Lerach admits role in kickback scheme (Prison sentence for big Hillary donor)

The fall of San Diego trial lawyer William S. Lerach may end his reign as Wall Street's king of pain, but the class-action lawsuit industry he helped create has become an established reality for corporate America.

Lerach, 61, admitted in a plea agreement that prosecutors filed yesterday that he participated in a scheme that secretly paid kickbacks to recruit plaintiffs for more than 150 class-action lawsuits brought against U.S. companies. As part of the deal, Lerach agreed to forfeit $7.75 million in unlawful gains, pay a $250,000 fine and accept a prison sentence ranging between one and two years.

He will be arraigned at a later date, said Thom Mrozek, a spokesman for U.S. Attorney George Cardona in Los Angeles.

“From a historical perspective, this is the fall of a titan,” said Professor John Coffee of the Columbia University School of Law. “Bill Lerach did not invent the securities class-action lawsuit. But he converted it from being an irritant and a nuisance to public corporations to being a major threat.”

Stanford University law professor Joseph Grundfest agreed. He said Lerach was involved in setting many records, including a colossal $7.2 billion in settlements recovered from executives, accountants, attorneys and financial institutions involved in the Enron fraud.

“But many of those records will now have an asterisk,” Grundfest added, “because there is no doubt now that his record was not clean. There were cases in which the ball was juiced and the fix was in. And his legacy will always be marred by that fact.”

Grundfest and other experts doubted that Lerach's plea would have any broader effects, because class-action litigation has become institutionalized.

While Lerach “has been extraordinarily influential,” Georgetown University Law Center professor Donald Langevoort said, “it's a maturing industry, with plenty of talent and plenty of brainpower to carry on this work.”

Lerach struck the deal amid a seven-year federal investigation into allegations that his former Milberg Weiss law firm was paying certain clients to serve as “professional plaintiffs” in lawsuits against companies the firm had targeted.

The law firm typically paid these clients 10 percent of the attorneys fees that Milberg Weiss obtained to settle their suits, prosecutors said. The secret arrangements enabled the firm to maintain a stable of people who were ready to serve as lead plaintiffs in its class-action cases.

Prosecutors allege that the firm reaped more than $216 million in attorneys' fees from such compromised lawsuits, which spanned a 20-year period.

Under law, the lead plaintiff in a class-action shareholder suit must serve as a representative of the class and cannot have a special interest or hidden inducement beyond other shareholders in the case.

Prosecutors said that Lerach and others, by participating in the secret payment scheme, betrayed their fiduciary duties of loyalty, honesty and trust to their other clients. If the secret payments had been uncovered, prosecutors said, judges overseeing the cases could have disqualified the law firm from serving in the case.

“I have always fought for my clients aggressively and vigorously in order to hold powerful corporations responsible when their actions harmed people,” Lerach said in a statement. “However, I regrettably crossed a line and pushed too far.”

“I've been a lawyer since 1970, and I never met a person who did more good for more people than Bill Lerach,” said Ben Stein, the financial commentator and erstwhile actor and game show host. “He genuinely cared about the little people getting screwed.”

Lerach also was a prominent friend to former President Bill Clinton and was an influential fundraiser for the Democratic Party. He contributed $1.28 million to federal campaigns since 1993 and has been a strong supporter of Democratic candidates for governor and other state offices.

Stein lamented that Lerach acted as a counterbalance to corporate power in many ways, and that executives and directors will only be emboldened with him gone.

Yet Georgetown's Langevoort said Lerach's plea in many ways harks back to an era that existed before 1995, when congressional legislation revised the laws governing class-action shareholder suits.

The changes curtailed the “rush to the courthouse” suits that typically enabled a small investor who filed the first lawsuit against a company to take control of the class-action case. Instead, the law directed judges to give preference to institutional investors, such as state employee pension funds, that had incurred the biggest dollar losses.

Whether any law firm will emerge from the post-Lerach era with the power that Milberg Weiss wielded is an open question, experts said.

Terms of Lerach's plea agreement stipulate that he is not required to cooperate with the government's continuing investigation of the Milberg Weiss firm and its key partners. Lerach split from Milberg Weiss in 2004 to form a new San Diego law firm, which is now known as Coughlin Stoia Geller Rudman & Robbins.

As part of the deal, the government exempted the Coughlin Stoia law firm from prosecution in its investigation, including, specifically, partners Patrick Coughlin and Keith Park.

