KICKBACKS: ZERO DOLLARS
Court: Racine County Circuit Court
Case name: S.C. Johnson & Son, Inc. vs. Milton E. Morris, et al.
Case number: 04-CV-1873
Judge: Wayne J. Marik
Verdict & Settlement: Defense verdict
Award: Zero dollars
Disposition date: June 17, 2009
Plaintiffs attorney (firm): Jeffrey L. Willian and Donna M. Welch, Kirkland & Ellis, LLP; Mark Cameli, Reinhart Boerner Van Deuren SC
Defendants attorney (firm): Bay Darnell, Schoone, Leuck, Kelley, Pitts & Knurr, S.C. Attorney Timothy S. Knurr; Leonard J. Lewensohn, Lewensohn Law Office; David Eggleston and All Modes Inc.; Kenneth R. Ross and Sean Crotty, Coleman Law Firm
Defense counsel’s summary of the facts: On or about February 2004, S.C. Johnson & Son, Inc., through a “tip” learned that there allegedly was inappropriate conduct going on within their transportation department with regard to rates, kickbacks, and the like. At that point, S.C. Johnson instituted a massive covert investigation of the situation which included monitoring internal e-mails, the hiring of experts to assist it in its investigation, and cooperation with Federal investigation authorities including postal inspectors, IRS agents, and representatives of the US Attorney’s office.
The investigation culminated with the firing of the head of its transportation department, Milton Morris, in October 2004. Shortly thereafter, his “second in command” Katherine Scheller was also fired. At the same time, S.C. Johnson & Son, Inc. filed a civil suit against Milton Morris, Katherine Scheller, and three trucking companies and their principals; Buske Lines, Inc., Buske Intermodal, LLC and Thomas H. Buske; JMP Intermodal, Inc. and Thomas Russell; Vantraxx, Inc., and Peter O’Malley. Approximately six months later, S.C. Johnson added All Modes Logistics, Inc. and David Eggleston and Wilbur “Bay” Darnell. Each of the trucking company Defendants provided carrier services for S.C. Johnson over varying periods of time.
Defendant, Bay Darnell, represented by Attorney Timothy S. Knurr (the only local attorney involved in the trial in Racine County) provided carrier services to S.C. Johnson since 1975. He introduced intermodal carrier services to S.C. Johnsons (Intermodal is simply placing semi-trailer’s on top of railroad cars to help increase efficiency and decrease costs). In 2001, Darnell sold his company to David Eggleston who continued to provide carrier service to S.C. Johnson.
In its complaint against the Defendants, S.C. Johnson asserted a variety of claims including, but not limited to, fraudulent misrepresentation, conspiracy to commit fraud, violation of WOCCA, common plan and scheme to commit fraud, violations of Sec. §134.05 and the like. The essence of each and every cause of action was the claim that the trucking company Defendants engaged in a plan and scheme of artificially inflating carrier rates to facilitate a kickback of money to Milton Morris and indirectly, his second in command, Katherine Scheller.
At the same time the civil action was preceding, the US Attorney’s office began investigating Morris, Scheller, Buske, Russell, and O’Malley as well as one of O’Malley’s partners. This investigation ultimately resulted in those Defendants being indicted, charged, and all but Buske have admitted to participating in this scheme and wrongdoing and have entered into plea agreements with the US Attorney’s office. At this stage, O’Malley, Russell, and Russell’s partner have been sentenced. Morris and Scheller are awaiting sentencing. It is our understanding that sentencing is being withheld because of the cooperation requirement included in the plea agreements and the fact that Buske is “holding out” in defending the criminal prosecution.
During the proceedings, counsel for Darnell and Eggleston and All Mode’s moved to bifurcate the case and remove themselves from a civil trial involving Morris, Scheller, Buske, Russell, and O’Malley. The reason for the motion was that counsel for Darnell and Eggleston argued that the negative inferences associated with those Defendants exercising their 5th amendment rights in the civil case would clearly and certainly prejudice Darnell and Eggleston. The court agreed and the 5th Amendment defendants’ trial was severed from the trial against Darnell, Eggleston, and All Modes, Inc.
The first trial took place in February 2008 and resulted in a jury verdict of approximately $140,000,000. The court reduced the verdict to $101,000,000 as the jury awarded nearly $40,000,000 more than S.C. Johnson asked for. Pursuant to the provisions of WOCCA, the court doubled the award and there is now a judgment against the 5th Amendment defendants’ in the amount of $203,000,000. (That excepts O’Malley and Vantraxx, Inc. who settled prior to the trial.)
The second trial involving Darnell, Eggleston, and All Modes, Inc. commenced on May 26, 2009. S.C. Johnson adopted a tactic of essentially trying to prove the conspiracy and scheme by introducing evidence it had regarding Morris, Scheller, Buske, Russell, and O’Malley; i.e., S.C. Johnson had a mountain of evidence against the 5th Amendment Defendants but scant little against Darnell and Eggleston. S.C. Johnson retained the services of retired FBI agent, Thomas Marquardt, to analyze the bank accounts, credit card statements, and the like of all the parties involved. He developed an elaborate charting system tracking cash withdrawals by the trucking companies versus cash deposits by Morris and Scheller. The charts showed the massive increase in business to Buske, Russell, and O’Malley and the extreme decrease in business to Darnell and later Eggleston. Darnell took the information from those charts and created his own charts and graphs which showed that in 1999 he was doing 50 percent of S.C. Johnson’s intermodal business. By 2001, he was down to 12 percent. This information was obviously inconsistent with Bay Darnell being involved in any kickback scheme with Milton Morris. As argued to the jury by Darnell’s counsel, if he was in fact involved in the scheme what would you expect to see? Naturally, you would see his business staying the same if not growing.
After a day of closing arguments, the jury deliberated for two days and completely exonerated Bay Darnell, David Eggleston and All Modes, Inc.