Probe of McCaffery and wife expands to law firms

Posted: August 19, 2013

In the ongoing federal investigation of state Supreme Court Justice Seamus P. McCaffery, prosecutors have served subpoenas on numerous law firms, seeking detailed information about referral fees paid to McCaffery's wife.

Veteran defense lawyer John W. Morris, who represents one of the eight firms referred cases by McCaffery's wife, Lise Rapaport, said his client turned over records last month.

The federal grand jury subpoenas to law firms also demanded information about campaign donations to McCaffery, according to Morris and Charles E. Schmidt Jr., a top attorney with another of the firms that received a subpoena.

Though federal authorities have refused to discuss their investigation, they appear to be examining how Rapaport, a lawyer who is her husband's chief judicial aide, found the clients she brought to the eight firms, according to people with knowledge of the inquiry.

Legal experts have said the fact that Rapaport made the referrals while serving as a state judicial aide raised potential ethical issues.

People familiar with the inquiry say the federal prosecutors and the FBI are also scrutinizing complaints that McCaffery leveled last year about a lower-court judge.

McCaffery contacted a top court administrator to register objections about the judge, who had been hearing cases brought by a Philadelphia law firm that had been a source of referral income for McCaffery's wife and a source of campaign donations for him.

Assistant U.S. Attorney Robert A. Zauzmer, identified by sources as the federal prosecutor in charge of the inquiry, declined to comment Friday.

The federal inquiry into the referral fees began in the spring. Zauzmer has a track record handling intricate, high-profile cases, such as the corruption prosecution of former State Sen. Vincent J. Fumo.

FBI agents working with Zauzmer during the investigation have interviewed several city judges as part of the probe, people familiar with the interviews said.

Federal prosecutors also have subpoenaed copies of McCaffery's annual statements of financial interest dating to 1993, the year he was first elected to public office, a judgeship on Philadelphia Municipal Court.

McCaffery, a Democrat, next won a seat on state Superior Court in 2003 and was elevated to the Supreme Court in 2007.

His financial-interest forms, which court officials make public upon request, report that the eight firms have paid referral fees to Rapaport on 19 occasions since 2003. McCaffery reported no such fees earlier, during his decade as a Philadelphia judge.

Other public records show the eight firms and their lawyers have given McCaffery a total of about $50,000 in campaign donations since 2003, the year he first ran for the appeals bench.

The financial-disclosure forms don't require judges to list amounts paid. Only one fee paid to Rapaport has become public - $821,000 revealed in a court filing last year.

Referral fees are legal in Pennsylvania. Here's how they work: Lawyers who refer clients to other lawyers are paid a share of any settlement or award.

In the lawsuit that generated the $821,000 fee, Rapaport referred a Northeast Philadelphia couple to a law firm that filed a medical-malpractice lawsuit that led to a multimillion-dollar settlement, court papers show.

McCaffery and Rapaport and their lawyer, Dion G. Rassias, did not respond to requests for comment for this article. Rassias has said Rapaport's referrals were "legitimate and proper" and reflected that her friends and former clients frequently went to her for legal guidance.

Chief Justice Ronald D. Castille, a Republican, has said Rapaport's referral fees raised questions of potential conflict of interest and the appearance of impropriety because she had collected them while "employed in a judicial chamber."

Castille and McCaffery are known in legal circles to be bitter enemies, both personally and professionally.

In an interview with The Inquirer earlier this year, Lawrence J. Fox, a former managing partner of Drinker, Biddle & Reath in Philadelphia who counsels law firms on professional responsibility and ethics, said Rapaport's dual roles raised significant ethical questions.

In an interview last week, Morris, who represents one of the firms referred cases by Rapaport, said federal prosecutors would find nothing untoward in the subpoenaed records.

"These were real cases, real referrals," he said. "They were all real cases, there were case files, all of that stuff."

Morris said the legal documents contain nothing legally troubling.

"Nothing embarrassing at all," he said. "I really don't understand the federal theory in the case."

Morris declined to name the firm that hired him. People familiar with the matter said it was the Philadelphia personal-injury firm Brookman, Rosenberg, Brown & Sandler.

The firm was a source of referral-fee income for Rapaport in 2003, 2007, and 2010, public records show. The firm and its lawyers have donated $23,500 to McCaffery campaigns since 2003, according to campaign-finance reports.

Along with the referral fees, federal prosecutors and the FBI are investigating reports that McCaffery and Russell M. Nigro, a lawyer and former state Supreme Court justice, made calls to a top administrator in the Philadelphia court system to register complaints about a judge hearing civil cases.

As The Inquirer reported in June, sources said McCaffery was critical of Common Pleas Court Judge Allan Tereshko.

The sources said Nigro contacted Administrative Judge John W. Herron in early 2012 and told him McCaffery was bothered by Tereshko's oversight role in a crib-death lawsuit. Herron was Tereshko's supervisor.

The suit had been filed by the Saltz, Mongeluzzi, Barrett & Bendesky law firm. In 2007, Rapaport was paid a fee for bringing a client to the firm. Lawyers with the firm have contributed $18,000 to McCaffery's campaigns since 2003, records shows.

The sources said McCaffery called Herron directly later in 2012 to complain about Tereshko.

In January 2013, the state Supreme Court removed Tereshko from hearing civil cases. It did so after Tereshko was criticized by an appeals court for failing to disclose that his wife, a lawyer, worked for a firm representing an insurance company in a suit he was presiding over.

Of the eight firms that have been a source of referral income for Rapaport, principals of only two returned phone calls last week.

Schmidt, of the Schmidt Kramer firm in Harrisburg, said his firm had turned over information in response to the subpoena last week.

He said Rapaport had recommended his firm and at least one other firm to a woman considering filing a lawsuit over an auto crash. The plaintiff selected Schmidt Kramer, and the case ultimately resulted in a "significant" payment, Schmidt said.

Schmidt has declined to identify the plaintiff, but said the firm, in response to the subpoena, turned that information over to federal investigators.

Abraham C. Reich, cochair of the Fox Rothschild firm, said he could not comment on the federal investigation. But he did disclose details of his firm's referral-fee payments to Rapaport.

He said the payments were made over a number of years but stemmed from a client she referred in 1986, four years before she married McCaffery and 11 years before she became his judicial aide. The total paid her was relatively small, Reich said.


Contact Craig R. McCoy at 215-854-4821, cmccoy@phillynews.com, or follow @CraigRMcCoy on Twitter.

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