Columbia's Coffee said, “This is a very attractive plea deal for (Lerach), both in the minimal 'taste of jail' sentence range, one to two years, and the fact that he does not need to cooperate with the prosecution as a condition of the plea.”

From an East Coast perspective, Coffee said, the most interesting question focuses on the fate of Milberg Weiss and co-founder Melvyn Weiss.

A federal grand jury indicted the Milberg Weiss law firm last year, along with partners David J. Bershad and Steven G. Schulman, for making “secret and illegal payments” to clients. Weiss has not been charged, but he is widely viewed as the unnamed “Partner A,” who is alleged in the indictment to be a participant in the scheme.

Bershad, 67, pleaded guilty in July to the same charge as Lerach – conspiring to obstruct justice and to make false statements under oath. Steven G. Cooperman, an eye surgeon who received improper payments to serve as a plaintiff, also pleaded guilty to a conspiracy charge.

The remaining defendants in the case – the Milberg Weiss firm, Schulman, plaintiff Seymour M. Lazar and lawyer Paul T. Selzer – are scheduled to go to trial in January.

Milberg Weiss, founded in New York in 1965, was among the first law firms to use class-action law in suits filed on behalf of investors and consumers. The firm boasts on its Web site that it has recovered more than $45 billion in settlements and judgments.

Lerach, who joined the firm in 1976 when he moved to San Diego, rose to nationwide prominence for his unrelenting ferocity and for the innovative legal strategies he devised. By the 1990s, Lerach and Milberg Weiss dominated the field, handling more than 50 percent of such litigation nationwide.

In high-profile cases, such as the demise of Lincoln Savings & Loan, Lerach cast himself as a legal champion for powerless victims who had lost their savings and investments to unscrupulous robber barons.

But glimpses of Lerach's hardball tactics emerged during a 1998 trial in Chicago, which was the culmination of a civil suit filed against Milberg Weiss by Dan Fischel, a prominent legal expert.

Fischel's lawyers argued that Milberg Weiss had used an abusive lawsuit to damage his reputation and harm Lexecon, his Chicago-based consulting business.

After jurors returned a judgment against Milberg Weiss, the firm settled the case for $50 million.

Alan Salpeter, a Chicago lawyer who represented Lexecon in the trial, said Lerach's plea agreement yesterday came as no surprise because Lerach doesn't believe the rules apply to him.

“To me, this is the ultimate justice,” Salpeter said. “It is even more justice than Lexecon vs. Milberg Weiss. That was a black eye. This is a knockout punch. He's finished.”

OpenSecrets - Query = "Lerach"

