GULFPORT -- The U.S. Attorney's Office in Mississippi's Southern District has indicted a San Antonio attorney, his brother and five others on 95 counts of conspiracy, mail fraud, wire fraud, identity theft and aggravated identity theft for allegedly submitting false claims in BP oil catastrophe litigation.
Southern District U.S. Attorney Gregory Davis said at a news conference Thursday the case represents the largest to date in connection with the Deepwater Horizon Oil Spill Trust, established to compensate victims.
In one incidence, the government alleges the name of a dog, Lucy Lu, was submitted as an injured BP claimant. At least four claimants had died before the 2010 oil
catastrophe, the indictment says.
Davis said the charges resulted from a four-year investigation by the U.S. Attorney's Office and Secret Service, which investigates identity theft. Craig S. Caldwell, special agent in charge of the Secret Service office in Birmingham, Ala., joined Davis at the news conference.
Beginning with the oil catastrophe in April 2010, attorney Mikal Watts and associates are accused of attempting to defraud not only BP and claims administrators, but also 41 unnamed victims from Mississippi, Louisiana, Texas and Alabama who allegedly had claims submitted for reimbursement without their knowledge. Most were described as deckhands, but none worked in the seafood industry.
In all, the government alleges, Watts and his firm submitted as plaintiffs more than 40,000 names in the consolidated BP case being managed by U.S. District Judge Carl Barbier in New Orleans. The defendants knew people had not consented to the firm's representation and further used "stolen and false Social Security numbers, dates of birth, occupations and addresses" for some claims. In the end, only four clients were found to be eligible for payments, the indictment says.
It also says two attorneys licensed in Texas, and identified only as Attorney #1 and #2, paid Watts a total of $10.9 million to help represent the claimants.
In addition to Mikal Watts, those indicted are his brother, David Watts, 50, who worked at the firm Watts, Guerra and Craft, and Wynter Lee, 37, the firm's mass tort coordinator. Four others named in the indictment were collecting client names and personal information for Watts through various companies: Gregory Warren, 51, of Lafayette, La., owner of a Lafayette company and K&G Consulting in Biloxi; Hector Eloy Guerra. 48, of Texas, owner of JEG Development; Kristy Le, 48, of Pascagoula, an owner of K&G Consulting; and Abbie Nguyen, 30, of Grand Bay, Ala., sister-in-law of Le.
The indictment alleges Mikal Watts paid Warren and Le more than $10 million for names and personal information used for claims. Watts sent money through wire transfers to an unnamed attorney in Jackson, who then wired money to Warren, the indictment says.
Mikal Watts, David Watts, Lee, Guerra and Nguyen all pleaded not guilty to the charges Thursday afternoon. U.S. Magistrate Judge John Gargiulo set unsecured bonds of $25,000 each for the defendants, meaning they will have to pay only if they fail to appear for court. The U.S. Attorney's Office said Greg Warren has not been found. Le is scheduled to appear in court Nov. 9.
The attorney for Mikal Watts, Robert McDuff of Jackson, said Watts had an extensive external team signing up clients, and nobody in the firm knew some of the claims were false.
"Although at times (Watts) and others in his office expressed frustration with the data regarding some of these individuals, Mikal believed that the vast majority of the people on the list were real people with real damages, and he knew that any fraudulent claims would be sifted through the routine processes in cases such as this," McDuff said.
McDuff said the firm has handled cases with up to 70,000 plaintiffs.
The indictment indicates Mikal Watts knew he had problems. It lists multiple occasions when mail to clients was returned as undeliverable. Also, in a 2011 e-mail, the indictment says, he told Guerra and Wynter Lee: "Another fine example of the s--- we paid for; dead 5 years ago." David Watts sent an email to his brother and Guerra in August 2010 that said, "So far you have sent me 2,510 records of updated SSNs (Social Security numbers). Of this, 2,477 DOBs (dates of birth) are changing. This does not pass the smell test????????"
BP sued Watts
The indictment says Mikal Watts applied in August 2010 to serve on the BP claimants steering committee, citing his representation of more than 40,000 plaintiffs. He was one of 15 attorneys appointed to the committee set to receive fees for their work, but he later resigned.
BP sued him in December 2013, alleging he and his firm, identified as Watts Guerra, had committed "brazen fraud" by claiming to represent more than 40,000 deckhands eligible for payments under the company's Seafood Compensation Program.
McDuff said the government's case "recycles claims" in the BP lawsuit.
BP's complaint said Mikal Watts' client list contained more than 76 percent of potential claimants eligible for compensation under the program, leading BP to set aside $2.3 billion for payments. In its lawsuit, BP asked that the amount of the money be reduced and sought to suspend a second round of payments while the case was pending.
Judge Barbier, who is presiding over the BP catastrophe litigation in the Eastern District of Louisiana, suspended the case in February 2014 pending the outcome of the criminal investigation.
Mikal Watts has made millions in product liability cases, including SUV-rollover litigation against Bridgestone/Firestone Inc. and Ford Motor Co.
Mikal Watts has long been a major donor to Democratic candidates. In 2007, he even launched his own bid for a U.S. Senate seat but pulled out of the race, according to news reports in Texas. The New York Times reported he hosted a campaign event in July 2012 for President Barack Obama that cost $35,800 a plate.
The biography on his law firm's website says he was listed as a Texas Super Lawyer from 2003 to 2012. It also says he once worked as a briefing attorney for the chief justice of the Texas Supreme Court.