Top Litigator Faces Potential Prison Term
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Securities lawyer William Lerach found himself on the wrong side of the law today. Lerach agreed to plead guilty to a criminal conspiracy charge stemming from alleged kickbacks to clients in class action lawsuits. Under a plea agreement, the 61-year-old lawyer is likely to face one to two years in prison. He's also agreed to forfeit $8 million.
As NPR's Scott Horsley reports, it's a grim comeuppance for a man who has made his living pursuing corporate wrongdoing.
SCOTT HORSLEY: Until he retired two weeks ago, Bill Lerach was one of the busiest lawyers in the country - suing companies for alleged misdeeds on behalf of shareholders who'd lost money.
Law professor James Cox of Duke University says Lerach's reputation tended to rise when stocks were falling and vice versa.
Professor JAMES COX (Law, Duke University): He is a saint in the post-Enron era and a demon in the market-boom era, when he was suing high-tech companies left and right.
HORSLEY: Cox says the truth about Lerach lies somewhere in between.
Prof. COX: He is the classic illustration of the entrepreneurial plaintiff's lawyer, pushing the envelope, using the press to his full advantage, to wrest a settlement for what he genuinely believed were abusive practices.
HORSLEY: But federal prosecutors say Lerach's old law firm, Milberg Weiss, had some abusive practices of its own. Last year, a grand jury in California indicted the firm for allegedly paying illegal kickbacks to clients. The indictment argued those kickbacks gave Milberg Weiss a ready stable of plaintiffs, which would have been an advantage in an era when lucrative class action cases were typically handled by the first law firm to file.
Professor Cox says it was during that era that Lerach brashly claimed to have the best job a lawyer could hope for, since he didn't have to worry about clients.
Prof. COX: Clients are supposed to come to the lawyer, lawyers are not supposed to come to the client. When you have clients on retainer, you're essentially buying the lawsuits. And that's unprofessional.
HORSLEY: In 1995, a Republican Congress passed a law designed to rein in class action lawsuits and the attorneys behind them - many of whom, like Lerach, were big contributors to the Democrats. Lerach stayed busy, though.
In a 2002 interview with NPR, he said he was increasingly working for big pension funds who'd come to see lawsuits as one way to combat accounting fraud, the likes of Enron and WorldCom.
Mr. WILLIAM LERACH (Lawyer): At first, there was no activity, then a trickle, then a stream, then a river - now, a flood. I think institutional investors have simply come to realize the government can't protect them. They can't really vote with their feet. They're going to have to stand up and fight for what's right.
HORSLEY: So far, Lerach has recovered more than $7 billion for Enron investors by suing executive, accountants, attorneys and the Wall Street firms who worked with the bankrupt company. But for seven years now, Lerach and his former partners have been dogged by the kickback investigation. Another partner pled guilty in July. The firm itself and a third partner are awaiting trial in January. Under his plea agreement filed today, Lerach acknowledges secret kickbacks were paid to clients and concealed from the courts overseeing the cases.
Financial commentator Ben Stein says he's disappointed for his friend. Stein says Lerach was one of the few people that corporate power players really feared.
Mr. BEN STEIN (Financial Commentator): People conceived him as being a big bully. But to my - I would think, he was not a big bully at all. He was just a guy trying to help the little shareholder. And I don't have any doubt that he was a force for good in the world of corporate finance.
HORSLEY: Lerach's plea agreement does not require him to cooperate with prosecutors or testify against his former partners. Another law firm he founded in San Diego is not threatened with prosecution and promises to carry on his work.
Scott Horsley, NPR News, San Diego.
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