Contributor	Occupation	Date	Amount	Recipient
ALEXANDER, SUSAN	Lerach Coughlin/Attorney	2/14/2007	$300	Boxer, Barbara
SAN ANSELMO,CA 94960
BANDMAN, RANDI	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$600	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
BANDMAN, RANDI D	Lerach Coughlin Stola Geller Aidman	3/31/2007	$2,100	Edwards, John
BEVERLY HILLS,CA 90210
BARON, RANDALL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$500	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
BLOOD, TIMOTHY	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$600	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
BURKHOLZ, SPENCER	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$800	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
CARROLL, CANDICE M	Lerach Coughlin/Attorney	1/17/2007	$1,000	Edwards, John
LA JOLLA,CA 92037
CICCARELLI, MICHELLE M	Lerach Coughlin/Attorney	5/11/2007	$2,300	Biden, Joseph R Jr
LA JOLLA,CA 92037
CICCARELLI, MICHELLE M	Lerach Coughlin Stoia & Geller/Atto	3/31/2007	$2,300	Edwards, John
LA JOLLA,CA 92037
CICCARELLI, MICHELLE M	Lerach Coughlin Stoia & Geller/Atto	1/18/2007	$2,100	Edwards, John
LA JOLLA,CA 92037
CICCARELLI, MICHELLE M	Lerach Coughlin/Attorney	5/11/2007	$400	Biden, Joseph R Jr
LA JOLLA,CA 92037
CICCARELLI, MICHELLE M	Lerach Coughlin Stoia & Geller/Atto	3/31/2007	$200	Edwards, John
LA JOLLA,CA 92037
COUGHLIN, PATRICK	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92101
COUGHLIN, PATRICK	Lerach Coughlin Stoia Heller Rudma	6/13/2007	$2,100	Madrid, Patricia A
BEVERLY HILLS,CA 90210
COUGHLIN, PATRICK	Lerach Coughlin/Attorney	3/31/2007	$2,100	Edwards, John
SAN DIEGO,CA 92101
COUGHLIN, PATRICK	Lerach Coughlin/Attorney	3/31/2007	$200	Edwards, John
SAN DIEGO,CA 92101
COUGHLIN, PATRICK J	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$5,700	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
COUGHLIN, PATRICK J	Lerach Coughlin Et Al/Attorney	3/30/2007	$2,300	Filner, Bob
SAN DIEGO,CA 92101
COURTNEY, JEAN	Lerach Coughlin/Paralegal	3/8/2007	$250	Obama, Barack
SAN DIEGO,CA 92110
DANIEL, PATRICK	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,100	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
DANIELS, PATRICK W	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,000	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
DAVIDSON, STUART A	Lerach Coughlin/Attorney	4/20/2007	$250	Edwards, John
BOCA RATON,FL 33498
DOWD, MICHAEL	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92123
DOWD, MICHAEL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,500	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
DOWNS, TRAVIS E III	Lerach Coughlin Et Al/Attorney	3/31/2007	$1,000	Edwards, John
SAN DIEGO,CA 92127
GELLER, PAUL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,500	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
GELLER, PAUL J	Lerach Coughlin/Attorney	3/31/2007	$2,300	Edwards, John
BOCA RATON,FL 33432
GELLER, PAUL J	Lerach Coughlin/Attorney	6/11/2007	$2,300	Clinton, Hillary
BOCA RATON,FL 33432
GELLER, PAUL J	Lerach Coughlin/Attorney	1/18/2007	$2,100	Edwards, John
BOCA RATON,FL 33432
GELLER, PAUL J	Lerach Coughlin/Attorney	3/31/2007	$200	Edwards, John
BOCA RATON,FL 33432
GELLER, PAUL MR	Lerach Coughlin Stoia Geller Rudma/	5/22/2007	$1,000	Marshall, Jim
SAN DIEGO,CA 92101
GEORGE, DAVID J	Lerach Coughlin Et Al/Attorney	3/31/2007	$1,000	Edwards, John
WELLINGTON,FL 33414
GEORGIOU, BYRON S	Lerach Coughlin/Attorney	3/6/2007	$2,300	Edwards, John
LAS VEGAS,NV 89109
GEORGIOU, BYRON S	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
LAS VEGAS,NV 89109
