I loooove to say I told you so.
So here it comes: I told you so!
OK, maybe not you, the person reading this, in particular, but I did kind of mention there might be a problem with a lawyer named William S. Lerach. Lerach, the other day, got sentenced to two years in prison for filing class actions on behalf of plaintiffs that, essentially, worked for him and giving them kickbacks.
I mentioned this problem 15 years ago.
Really. I did. If you can somehow find it, go check out the April 22, 1992 edition of the National Law Journal. What I pointed out back then in a front page article was that Lerach and his law firm were repeatedly filing these suits for the same plaintiffs immediately after any bad news broke about a public company.
They weren’t even making any pretense at hiding this stuff. The same plaintiff names would pop up again and again. These plaintiffs were either astonishingly bad investors or they bought a share of everything so they could be ready to sue anyone when needed.
And then the suits would be settled for some tiny amount for real shareholders while Lerach’s firm got lots and lots of money for doing next to nothing for the supposed plaintiff class.
They even had an “expert” they used who would file declarations claiming that company agreements to be ethical from then on were somehow worth millions of dollars and, thus, Lerach’s firm was entitled to a percentage of that.
Now I want to be clear that I’m not gloating about Lerach going to jail. It doesn’t really matter to me. After all, he was just manipulating a system that seemed, at least for a very long time, not to care. Judges, after all, were rubberstamping those settlements.
So the really amazing thing to me is that someone actually decided to do something – 15 years later.
The tale is also instructive on other levels.
First off, it’s yet another illustration of what I keep telling you – no one is sorry until they’re caught.
The news reports of Lerach’s sentencing quoted him saying he knew what he was doing was wrong. “My conduct was completely and absolutely unacceptable from anyone, especially a lawyer.”
Yet somehow he managed to keep doing it year after year.
The best part, though, came toward the end of the story as reported by the Los Angeles Times. It was this: “Lerach requested that … upon his release (he) be allowed to teach, for no salary, via teleconference at his alma mater, the University of Pittsburgh School of Law, on ethics and corporate governance.”
Pause. Think a moment.
The guy who just got out of jail is an expert on ethics?
If I’m at the University of Pittsburgh, I’m not taking that class.
MORE ETHICAL BEHAVIOR. The strangeness continues.
Three days after the Lerach sentencing, a lawyer filed a suit in Los Angeles Superior Court against the firms Lerach used to be with for – get this – not paying him to be plaintiff in a class action.
That’s right. This guy seems to think he should get $1.1 million from the law firms for being the named plaintiff in a class action.
Allow me to remind you here that Mr. Lerach just got sent to prison for paying plaintiffs in class action lawsuits.
Why does this plaintiff want Milberg Weiss, et al. to pay him now?
Because a guy who was supposed to pass on the illegal kickback refused to do it.
I couldn’t possibly make this up.
According to the suit, the plaintiff – and let me repeat that this guy is lawyer too – hired Lerach’s firm to file a class action with himself as the class representative and then asked the firm “to advise plaintiff of the appropriate means for securing plaintiff’s referral fee as an attorney referring himself and the class to defendants.”
He wanted a referral fee for referring himself. It sounds like every plaintiff should get that.
Anyway, the advice from Lerach’s firm, allegedly, was that he should get a “trusted friend or associate” to act as the referring attorney to accept the referral fee and then give it to the plaintiff.
Milberg Weiss, et al. settled the class action and paid $1.1 million to said trusted friend.
Trusted friend kept the money.
The plaintiff, according to the suit, had no idea that the arrangement was “in any way wrong, illegal, improper, unethical or in violation of any statute, case law or State Bar rule.”
I repeat: this plaintiff is a lawyer.
So he sued the trusted friend and lost because a court ruled the deal was illegal and he had “unclean hands.”
So now he’s suing Lerach’s firms and the trusted friend for legal malpractice.
Do you think he’s washed his hands yet?
I loooove to say I told you so.