Lawyers for McLean's Dominion Federal Savings & Loan Association, which lost a potentially crippling $129 million judgment to the owner of Penthouse magazine last summer, say that at the same time Penthouse International was accusing Dominion Federal of scuttling an Atlantic City casino deal, the magazine's publisher was blaming federal investigators for the same thing.
In papers filed in federal court in New York last week, Dominion Federal alleges that Penthouse and its publisher, Robert C. Guccione, have made contradictory claims about who was to blame for the failure of the casino project, and that Penthouse's lawyers "concealed" the fact that Guccione had filed suit against the government in 1985. That suit was dismissed on technical grounds last summer, but the dismissal is being appealed by Guccione.
Last July, U.S. District Court Judge Kevin Thomas Duffy in New York ruled that Dominion and its Washington law firm were responsible for torpedoing the Atlantic City project and causing Penthouse to lose more than $100 million in potential profits.
Duffy ordered Dominion and the law firm -- Melrod, Redman & Gartlan -- to pay Penthouse $129 million in damages. If upheld on appeal, the judgment could devastate Dominion Federal, Virginia's largest savings and loan association and one of its fastest-growing S&Ls.
However, lawyers for Dominion and Melrod, Redman say they recently discovered the existence of the second lawsuit, which they say could have changed the result of their trial last summer.
In the second lawsuit, Guccione alleged that during the government's Abscam investigation of influence-peddling on Capitol Hill in the late 1970s, a federal informant attempted to persuade him to engage in criminal conduct, including bribing New Jersey gaming officials.
When Guccione refused, the lawsuit alleges, the informant spread false rumors about the publisher. The suit contends that the rumors helped prevent Guccione from obtaining the necessary financing for the project.
Dominion's lawyers said in their pleadings that Penthouse was making inconsistent allegations in its two lawsuits. In its lawsuit against Dominion, Penthouse alleged that the casino project fell through after Dominion reneged on a commitment to lend the company $35 million for the project.
"It should not lie in a plaintiff's mouth to pursue a huge recovery in one courtroom while simultaneously asserting the flat contradictory of his position before another judge of the very same court," the lawyers argued in their brief. They asked Duffy to set aside his judgment and hold a new trial.
A Penthouse spokeswoman declined comment yesterday. Penthouse is understood to be preparing a reply to the Dominion papers, a Dominion lawyer said.
New York attorney Norm Roy Grutman, who represented Guccione during the Abscam litigation, said yesterday that he was well aware of Penthouse's allegations against Dominion when he filed Guccione's suit against the government in 1985, but that he felt there was no inconsistency.
"If the government did something wrong, it doesn't mean that the bank didn't do something wrong," said Grutman, who no longer represents Guccione. He said Penthouse would be precluded only from collecting double damages for the same injury.
In their pleadings, Attorneys for Dominion and Melrod, Redman cited other arguments to support their request for a new trial. In particular, they alleged that the trial last summer was unfair because Judge Duffy indicated to a Dominion lawyer that he thought a key witness was lying even before the witness had finished his testimony, thus undermining the witness' ability to testify effectively.
The credibility of the witness -- Philip Gorelick, a partner for Melrod, Redman -- was a key factor in the judge's decision against Dominion and the law firm. Duffy refused comment yesterday, his clerk said.