GEORGIOU, BYRON S	Lerach Coughlin/Attorney	3/6/2007	$200	Edwards, John
LAS VEGAS,NV 89109
GRONBORG, TOR	Lerach Coughlin Et Al/Attorney	1/18/2007	$600	Edwards, John
SAN DIEGO,CA 92104
GRONBORG, TOR	Lerach Coughlin Et Al/Attorney	5/23/2007	$300	Biden, Joseph R Jr
SAN DIEGO,CA 92104
HODGES, HELEN J	Lerach Coughlin Et Al/Attorney/Part	3/30/2007	$2,300	Filner, Bob
SAN DIEGO,CA 92103
HODGES, HELEN J	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92103
HODGES, HELEN J	Lerach Coughlin/Attorney	3/31/2007	$2,100	Edwards, John
SAN DIEGO,CA 92103
HODGES, HELEN J	Lerach Coughlin/Attorney	3/8/2007	$250	Obama, Barack
SAN DIEGO,CA 92103
HODGES, HELEN J	Lerach Coughlin/Attorney	3/31/2007	$200	Edwards, John
SAN DIEGO,CA 92103
HODGES, HELEN MS	Lerach Coughlin Stoia Geller Rudma/	5/22/2007	$1,000	Marshall, Jim
SAN DIEGO,CA 92101
HOWES, G P	Lerach Coughlin/Lawyer	3/31/2007	$2,300	Edwards, John
SAN DIEGO,CA 92130
HOWES, G P	Lerach Coughlin/Lawyer	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92130
HOWES, G P	Lerach Coughlin/Lawyer	3/31/2007	$200	Edwards, John
SAN DIEGO,CA 92130
HOWES, PAUL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,100	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
ISAACSON, ERIC	Lerach Coughlin Stoia Geller Rudman	1/4/2007	$500	San Diego Democratic Club
EL CAJON,CA 92020
ISAACSON, ERIC	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$400	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
ISAACSON, ERIC	Lerach Coughlin Stoia Geller Rudman	2/20/2007	$350	San Diego Democratic Club
EL CAJON,CA 92020
ISAACSON, ERIC A	Lerach Coughlin Et Al/Attorney	4/12/2007	$2,300	Filner, Bob
EL CAJON,CA 92020
ISAACSON, ERIC A	Lerach Coughlin Stoia Geller Rudman	1/17/2007	$2,100	Edwards, John
EL CAJON,CA 92020
ISAACSON, ERIC A	Lerach Coughlin Stoia Geller Rudman	3/31/2007	$200	Edwards, John
EL CAJON,CA 92020
JUDA, NANCY M	Lerach Coughlin/Attorney	1/18/2007	$1,000	Edwards, John
WASHINGTON,DC 20037
LEAHY, ARTHUR C	Lerach Coughlin/Attorney	1/17/2007	$1,000	Edwards, John
SAN DIEGO,CA 92101
LERACH, MICHELLE C	Lerach Coughlin Et Al/Attorney	3/30/2007	$2,300	Filner, Bob
SAN DIEGO,CA 92101
LERACH, WILLIAM	Lerach Law/Attorney	1/18/2007	$2,100	Edwards, John
LA JOLLA,CA 92037
LERACH, WILLIAM	Lerach Law/Attorney	3/31/2007	$2,100	Edwards, John
LA JOLLA,CA 92037
LERACH, WILLIAM	Lerach Law/Attorney	3/31/2007	$200	Edwards, John
LA JOLLA,CA 92037
LERACH, WILLIAM	Lerach Law/Attorney	3/31/2007	$200	Edwards, John
LA JOLLA,CA 92037
LERACH, WILLIAM S	Lerach Coughlin Stoia Geller Rudman	5/11/2007	$2,300	Biden, Joseph R Jr
LA JOLLA,CA 92037
LERACH, WILLIAM S	Lerach Coughlin Stoia Geller Rudman	5/11/2007	$400	Biden, Joseph R Jr
LA JOLLA,CA 92037
MCLAUGHLIN, VALERIE L	Lerach Coughlin/Attorney	1/17/2007	$1,000	Edwards, John
SAN DIEGO,CA 92101
MENON, RUBY	Lerach Coughlin/Attorney	4/26/2007	$2,300	Edwards, John
RAMSEY,NJ 07446
MEYERHOFF, AL	Lerach Coughlin Stoia Geller Rudma/	1/5/2007	$2,500	Solidarity PAC
SAN DIEGO,CA 92101
MEYERHOFF, AL	Lerach Coughlin Stoia Geller Rudma/	6/20/2007	$2,500	Solidarity PAC
SAN DIEGO,CA 92101
MEYERHOFF, AL	Lerach Coughlin Stoia Geller Rudman	3/23/2007	$1,000	McNerney, Jerry
STUDIO CITY,CA 90254
MEYERHOFF, ALBERT H	Lerach Coughlin Stoia Et Al/Attorne	3/31/2007	$2,000	Edwards, John
STUDIO CITY,CA 91604
MEYERHOFF, ALBERT H	Lerach Coughlin Et Al/Attorney	3/28/2007	$1,000	Boxer, Barbara
STUDIO CITY,CA 91604
MOTTEK, JACQUELINE	Lerach Coughlin; Et Al/Attorney	3/29/2007	$350	Edwards, John
LARKSPUR,CA 94939
PARK, KEITH F	Lerach Coughlin Et Al/Attorney	3/30/2007	$2,300	Filner, Bob
SAN DIEGO,CA 92101
