Trial Lawyer Lerach May Step Down
STEVE INSKEEP, host:
One of the nation's most powerful trial lawyers has announced that he's thinking about retiring. William Lerach has made millions by suing businesses on behalf of shareholders. And last year, Lerach's old firm was indicted for allegedly paying illegal kickbacks to some of its investor clients.
NPR's Scott Horsley tells us about the man that some call a white-collar ambulance chaser.
SCOTT HORSLEY: Just the name Bill Lerach is enough to raise blood pressure in executive suites around the country. Any public company that sees its stock price drop unexpectedly runs the risk of being sued by Lerach. His firm files dozens of lawsuits every year, and he and his partners have won tens of billions of dollars in legal settlements for investors.
Lerach's current law firm and the firm he used to work for are the Coke and Pepsi of shareholder lawsuits, says Stanford law professor Joe Grundfest. Much of the credit or blame goes to the 61-year-old attorney known for his fiery manners and his frizzy hair.
Professor JOE GRUNDFEST (Law, Stanford University): In many ways, he was the most active, prolific, feared and - by some - hated plaintiff's class action lawyer in America.
HORSLEY: Corporate America vilified Lerach and tried to rein in class-action lawsuits - lobbying successfully for new legislation in 1995. By the time the tech bubble burst and Enron collapse, though, many investors were feeling cheated. Lerach told NPR in this 2002 interview shareholder lawsuits are an important check against corporate wrongdoing.
Mr. WILLIAM LERACH (Securities Lawyer): We knew for many years that underlying the thin veneer of prosperity and growth was a lot of accounting rot and fraud.
HORSLEY: By this time, Lerach was representing primarily big investors, like the University of California, who'd lost money on companies such as Enron and WorldCom. He helped to recover more than $7 billion from the Wall Street bankers who'd backed them. And it was lucrative for Lerach himself, who earned more than $10 million a year.
Mr. LERACH: We're profit-motivated. Nobody ever said it was a charitable enterprise. It takes the ability to make money to be able to stand up against big insurance companies, Wall Street investment banks, big corporations and big accounting firms.
HORSLEY: Two years ago, a federal grand jury in California indicted a man for allegedly taking secret, illegal kickbacks from Lerach's old law firm, Milberg Weiss, in exchange for serving as a plaintiff in more than 50 class-action suits. The firm and two of its partners were indicted a year later. All have pleaded not guilty.
The indictment alleges that kickbacks provided Milberg Weiss a ready stable of plaintiffs, which could be an advantage in the race for the courthouse door. Critic John Sullivan of the Civil Justice Association of California says the charge also suggests Milberg's suits were attorney-driven.
Mr. JOHN SULLIVAN (President, Civil Justice Association of California): The problem is that they are generating litigation where, in many cases, no one has really been harmed - in many cases where they have to manufacture both the client and the harm.
HORSLEY: Shareholder lawsuits are still controversial. A number of suits quickly rebounded after the 1995 crackdown and held steady until a couple of years ago, when Stanford's Professor Grundfest says the suits dropped rather sharply.
Prof. GRUNDFEST: There are three main theories. One is what we call the Milberg effect. It was roughly at that time that the Milberg firm was indicted. The second theory is that since the middle of '05, the market has been strong and volatility has been low. The third theory is that there's actually less fraud in the market today.
HORSLEY: Lerach left Milberg Weiss three years ago. His new firm says in a statement it has never been under investigation. The statement confirms Lerach is considering retirement, though, saying the investigation of his old firm should not become a distraction. The firm says it will continue to pursue corporate fraud, even if it has to do so without Bill Lerach himself.
Scott Horsley, NPR News, San Diego.