandra Watts of Corpus Christi, her son Mikal Watts, and Nueces County-Court-at-Law Judge Terry Shamsie walk into the courthouse in Gulfport, Miss. Photo by Desi Canela.