Judge’s link to ‘Fish House Gang’ raised as issue as lawsuit against Aflac dismissed

A federal judge has dismissed a civil suit filed by three Aflac shareholders on behalf of the Columbus-based insurance company, alleging that executives and directors breached their fiduciary duty, received unjust enrichment and violated the Securities Exchange Act.

In dismissing the suit in a Friday order, U.S. District Court Judge Clay Land of the Middle District of Georgia addressed the plaintiffs’ “invitation” to recuse himself because of family relationships with Aflac and the judge’s affiliation with the so-called “Fish House Gang.”

Shareholders Martin Conroy, Gerald McCarthy and Louis Varela filed the suit in December in the Southern District of New York against Chairman and CEO Daniel P. Amos, former president of Aflac Paul S. Amos II and members of the board of directors Douglas W. Johnson, Charles B. Knapp, Elizabeth Hudson, Paul Bowers, Joseph L. Moskowitz and Melvin T. Smith. Aflac filed a motion to have the case moved to Georgia’s Middle District and it was transferred in January.

“This lawsuit had no merit,” according to a prepared statement released by Aflac on Monday. “Aflac has been open and transparent from day one, even posting the reports from the independent Special Litigation Committee on our website for the purpose of full disclosure. The judge determined that the SLC was indeed independent and that it conducted a thorough, reasonable and good faith investigation with the assistance of non-conflicted, independent counsel. We are pleased that the court has dismissed the case in its entirety.”

The claims were investigated by a Special Litigation Committee of the Aflac board and Land took the findings of that committee into consideration when making his decision.

“Based upon a thorough review of the substantial record, the court finds that the (Special Litigation Committee) was composed of independent members who conducted a reasonable investigation into plaintiffs’ claims and that the SLC acted in good faith when it determined that pursuing plaintiffs’ demands was not in the best interest of Aflac,” Land wrote in the 30-page order.

The plaintiffs’ attorney, Dimitry Joffe of New York City, said on Monday they will appeal Land’s ruling to the 11th Circuit Court of Appeals.

“We plan to appeal the whole order,” Joffe said. “This is obviously a sensitive matter and we would rather not comment and just see it play out in court.”

Attorneys for the plaintiffs argued that the Special Litigation Committee was not independent because board members Bowers, Moskowitz and Stith served on the committee. The plaintiffs also questioned prior business relationships the three board members had with Dan Amos.

“The Court finds that notwithstanding these prior professional relationships between the SLC members and Amos, the record establishes that the SLC members were sufficiently independent under Georgia law,” Land wrote.

The complaints go back to December 2016 when plaintiffs’ counsel sent Amos, Amos II and Aflac’s general counsel a dispute notice explaining that a group of former sales associates, including plaintiffs, believed Aflac employees were engaged in certain improper business practices.

According to the lawsuit, those practices included:

▪ Aflac engaged in fraudulent recruiting by promising potential sales associates they could make more money than was actually possible.

▪ Aflac manipulated its key operational metrics to artificially inflate its potential earnings and growth.

▪ Aflac engaged in fraudulent underwriting through various means designed to artificially inflate its earnings.

▪ Aflac engaged in fraudulent accounting practices by improperly extending revenue reporting periods.

▪ Aflac regional sales coordinators and market coordinators stole sales associates’ commissions. The associates also alleged that AFLAC retaliated against them for informing management of the Fraud Allegations.

The suit also alleged Amos II engaged insider trading when he sold more than 200,000 shares of Aflac stock in June 2017 when he resigned from the board.

Amos II notified Aflac’s board that he would be resigning as a director and as president of Aflac on July 1, 2017. He sold the stock a few days later and the plaintiffs’ claimed he traded on material, nonpublic information — namely, knowledge of plaintiffs’ fraud allegations.

Land did not recuse himself and called the request from Joffe a “careless” suggestion.

“Plaintiffs’ counsel suggests that the undersigned and certain defendants are members of what he describes as a “tight-knit group of local elites” called the Fish House Gang, also known as the Fish House Crowd by those who have no motive to sensationalize the moniker,” Land wrote. “This group actually includes approximately two-hundred invitees who gather three or four times a year to enjoy fried fish, french fries, hushpuppies, coleslaw, and each other’s company.”

The group was led decades ago by Land’s late uncle, Superior Court Judge John Land. Land said in his order he regularly attended “Fish House Gang” dinners.

“The group conducts no official business, charges no membership fees, and has no stated organizational purpose,” Land wrote. “The attendees pay for the cost of their own meals. Although it is possible that one or more of the defendants in this action may have attended one or more of these fried-fish suppers in the past, the undersigned has no specific recollection of them having done so and does not believe that they are presently on the invitee list.”

The “Fish House Gang” is by invitation-only.

The plaintiffs also asked Land to recuse himself because of family connections to Aflac. The plaintiffs maintained certain members of the Land’s extended family are allegedly related to the Amoses and that other members of the judge’s extended family are allegedly Aflac employees.

“A judge must recuse when ‘a person within the third degree of relationship’ to the judge is or could be involved in a proceeding in certain ways or has ‘an interest that could be substantially affected by the outcome of the proceeding,’” Land wrote. “None of the individuals counsel identifies are within the third degree of relationship to the undersigned; at least one of the identified family members is dead; and to the best of the undersigned’s knowledge, the others are not employed with Aflac.”

Land summed up his decision to stay on the case in a short paragraph.

“Neither fish nor family disqualifies the undersigned from presiding over this action,” Land wrote. “ And because ‘there is as much obligation for a judge not to recuse when there is no occasion for him to do so as there is for him to do so when there is,’ the undersigned has a solemn duty to remain.”

This story was originally published September 4, 2018 at 4:21 PM.