Last week in this post I linked former Eaton in-house attorney Sharon O’Flaherty’s lawsuit against Eaton, its CEO, General Counsel, and the Latham and Watkins law firm. What a bombshell.

To review, the Hinds County Circuit Court has already found Eaton to have committed fraud at least three times:

  1. by Judge Swan Yerger in 2006 for not disclosing that it was paying a witness. This one cost Eaton a $1.56 million sanction.
  2. by Judge Yerger in 2010 for hiring Ed Peters to improperly influence ex-Judge Bobby DeLaughter. This one is where Yerger dismissed Eaton’s billion dollar lawsuit; and
  3. by Judge Jeff Weill in 2012 for intentionally not producing relevant documents to Frisby Corp. that showed Eaton’s improper actions with respect to Ed Peters.

O’Flaherty’s Complaint alleges a fourth round of fraud on the Court in response to Judge Weill’s findings related to Eaton’s third round of fraud.

In May 2012 Judge Weill ordered Eaton CEO Sandy Cutler and others to explain why Eaton did not previously produce emails from Ed Peters discussing his communications with Bobby DeLaughter. In response, Eaton filed affidavits and submitted a report from outside counsel Latham & Watkins that basically said that it was an accident that Eaton had not previously produced the emails due to inadvertence by O’Flaherty.

Not true–according to O’Flaherty:

166. Cutler, McGuire [general counsel] and/or Brandt [Latham & Watkins] decided, at or before the May 15 meeting, to defraud the Mississippi Court and the Frisby Defendants/ Counterclaim Plaintiffs by claiming that the reason the two emails had not been produced was inadvertence on O’Flaherty’s part.

167. Cutler [et al.] decided, at or before the May 15 meeting, to defraud the Mississippi Court and the Frisby Defendants/ Counterclaim Plaintiffs by claiming that Eaton, through L&W, had investigated the circumstances that led to the failure to produce the two emails, and found no ‘evidence of a deliberate attempt to hide’ the two emails.

180. Despite knowledge to the contrary, the Latham Report states, ‘Latham did not find evidence of a deliberate attempt to hide the March 23 or October 16 emails during discovery in the Peters Inquiry.’

So what really happened? According to O’Flaherty, in 2008 Eaton in-house lawyer Vic Leo deep-sixed the two emails, which she printed and gave to Leo, and told Eaton IT to not search the in-house lawyers’ hard drives for emails.

In paragraphs 59-102 O’Flaherty explains in detail how in 2008 she printed the two emails and instructed IT to search hard drives, only to have Leo go behind or back and trash the hard copies and tell IT to not search the hard drives.

O”Flaherty then reveals a May 10, 2012 meeting with Latham & Watkins lawyers in which a L&W attorney stated that she suspected that Leo had deliberately attempted to hide the two emails:

149. Barton [L&W] asked O’Flaherty whether Leo could have removed the two emails because Barton had reason to suspect that Leo had made a deliberate attempt to hide the two emails during discovery in the Peters/DeLaughter inquiry.

150. O’Flaherty did not know that Leo had insisted that hard drive images not be searched for emails, and she was unaware of other facts known to Barton, and therefore she had no reason to suspect that Leo had made a deliberate attempt to hide the two emails during discovery in the Peters/DeLaughter inquiry.

My Take:

Eaton Special Counsel Wile E. Coyote, Esq.

Looks like Eaton didn’t listen to the advice from Ken Feinberg about no more cover-ups. Just in, I have a picture of the guy who has been pulling the strings for Eaton.

Do I have to say it? Eaton is in big even bigger trouble. Trouble so big that all its prior troubles can fondly be looked back upon as “the good ole days.”

Can Eaton really ever go back before Judge Weill? No, they can’t. 

But how can they not go back before Judge Weill?

I’m guessing that Frisby’s settlement demand went up last week. Way up. At this point, Frisby’s demand is probably: “how much you got?”

This case was going south for Eaton as early as 2006 when Judge Yerger sanctioned Eaton $1.56 for providing inaccurate and misleading discovery responses related to its paying a witness in the case. Judge Yerger later threw out the case due to Peters’ conduct.

Then in 2012, Judge Weill found that in 2008, Eaton tried to cover up its communications with Peters about DeLaughter.

Now in 2013, one of two Eaton in-house attorneys working on the case alleges a new cover-up by Eaton: in 2012 in response to getting caught covering up in 2008. A cover-up of the cover-up so to speak. Or is it a cover-up of the cover-up of the cover-up? It’s confusing.

So not only did Eaton hire Peters to improperly influence DeLaughter, it has now been found or alleged to have intentionally concealed evidence, what? Three times? I’m losing count.

It’s easy to say now that Eaton should have gotten Leo off the case in 2006 when Eaton was first sanctioned. And it would have been easy to say in 2006. You can’t pin this decision on outside counsel–they answered to Leo and couldn’t really tell him to fire himself from the case.

McGuire or whoever was general counsel at the time should have re-assigned the case within Eaton’s legal department no later than 2006. But according to O’Flaherty, Leo stayed in charge of the case until 2012. Eaton didn’t even reassign the case when Judge Yerger dismissed Eaton’s claims.

Instead of getting Leo off the case, Eaton left him in a position to actively try to conceal Eaton’s misconduct that Leo spearheaded. That’s about the worst job of general counseling I’ve ever heard about. It’s amazing that McGuire still has his job–just like it was amazing that Leo did between 2010 and 2012.

You always had to wonder if Leo kept his job because he knew that McGuire knew about Peters. Now those questions move up to whether McGuire is keeping his job because he knows that Cutler knew about Peters.

O’Flaherty’s Complaint doesn’t help Cutler on these questions:

49. Throughout the Frisby litigation, Leo met regularly or periodically with the General Counsel and the CEO to discuss the Frisby litigation; O’Flaherty was not included in those meetings. 

Stay tuned. It’s not over. As always, it can still get worse for Eaton. And Eaton is re-loading its gun as we speak. Coming soon to a courthouse near you: “Eaton Cover-up V– This Time You Really Can Trust Us. Seriously.”