Winning Wasn't Everything

Jim Dougherty exposed insurance fraud for Lloyd's of London -- until they concluded the Miami Beach lawyer had overbilled them by millions. Now the U.S. attorney is involved and things have turned very ugly, indeed.

The senator spoke, as befits a Democrat from Massachusetts, with the moral indignation of a Kennedy. "Today is really a case study in the way a bank can foster the sort of conspiracy that rips at the fabric of our values," John F. Kerry warned, his small mouth frowning.

Though widely regarded by his brethren as Capitol Hill's ranking conspiracy theorist, Kerry had been lionized during the Eighties for ferreting out details of the Iran-contra affair and exposing American collusion with Panamanian bogeyman Manuel Noriega. By October 1991 the towering lawmaker had set his sights on a new culprit: the notorious Bank of Credit and Commerce International (BCCI), whose clientele included drug smugglers, terrorists, and money launderers.

On this, the fifth day of Senate hearings devoted to the outlaw bank, Kerry used his introductory remarks to raise the startling possibility that BCCI had operated with the tacit approval of U.S. officials. He then ceded the floor to a man he hoped would bolster this hunch: James F. Dougherty II.

Dougherty was at no loss for words. In a rambling discourse broadcast live on C-Span, the beefy Miami Beach attorney explained how his pursuit of a fraudulent insurance claim by a Jordanian named Munther Bilbeisi had revealed BCCI's rotten underbelly. Directing the assembled legislators to an endless ream of exhibits, he described how Bilbeisi, in cahoots with friendly bank branch managers, had smuggled tons of coffee into the U.S., sold arms illegally, and bribed foreign officials. The government, Dougherty noted darkly, had done next to nothing about any of this, despite his herculean efforts to encourage them.

"Let us put it on the table," snapped Republican Hank Brown of Colorado, plainly unnerved by Dougherty's recitation. "Is there any way, in your view, that the U.S. Customs Service could have not been involved in this conspiracy?"

"Senator, we have documents that show Customs knew in June of 1983 that Bilbeisi was [smuggling]," Dougherty replied. "Now the question is, when this information is brought to the Justice Department and there's absolutely zero interest: Why?"

This, of course, was precisely what Kerry had sought: a query designed to stir doubts about unseen plots, executive-level coverups, and the shaky cornerstones of democracy.

To those who knew Jim Dougherty in his previous incarnation, as a smalltime insurance defense attorney prone to fits of cussing and braggadocio, his performance before the Senate was surreal, like watching a local repertory actor suddenly soliloquizing beneath the lights of Broadway. For Dougherty himself, it marked the summit of a crusade that had consumed his life -- and, as it turns out, eroded his sense of morality.

No more than six months after delivering this testimony, his client, Lloyd's of London, forced him to resign, claiming that he had overbilled them at least $2.5 million. This past November a Florida Bar grievance committee found probable cause to support the charges.

Dougherty is now the target of a federal fraud investigation. After sitting on the case for nearly two years, investigators are also taking a keen interest in how the 54-year-old attorney spent the nine million-plus dollars Lloyd's paid him. Last month the U.S. Attorney's Office subpoenaed his records and empaneled a grand jury to hear testimony. The fraud allegations, however, are only the initial phase of the probe. The other allegations against Dougherty run to the bizarre: that he bribed foreign officials, paid off witnesses, smuggled an undocumented Salvadoran woman into the U.S., and received confidential documents from the U.S. Customs Service. Sources familiar with the inquiry say the feds are examining Dougherty's purported associations with a colorful cast of Miamians, including convicted arms dealer Sarkis Soghanalian and convicted bribe-taker and ex-Miami Beach mayor Alex Daoud.

Cast by admiring journalists as a loose cannon who helped sink BCCI, Dougherty now appears destined to play a more inglorious role: that of a man corrupted by the righteous power vested in him, an unhinged Ahab whose world became a mirror image of the evil empires he sought to vanquish. "By the end there was no difference between Jim and Bilbeisi," observes one former confidant. "They were both beyond the law."

Dougherty, who once held forth for journalists on a daily basis, initially agreed to an interview with New Times, but on the advice of his attorney he has since declined to discuss any of the accusations leveled against him. He has left unanswered more than a dozen phone calls and did not respond to three letters with written questions, except to characterize all the allegations against him as "false...made by individuals who lack credibility...." Instead he defends himself via fax, transmitting a deluge of documents intended to incriminate his accusers, along with letters of support and newspaper articles from his heyday, all of which attest, quite by accident, to the depth of his fall.

At age 31, two years out of law school, Richard Lehrman was a young man with prospects. There was interest from the fancy firms on Brickell Avenue, the lure of hanging out his own shingle, and most unlikely, an offer from a sole practitioner in Miami Beach named James F. Dougherty II.

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