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Steven Perles and Thomas Fortune Fay made their reputation representing victims of terror attacks in lawsuits against countries that sponsor terrorism. But the two Washington, D.C. lawyers are now embroiled in a legal battle over the multimillion-dollar fees their successful litigation brought about, with Perles fending off charges he misused money in a trust account that belonged to both of them.

Steven Perles and Thomas Fortune Fay made their reputation representing victims of terror attacks in lawsuits against countries that sponsor terrorism. But the two Washington, D.C. lawyers are now embroiled in a legal battle over the multimillion-dollar fees their successful litigation brought about, with Perles fending off charges he misused money in a trust account that belonged to both of them.

In a suit filed June 20, Fay accuses Perles of improperly using $1 million of his terror-case proceeds as a bond in another suit filed against Perles by a former employee, Anne-Marie Kagy, who is seeking her own share of the proceeds. In the Kagy case, U.S. Magistrate Judge Alan Kay concluded that Perles owes the former employee almost $1.5 million.

Fay and Perles worked as co-counsel in high-profile terrorism cases, including two against the government of Iran that yielded judgments of almost $600 million, of which $54 million has been collected. And, in fact, their lobbying efforts had made such suits possible: They persuaded Congress in 1996 to pass a law permitting terrorism victims to collect a portion of their judgments from the frozen assets of states that sponsor terrorism.

Both Fay and Perles declined to comment about the substantive issues in the lawsuit, since the litigation is still pending and Perles has yet to file a response to Fay’s complaint. But both say they hope that Fay’s suit will not affect three other terrorism cases against Libya, Sudan and Iran in which they are currently collaborating.

“It is just a lawsuit right now, and I hope it stays that way,” Fay says. “It is unfortunate.”

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