Aug. 17 (Bloomberg) -- Two disbarred Kentucky lawyers were sentenced to 20 years and 25 years in prison for stealing from a $200 million fen-phen diet-drug settlement fund, a scheme the sentencing judge said showed “unmitigated greed.”

U.S. District Judge Danny Reeves sentenced William Gallion to 25 years and Shirley Cunningham Jr. to 20 years today for their April conviction on nine criminal counts including wire fraud and conspiracy. And he ordered the men to pay $127.7 million in restitution to the 421 former clients who were victims of the fraud.

In separate hearings today in Covington, Kentucky, lawyers for Gallion, 58, and Cunningham, 54, argued in favor of leniency. Both men, who were dressed in gray-striped prison uniforms, declined to address the court.

“There has not been a grain of remorse that has been shown by either defendant in this proceeding,” Reeves said before announcing Cunningham’s sentence.

Gallion’s lawyer, Hale Almand, declined to comment on the sentence. Both men have said they will appeal their convictions.

Reeves declined requests by attorneys for the former lawyers to release them on bail pending appeal. He agreed to recommend that they be assigned to prisons in Kentucky.

Deter Other Lawyers

During the sentencing, Reeves said Gallion’s 25-year term was intended to deter other lawyers who might be tempted to steal from settlement funds. He said Cunningham deserved a lighter sentence because he had less involvement in the fraud than Gallion.

Gallion and Cunningham were convicted April 3 by a jury of of seven women and five men who deliberated for 11 hours over two days before reaching a verdict.

The convictions came in the former lawyers’s second trial. The first ended in a mistrial in July 2008 after jurors deadlocked 10-2 in favor of acquittal. The same jury acquitted a third attorney, Melbourne Mills, after his lawyer argued that he was too impaired by alcoholism to participate in the scheme.

During the trial, prosecutors showed jurors evidence that Gallion and Cunningham had contracts entitling both men to fees of as much as one-third of the $200 million awarded to a statewide group of Kentucky citizens who said they were harmed by the once-popular fen-phen diet drug combination. The lawyers tried to keep more than twice that amount, prosecutors said.

Fen-Phen Settlement

Gallion and Cunningham didn’t tell clients the size of the settlement, from American Home Products Corp., now Wyeth, which was the manufacturer of the drugs fenfluramine and dexfenfluramine under the trade names Pondimin and Redux. The men then lied to their clients about how much they would get, the prosecutors said.

Lawyers for Gallion and Cunningham argued that they were innocent, inexperienced in handling large awards in class-action suits and made mistakes. They tried to blame Cincinnati lawyer Stan Chesley for many of the men’s decisions.

Chesley, who wasn’t charged with a crime, advised the pair on the fen-phen settlement for a $20 million fee and testified at the trial after accepting an immunity agreement from prosecutors.

“I think it was improper to shift the focus of the defense to Mr. Chesley,” Reeves said. Reeves said he didn’t believe Chesley was responsible for the fraud and that the jury properly rejected that argument.

“I’m happy,” said Connie Centers, a former client who said she had received only about a third of what she was due under the fen-phen settlement, outside the courtroom. “I know we’ll never see the money.”

Judge Reeves said Gallion and Cunningham must continue to make payments while in prison until the $127.7 million in restitution is paid, at a minimum payment of $25 per quarter.

The case is U.S. v. Gallion, 07-CR-39, U.S. District Court, Eastern District of Kentucky (Frankfort).

To contact the reporter on this story: Bob Van Voris in U.S. District Court in Covington, Kentucky, at rvanvoris@bloomberg.net.

Last Updated: August 17, 2009 18:09 EDT