Former Annapolis attorney Edward S. Digges Jr. contemplated suicide in the midst of a deep depression after the discovery that he had cheated a major client and robbed his law partners, according to testimony in U.S. District Court in Baltimore.
That testimony came yesterday from Dr. Karl Lanocha, a former Sheppard-Pratt Hospital psychiatrist who examined and interviewed Digges in March 1989.
Lanocha examined Digges when he sought mental treatment in March 1989, shortly after Dresser Industries Inc., his major client, filed a breach-of-contract suit against him and his law partners, James T. Wharton and David A. Levin, and after his partners had thrown him out of their firm.
Digges, who underwent outpatient psychiatric therapy at Sheppard-Pratt, eventually pleaded guilty to mail fraud connected to massive overbilling of Dresser. He is serving a 2 1/2 -year prison term.
According to Lanocha's notes, Digges, who was regarded as one of the nation's top product-liability litigators, suffered from insomnia, "recurrent crying spells" and "persistent anxiety," among other symptoms in the wake of his embezzlement and Dresser's lawsuit.
The notes said Digges "has gone so far as to contemplate various methods of taking his own life. He denies any intention of acting upon those feelings at this time . . . yet states that he continues to feel hopeless and very worried about the future."
Douglas D. Connah Jr., one of the lawyers who represents Dresser, introduced the psychiatrist's notes into evidence to show independent corroboration of testimony last week from two Dresser lawyers.
The Dresser lawyers said Digges told them, when they confronted him about his apparent billing fraud in May 1988, that Wharton and Levin knew nothing about it.
Lanocha testified that Digges "voluntarily" said his partners didn't learn of his fraud and embezzlement until Dresser officials audited the law firm's billing records.
At that point, Lanocha's notes said, "Mr. Digges' two legal
partners became aware of what had been going on for the first time."
The notes also said Digges admitted stealing nearly half a million dollars from the law firm in 1987 to pay for renovations to his Eastern Shore mansion.
Dresser later proved that Digges stole at least $3.1 million in his overbilling scheme, and his former partners say he stole at least $1 million from them.
The case in trial was filed by St. Paul Fire and Marine Insurance Co., which insured Wharton, Levin and their former firm, in an attempt to avoid paying $3.6 million in negligence judgments. Dresser won those judgments against Wharton, Levin and their old firm when a court ruled that the partners did not properly monitor Digges' activities.
St. Paul claims that Wharton and Levin knew of Digges' illegal activities when they applied for the law firm's liability policy.
The insurance company's lawyers also contend that it doesn't make any difference whether Wharton and Levin knew of Digges' fraud, because a clause in the liability policy voids it if any of the firm's lawyers engaged in unreported activities that could have prompted lawsuits.
St. Paul's lawyers argued yesterday that Lanocha's testimony and notes should not be admitted into evidence because they had no bearing on the psychiatric treatment Digges received.
But Judge Joseph C. Howard let the jury hear the evidence after agreeing with Connah that it revealed Digges' intent to defraud Dresser and his partners without their knowledge.