PARK, KEITH F	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92101
PARK, KEITH F	Lerach Coughlin/Attorney	3/31/2007	$1,900	Edwards, John
SAN DIEGO,CA 92101
PARK, KEITH F	Lerach Coughlin/Attorney	3/31/2007	$200	Edwards, John
SAN DIEGO,CA 92101
REISE, JACK	Lerach Coughlin/Attorney	3/31/2007	$1,000	Edwards, John
BOCA RATON,FL 33434
ROBBINS, DARREN	Lerach Couglin Stoia Geller Rudman/	6/7/2007	$4,700	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
ROBBINS, DARREN J	Lerach Coughlin/Attorney	3/27/2007	$2,300	Edwards, John
SAN DIEGO,CA 92130
ROBBINS, DARREN J	Lerach Coughlin Et Al/Attorney	3/31/2007	$2,300	Filner, Bob
SAN DIEGO,CA 92130
ROBBINS, DARREN J	Lerach Coughlin/Attorney	1/18/2007	$2,100	Edwards, John
SAN DIEGO,CA 92130
ROBBINS, DARREN J	Lerach Coughlin/Attorney	3/27/2007	$200	Edwards, John
SAN DIEGO,CA 92130
ROTHMAN, ROBERT	Lerach Coughlin Stoia Geller Rudman	1/18/2007	$500	Edwards, John
MELVILLE,NY 11747
RUDMAN, SAM MR	Lerach Coughlin Stoia Geller Rudma/	5/22/2007	$1,000	Marshall, Jim
SAN DIEGO,CA 92101
RUDMAN, SAMUEL	Lerach Coughlin/Attorney	1/30/2007	$2,000	Edwards, John
MELVILLE,NY 11747
RUDMAN, SAMUEL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$1,100	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
RUDMAN, SAMUEL	Lerach Coughlin/Attorney	3/31/2007	$300	Edwards, John
MELVILLE,NY 11747
SCHRODER, STEPHANIE	Lerach Coughlin/Attorney	1/17/2007	$1,000	Edwards, John
LA JOLLA,CA 92037
SCHROEDER, LAUREL	Lerach Coughlin Stoia/Desktop Admin	3/16/2007	$250	Obama, Barack
SAN DIEGO,CA 92107
SIMON, LEONARD	Lerach Coughlin Et Al./Attorney	5/30/2007	$300	San Diego County Democratic Party
LA JOLLA,CA 92037
SIMON, LEONARD B	Lerach Coughlin Et Al/Attorney	3/30/2007	$2,300	Filner, Bob
LA JOLLA,CA 92037
SIMON, LEONARD B	Lerach Coughlin Et Al./Attorney	1/17/2007	$1,000	Edwards, John
LA JOLLA,CA 92037
SKINMEYER, RANDALL	Lerach Coughlin/Attorney	1/18/2007	$2,100	Edwards, John
SAN DIEGO,CA 92101
SOLOMON, MARK	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$400	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
STEIN, JONATHAN M	Lerach Coughlin/Attorney	3/31/2007	$1,000	Edwards, John
BOCA RATON,FL 33428
STEIN, LAURA	Lerach Coughlin/Attorney	1/18/2007	$2,100	Edwards, John
BEVERLY HILLS,CA 90210
STEIN, LAURA	Lerach Coughlin	6/29/2007	$2,000	Obama, Barack
BEVERLY HILLS,CA 90210
STEIN, SANDRA	Lerach Coughlin/Attorney	1/18/2007	$2,100	Edwards, John
BEVERLY HILLS,CA 90210
STEINMEYER, RANDALL	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$700	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
STOIA, JOHN	Lerach Couglin Stoia Geller Rudman/	6/7/2007	$3,800	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
STOIA, JOHN	Lerach Coughlin/Attorney	1/17/2007	$2,100	Edwards, John
LA JOLLA,CA 92037
STOIA, JOHN MR	Lerach Coughlin Stoia Geller Rudma/	5/22/2007	$1,000	Marshall, Jim
SAN DIEGO,CA 92101
STROZZA, KATHLEEN	Lerach Coughlin Stoia Geller Rudman	1/18/2007	$1,000	Edwards, John
ENCINITAS,CA 92024
WALTON, DAVE MR	Lerach Coughlin Stoia Geller Rudma/	5/22/2007	$1,000	Marshall, Jim
SAN DIEGO,CA 92101
WALTON, DAVID	Lerach Coughlin Stoia Geller Rudman	6/7/2007	$900	Democratic Cong. Campaign Cmte
SAN DIEGO,CA 92101
WALTON, DAVID C	Lerach Couglin/Attorney	1/17/2007	$2,100	Edwards, John
SAN DIEGO,CA 92129
WALTON, DAVID C	Lerach Couglin/Attorney	3/31/2007	$200	Edwards, John
SAN DIEGO,CA 92129
WILENS, DOUGLAS S	Lerach Coughlin Et Al/Attorney	3/31/2007	$500	Edwards, John
BOCA RATON,FL 33433
WILLIAMS, SHAWN A	Lerach Coughlin Gerher Rudman & Rob	3/31/2007	$1,000	Edwards, John
SAN FRANCISCO,CA 94118

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