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Fraud Convictions in Fen-Phen Settlement Case

A courtroom scene with attorneys in action during a trial.

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News Summary

William Gallion and Shirley Cunningham, Jr. have been convicted of fraud related to the fen-phen settlement, resulting in significant financial losses for clients. They received lengthy prison sentences and were ordered to pay restitution. The case highlights major ethical concerns in attorney-client relationships and the need for increased transparency within the legal system.

Lexington – Attorneys William Gallion and Shirley Cunningham, Jr. have been convicted of fraud in a scandal that has drawn national attention, stemming from a settlement related to the controversial diet drug fen-phen. The U.S. District Attorney described their actions as deceitful and misleading, resulting in significant financial losses for their clients.

The case revolves around a class action lawsuit initiated in 1998, where Gallion, Cunningham, and fellow attorney Melbourne Mills, Jr. represented roughly 440 plaintiffs against American Home Products, Bariatrics Inc., and Dr. Rex Duff. The lawsuit was a response to serious health problems linked to fen-phen, a weight-loss drug combination that was marketed in the 1990s but later associated with serious health conditions, including pulmonary hypertension and heart valve damage.

In May 2001, the class action suit settled for over $200 million. However, reports indicate that the plaintiffs only received approximately $74.2 million of the total settlement amount, while Gallion, Cunningham, and Mills allegedly took home about $74.8 million. Additional legal fees amounted to $30 million for other attorneys involved, and a Kentucky Fund for Healthy Living was established, totaling $20 million, which was used to pay Gallion and Cunningham $5,300 each monthly without the clients’ knowledge.

The conviction against Gallion and Cunningham stems from multiple counts of wire fraud and conspiracy to commit wire fraud, accusations that arose due to their failure to provide clients with accurate information about the settlement. They reportedly pressured many clients to accept lower claim values under false pretenses. Following a hung jury in 2008, both attorneys were convicted in 2009 of their respective charges.

Gallion received a prison sentence of 25 years, while Cunningham was sentenced to 20 years. In addition to their imprisonment, both were ordered to pay a combined restitution of $127 million to the defrauded clients. After their convictions, a second payment was issued to the plaintiffs, but it still fell short of the expected financial recovery.

In a turn of events, William Gallion was granted clemency by President Biden in 2024, which permitted his release on December 22, five years earlier than his scheduled release of 2029. Cunningham, on the other hand, completed his sentence and was released in March 2024. Melbourne Mills, who was acquitted of fraud charges, faced his own consequences as he was disbarred but claimed to be unaware of the fraudulent actions at the time due to struggles with alcoholism.

This legal case is characterized as one of the largest fraud scandals related to the fen-phen settlement, resulting in extensive legal repercussions and financial strain for the plaintiffs involved. The case has raised serious ethical questions about attorney-client relationships and the responsibilities of legal representatives in handling class action lawsuits.

The actions of Gallion, Cunningham, and Mills have prompted scrutiny regarding the safeguards in place to protect clients from similar misconduct in the future. Their case serves as a critical reminder of the potential for exploitation within the legal system, underscoring the need for greater transparency and accountability in attorney-client dealings.