Ex-partner defrauded clients, lawyer says Digges left firm in shambles, lawyer claims.

May 30, 1991|By Kelly Gilbert | Kelly Gilbert,Evening Sun Staff

Edward S. Digges Jr. dominated his Annapolis law firm to the extent that he controlled its billings and bank accounts, and was able to perpetrate a fraud against a major client for years before his partners found out about it, one of the partners has told a federal jury.

David A. Levin, a senior partner in the former Digges, Wharton & Levin law firm, testified yesterday that Digges left the firm in a financial shambles when Levin and James T. Wharton, the other senior partner, threw him out in early 1989.

The ouster came in the wake of a multimillion-dollar lawsuit filed by the fraud victim, Dresser Industries Inc.

"He ran the firm," Levin said of Digges. "If we had any input [in its management], it was by his grace. But he'd do what he wanted to do anyway."

"Ed was a very good lawyer. When the offer came in [to form Digges, Wharton & Levin], I looked at it as an opportunity to step up, to better myself.

"It worked for a while. Then he just went off. You could not deal with this guy. He would agree to do something, and he'd do the other thing."

Levin was on the witness stand for nearly a second full day in U.S. District Court in Baltimore yesterday in a civil case filed by the firm's liability insurer, St. Paul Fire and Marine Insurance Co.

The insurer seeks a declaratory judgment from the trial jury that it does not have to pay $3.6 million in negligence judgments against Wharton and Levin for their failure to properly monitor Digges' billings.

St. Paul contends that the policy should be voided because Wharton and Levin allegedly knew of Digges' fraud when they applied for it.

By an unusual legal quirk, Dresser, which won the negligence judgments, is the defendant in this case. That company seeks to have the policy enforced so it can collect the judgments.

Levin and Wharton both have testified during the trial, now in its third week, that they had no idea what Digges was doing until they were confronted by Dresser officials who questioned the bills and demanded an audit in May 1988.

In his testimony over the past two days, Levin said he never saw Digges' bills to Dresser. He said he reviewed "pre-bills" that Digges gave him concerning his own clients and simply signed cover letters that were mailed out with the final bills without reviewing those bills.

Levin acknowledged that some of the bills to his clients contained overcharges and charges for legal work that wasn't done. But he accused Digges of changing them after he saw the prebills, and adamantly denied that he ever personally overcharged any clients.

"I didn't customarily look at the final bills," Levin said yesterday. "They should have reflected the changes I made, and I just signed the letters."

Levin said that Digges, as managing partner, insisted on handling all of the firm's billings.

"He had the expertise," Levin said, "and I'm not very good with numbers. It offered me the opportunity to practice law."

Digges' domination of the firm extended to 19 bank accounts, total control over lines of credit at local banks and manipulation of the firm's equity account, to which Levin said he and Wharton contributed huge shares of their growing incomes.

That domination extended to the partners borrowing money from banks to pay their annual income taxes, Levin said.

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