By John Patrick Ford
San Diego Daily Transcript
Friday, June 25, 2010
When introducing William S. Lerach to the City Club of San Diego, the author of a new book on corporate greed had it right. The Securities and Exchange Commission looked the other way and opened the opportunity door for class action litigation. Bill Lerach was savvy enough to take advantage of the corporate executives who fudged on their fiscal reporting, causing big stock losses.
There were previous stock market declines, like the savings and loan meltdown in the 1980s followed by the high tech dot-com collapse in 2001 providing Lerach and company lucrative cases of fraud that crowned him as the "King of Class Action." Where were you Bill as the sub-prime mortgage market triggered the latest and largest Wall Street scam?
That's what the capacity audience at the City Club luncheon in June came to hear about as both author Patrick Dillon and subject Bill Lerach took to the podium. The book title, "Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to its Knees," gives the reader an insight into what the book is about in a few words.
Of course, most the readers of this newspaper are well aware of Bill Lerach's rise and fall in the class action arena, as San Diego was his base of operation. His high profile in stockholder suits against major corporations caused panic on Wall Street. and made the perpetrator a target of scorn from professional colleagues and corporate America.
City Club host, George Mitrovich, said, "A person will be judged by the enemies you have made." Guest Jerry Butkiewicz, former head of the city's Labor Council, declared that Lerach was the Robin Hood of pension funds.
Whatever you think about Bill Lerach, credit must be given for the benefits he brought to thousands of stockholders who were ripped off by greedy corporate officers, their bankers and their consultants during the longest run of a bull market. Estimates project judgments as high as $45 billion returned to investors.
However, Lerach missed out on probably the biggest fraud ever unearthed in the financial meltdown of 2007 to 2009. He will also stand aside while others cash in on future oil spill litigation and the Toyota defect law suits already totaling 320.
I have tracked and commented on Bill Lerach's odyssey into the inner sanctums of corporate America for over 10 years. Initially, his raids on reputable companies incensed me. Out-of-court settlements with insurance carriers for deep-pocket consultants and investment bankers became prime targets for damages. Company executives claimed they were victims of "ambulance chaser" legal pirates.
After the dot-com bust in 2001 when a rash of risky public offerings ripped off thousands of investors, Lerach became kind of a folk hero. My observations published in 2003, 2005 and 2007 endowed him with accolades for exposing gaps in security regulations and insider deals that blew up into big bubbles of speculation in stocks. Remember when everyone was mad at Enron?
At the same time, Lerach's law firm earned $251 million in fees from 225 lawsuits filed from 1999 to 2005, representing about 43 percent of class action litigation. Congress tried to put restraints on stockholder claims, but President Clinton vetoed the bill. Wall Street referred to the probes into company finances as "getting Lerached."
What happened to this steamroller class action legal practice? Lerach and three of his colleagues were indicted for paying kickbacks to the plaintiffs they represented. Rather than defending their actions, the four attorneys plea-bargained to charges of conspiracy with guilty responses. Lerach spent 18 months in a low-security prison, returning to private life in March but disbarred from legal practice.
It boggles the mind to speculate what the "king of class action" would do in the mortgage market debacle dragging down prime banks and investment firms to generate the worst recession in 80 years. Then imagine going after the disastrous flubs caused by the BP oil spill.
Instead, Bill Lerach will teach law and fight for inequities caused by deregulation of the banking and securities industries. "Consumer laws were gutted," he warned. Regulators have been the pawns of lobbyists and their corporate clients, as recently revealed in the Gulf oil spill.
Even worse, the municipal pension funds are hopelessly under funded. The nation's largest, CALPERS for the state of California, is $500 billion short of its retirement obligations, Lerach told his full-house audience.
His prophecy for the coming years include a perpetual unemployment rate of 10 percent and insolvency of numerous pension funds that are currently under funded by billions of dollars. When asked about the effectiveness of the financial reform bill before Congress, the speaker was critical of the toothless provisions handcrafted by Wall Street insiders that downplay any form of regulation of the securities markets.
"Financial reform legislation currently before Congress was written by Wall Street," the noted securities litigator regretted to admit.