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Monday, Nov 9, 2009
When corporations run amok and accountants are shredding documents, who ya gonna call? Try lawyer Bill Lerach.
Jan 28, 2002 | It's midmorning on yet another sunny day in San Diego, but inside Bill Lerach's downtown office, a storm is brewing. "Where's the person interfacing on Arthur Andersen!" Lerach barks, sending one of his assistants scurrying to a phone.
Inside a cluttered, windowless study, Lerach finds a seat. Behind him are books upon books chronicling the misdeeds of modern capitalism. "Den of Thieves." "Money Machine." "The CEO's Complete Guide to Committing Fraud" (two copies!). And, of course, "Financial Shenanigans." But Lerach has no time for reading these days, unless it involves the financial books, records and boxes of shredded-document confetti associated with the bankrupt energy trader Enron and its now-tainted independent auditing firm, Arthur Andersen.
As the 60 class-action suits already filed against Enron are amalgamated into one, Lerach is angling for lead counsel. For the longtime thorn in the side of corporations everywhere, it could be the plum assignment of his life. The Enron case is shaping up to be the mother of all class-action claims.
Lerach, partner with Milberg Weiss Bershad Hynes & Lerach, has a well-earned reputation as the scourge of corporate America, loathed in boardrooms across the country for suing companies at the mere drop of a stock price. So loathed, in fact, that Congress passed a law in 1995 aimed specifically at deterring Lerach from filing "frivolous" shareholder class-action claims.
The law, called the Private Securities Litigation Reform Act, failed miserably. Lerach was busier than ever last year, instigating or involved with 60 percent of the 487 class-action lawsuits filed in 2001 -- double the previous record set in 1998, according to statistics compiled by the Stanford Law School Securities Class Action Clearinghouse. Thank the boom and inevitable bust of the dot-com era, when all manner of tech and other companies scrambled to go public.
"There's been an unprecedented upsurge in financial and accounting fraud, accompanied by an unprecedented upsurge in insider trading," Lerach says in his trademark Mark Twain gravelly voice. "With the benefit of hindsight, it's fairly easy to see that all of this was stimulated at least in part by the relaxation of securities laws in 1995."
Class-action lawyers, and Lerach in particular (an article in Wired magazine once dubbed him a "blood-sucking scumbag") are not widely viewed as white knights of the courtroom. But as the Enron fiasco demonstrates with astounding clarity, in an era when accounting firms are in bed with the very companies that they are supposed to be auditing, and federal oversight is under continued assault by the forces of free market deregulation lobbyists, class-action lawyers like Lerach may be the only viable defenders of shareholder and employee interests.
The Enron debacle, the largest bankruptcy in modern capitalism, complete with Nixonian revelations of dark partnerships, murky accounting, executive greed, questionable White House connections and even document-shredding parties, is, sadly, a fitting bookend to the growing catalog of duplicitous corporate accounting and conflict-of-interest shenanigans in the financial industry. Enter Bill Lerach.
"He believes the little guy gets screwed all the time," says John F. McCarrick, partner with Duane Morris & Heckscher in New York and executive member of the Professional Liability Underwriting Society. "I would find it hard to demonize him."
And yet, even as Lerach jockeys to become the point man representing plaintiffs in the Enron affair, a Los Angeles grand jury reportedly is investigating allegations that Milberg Weiss improperly paid off victims to appear in lawsuits, including a Beverly Hills eye surgeon who was convicted in 1999 for faking an art theft to collect $12.5 million in insurance. The surgeon Dr. Steven G. Cooperman, has been a recurring plaintiff in class-action lawsuits filed by Lerach's firm.
Lerach declined to comment on the accusation. In any case, he makes no apologies for his brand of litigation. When it comes to policing corporations, "I really believe we're better than the criminal justice system, better than the Securities and Exchange Commission," Lerach says. "Corporations fear us more than they fear anything else."
