Cut & Run

He made millions sculpting the figures of Houston women while dodging one of the largest malpractice judgments in Texas history. But after botching another surgery, can Dr. Gerald Johnson continue to operate?

Johnson also sued his malpractice attorney, David Davis, as well as Guy Abbey, whom he accused of altering medical reports on the ill-fated procedure. Those cases, like a subsequent malicious prosecution action against the Newsomes, were eventually dropped or dismissed.

Three months after the judgment, Johnson filed for bankruptcy. Actually, by then his practice had begun making him money hand over fist. Unlike June, who spent less and less time at the surgery center after the Newsome accident, Johnson took to working ridiculously long hours with little sleep. According to his own testimony, Johnson averaged a gross monthly income of between $80,000 and $120,000 from 1982 to 1992.

But apparently, Johnson remained troubled over the Newsome accident, and along with his anger over the jury verdict, it was crowding him toward the edge. According to his ex-wife, Johnson found a means of escape in nitrous oxide, the sweet, colorless laughing gas that fueled the twisted mirth of Dennis Hopper's character in the David Lynch movie Blue Velvet.

"I spent every night for several years running back and forth to the surgery center because I knew what he was doing," June says. "He'd be sitting in the operating room with the tanks and a mask on. I'd have to turn the nitrous off, turn the oxygen off and get him home. I tried different things to get him off it, but he had tanks hidden in the woods near our home."

June says the nitrous oxide kick lasted "two or three years," until she went to a support group for doctors' wives and learned of a Smyrna, Georgia clinic that specialized in treating physicians and their addictions. She went home and told her husband to pack his bags because they were leaving the next day. Johnson became angry and resisted, but finally let her make the arrangements. June says that when they arrived, the clinic's personnel wanted to admit Johnson. "They thought he was on other drugs," she recalls. "He was not well at all."

But Johnson had enough sense left to see his future amid the human wreckage lolling around the clinic. He refused the invitation to be admitted, but as far as June knows, he has not taken another whiff of nitrous oxide since.

"Fear," she notes, "is a great deterrent."

In 1976, due to what he called "underwriting considerations," Johnson lost his malpractice insurance. Though he testified that he considered obtaining it elsewhere, it was 1982 before he applied again. During those six years of, as they say in the medical profession, "going bare," Johnson employed what a federal bankruptcy judge called a medical malpractice defense plan, "a program designed to make [Johnson] judgment proof."

In the fall of 1978, Johnson sought some particular advice from his attorney, Ben Turner. The lawyer responded on October 16, 1978, with a letter that read in part: "It would appear that a transfer of assets to a foreign corporation would protect the assets from any judgment creditor of yours. However, if you own stock in the foreign corporation ... the judgment creditor could get at the assets .... I believe we discussed the difficulties of the judgment creditor being able to ascertain this information, without your volunteering it."

While attending a medical convention in Palm Beach in the mid-1970s, Johnson had noticed an abundance of advertising touting the tax advantages of doing business in the Cayman Islands. On a subsequent visit, Johnson learned that the banking secrecy laws in the West Indies tourist spot could enable one to avoid taxes and creditors. Indeed, the practice is so popular that there are 1,000 banks and 50,000 corporations headquartered in the Caymans, which have a population of roughly 20,000.

In June 1979, a short time after the botched operation on Jill Newsome, Johnson christened a scheme that seemed complicated on the surface, but, in fact, was a simple method by which he could funnel his income into a Cayman corporation, which would spit it back out to Johnson's relatives to use to "buy" his assets.

It started when Johnson chartered Houston International Plastic Surgery Associates on Grand Cayman. Ostensibly, the new corporation was to be a practice to cater to stateside patients who wanted vacations with their tummy tucks. Johnson testified that he had gotten approval to practice in the Caymans, but quit the venture because "the doctor who was controlling the deal had too much of a stranglehold on the operation."

The man who helped Johnson with the Cayman charter was Joe Bond, an attorney he met at a marriage counseling session the men and their wives attended. Bond was U.S. counsel for Bruce Campbell & Co., the Caymans' largest law firm. In the fall of 1981, around the time the Newsomes petitioned the court for a trial setting, Johnson talked to Bond about arranging the transfer of some real estate.

In November, Johnson sent $125,000 to something called International Medical Consultants. A week later, Bond received a letter from Campbell & Co., advising him to set up a corporation for Johnson "so that some loan agreement can be made." Just before Christmas 1981, Bond incorporated the Caribbean Investment Co., naming himself as president and sole director. Nine days later, on December 30, 1981, Caribbean Investment loaned $100,000 to Irene Martin, Johnson's live-in mother-in-law. The loan was for the purchase of two lots that Johnson owned adjacent to his homestead. As part of the same transaction, $20,000 was put in an escrow account in the name of Joe Bond.

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