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.

According to records Dougherty voluntarily gave Zeder, he spent hundreds of thousands of dollars but had no documentation to support the expenditures, including nearly one million dollars' worth of checks payable to "cash," most of which had never been disclosed to Sturge representatives. The time sheets Dougherty turned over to Zeder defied reality. Occasionally the combined hours he reported to Sturge and to a second Lloyd's syndicate exceeded 24 hours for a single day. From court records, Zeder learned that Dougherty handled 146 other cases during the same period.

When Zeder interviewed half a dozen attorneys who had worked in Dougherty's office, they characterized his billing figures as grossly inaccurate. Dougherty charged Sturge for almost 4000 hours on behalf of Jonathan Fordin. Fordin estimated his actual time spent on the case at ten to twenty hours. Oscar Syger, whom Dougherty clocked at 2520 hours, said he worked several days, mostly "schlepping boxes" to and from court. June Baker, credited with 1300 hours, reported that she did no work on the case at all. "Very conservatively," Zeder wrote in the Bar complaint, "we estimate underwriters were overbilled in excess of $1,437,118 in attorneys' fees, and well in excess of a million in [other] costs." After his termination, Dougherty forwarded two statements to Sturge demanding $1.3 million more. These brought his total billing to $10.5 million over five years. Sturge, which had already paid Dougherty more than nine million dollars, refused to pay this final bill.

Zeder's figures, startling as they are, do not include any assessment of the "reasonableness" of Dougherty's expenditures. For example, his decision to file numerous motions for sanctions against Bilbeisi's lawyers (accusing them of colluding with their client) cost Sturge thousands. Dougherty justified the motions by dangling the possibility of securing damages from Michigan attorneys David Gass and Richard Postma. "We should be in a position to obtain a sum in excess of $7 million," he wrote to Sturge underwriters in early 1992. (In the same memo, Dougherty suggests filing a RICO claim against Gass and Postma's entire firm.) All the motions were dismissed. They did have one notable effect, however: Gass and Postma withdrew from the case. "Once the attack switched from our client to us, we had to get out," recalls Postma. "We were spending a small fortune defending ourselves from Dougherty's ravings."

Zeder filed his Bar complaint against Dougherty on September 30, 1992. Six months later, in April 1993, the Bar assigned a special counsel to review the matter with Randi Lazarus, a Bar assistant staff attorney.

In letters to the Bar, Dougherty has presented numerous lines of defense. He insists Sturge's complaint amounts to a fee dispute, in which the Bar has no business meddling. He argues that he has made a good-faith effort to arbitrate with Sturge representatives. He accuses Lloyd's honchos of conspiring with BCCI and others to discredit him. He admits that his billing was partially erroneous but contends that he failed to charge Lloyd's for extra work that more than makes up the difference. He further maintains that he deserves a bonus for performing exemplary work.

Dougherty's letters also provide numerous explanations for the roughly five million dollars in costs he charged Sturge. He claims, for instance, that he paid hundreds of thousands of dollars for the time and expenses of witnesses who would only accept cash and who refused to supply him with receipts. Dougherty also notes costs of $5000 for "protection" during his 30 trips to Central America. One letter sent to Bar officials by Dougherty's lawyer explains, "There have been at least two attempts on [Dougherty's] life, including one by machine-gun-carrying thugs, one of whom was killed while trying to shoot Dougherty." Dougherty attached more affidavits to back his claims, most of these from individuals who had been paid for their services pertaining to the case. ("The gunfight and the death threats A that stuff never happened," contends one source, who spent time with Dougherty in Guatemala. "It's just Jim's Walter Mitty nonsense.")

In August 1993 the Bar began taking sworn statements from Dougherty's former employees, who simply reiterated what they had told Jon Zeder a year earlier. This past November a Bar grievance committee found probable cause that Dougherty had violated Bar rules by overbilling his clients, and last month a 27-page complaint was sent to the state Supreme Court. Earlier this month, the court appointed as a referee Circuit Judge Gerald Hubbard, who has six months to hold another hearing. If Hubbard finds that Dougherty has acted improperly, he will recommend a punishment ranging from a private admonishment to disbarment. Depending on the outcome, Dougherty, or the Bar, can then appeal the decision to the state Supreme Court. A final ruling will surely take months, possibly years. "Zeder gave the Bar that case on a silver platter," observes one former Dougherty associate. "It should have taken them about five minutes to figure out what was going on."

Bar attorney Randi Lazarus argues that the thirteen months spent investigating was necessary, given the complex nature of the complaint, along with Dougherty's determination to dispute it by inundating the Bar with pounds of papers. At one point, for instance, he hired a moving company to transport the entire case file of his federal racketeering suit A all 3000 docket entries A to the Bar offices on Brickell Avenue. They filled half a room.

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