By Paul Gable
A settlement check issued by the state of South Carolina for the Southern Holdings case has been held in abeyance for over six and one-half years while the plaintiffs in the case have continuously refused settlement of the case.
After six years in litigation where the state Insurance Reserve Fund spent several million dollars on lawyers defending the case, a rushed “settlement” was allegedly arranged between lawyers for the plaintiffs and lawyers for the defendants.
The alleged settlement took place behind closed doors with the federal trial judge, after jury selection was complete.
The plaintiffs in the Southern Holdings case, all represented by attorney John Rakowsky, never agreed to the settlement. No document exists with their signatures demonstrating agreement to the settlement, as required by state and federal law.
In fact, several of the plaintiffs said they never agreed to a settlement and were astounded when one was announced by the judge.
Within days of the alleged settlement, Rakowsky no longer represented the plaintiffs, who refused to accept and were proceeding to challenge the alleged settlement. A 60(d) motion to overturn the settlement, recuse the judge and move forward with the case remains active in federal court today.
However, 22 days after the alleged settlement was announced in court (May 8, 2007), the state of South Carolina issued a check (May 30, 2007) in the amount of $30,000 to “John R. Rakowsky, Esq. as Counsel for” Southern Holdings, Inc. and the individual plaintiffs.
By the time the check was issued, Rakowsky no longer represented any of the plaintiffs and he knew the plaintiffs refused to accept the proceeds of the check because they were challenging the settlement.
According to dates on the check, Rakowsky held it for nearly nine months before endorsing it over to attorney Desa Ballard for deposit.
By this time (February 25, 2008), Ballard was representing Rakowsky (as plaintiff) in an interpleader action (still ongoing today) to request the court to determine disposition of remaining litigation funds from the Southern Holdings case. The Southern Holdings plaintiffs, several (but not all) lending institutions and Rakowsky’s former co-counsel on the Southern Holdings case are defendants in the action.
An interpleader action originates when a party holds property on behalf of another but does not know to whom the property should be transferred. It asks the court to make the decision.
The $30,000 from the state is included in the interpleader action, according to records of the case. But, there is no indication of why the check was not returned to the state when it was known that the plaintiffs were not accepting the settlement.
In fact, according to a rather casual accounting of funds submitted to the court on behalf of Rakowsky, approximately $60,000 of litigation funds deposited by Rakowsky is not included in the interpleader action either.
The $30,000 certainly does not belong to Rakowsky or Ballard. It would appear to belong to the state of South Carolina because the Southern Holdings plaintiffs continue to refuse the alleged settlement.
Why was the $30,000 check not returned to the state, rather than being endorsed over to Ballard nine months after it was issued
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