Bill Lerach in happier days.
Nathan Koppel reports in the WSJ that securities class action lawyer William Lerach, 61, has agreed to plead guilty to a single count of conspiracy. If a judge accepts the deal, Mr. Lerach will serve one to two years in prison, according to the report, which also mentions that the government won’t pursue charges against Mr. Lerach’s spin-off firm, Coughlin Stoa Geller Rudman & Robbins LLP.
The plea relates to Mr. Lerach’s time with his old firm, Milberg Weiss, and appears to involve allegations that the firm paid kickbacks to class representatives.
Update: The NYT adds details about the Lerach plea arrangement:
- Mr. Lerach will make his guilty plea in Los Angeles federal court.
- He will forfeit $7.75 million and pay fines of $250,000.
- The plea will identify Dr. Steven G. Cooperman as the receiver of "secret payments" from Milberg Weiss in return for Dr. Cooperman’s agreeing to serve as a class representative in securities fraud cases.
Blawgletter supposes that some people will say Mr. Lerach deserves opprobrium and criminal punishment and that others will argue the government overreached by destroying the career of a prominent class action lawyer and threatening the existence of his former firm.
We’ll leave such judgments to those who know more than we do about the facts. But we do wish to point out that the viability of making "secret payments" in securities class actions probably ended years ago, not least because of the Private Securities Litigation Reform Act of 1995. The PSLRA required federal courts to prefer institutional investors in appointing the "lead plaintiff" in each case. It also mandates that the lead plaintiff certify the absence of arrangements for him, her, or it to receive extra benefits from the class action. So we doubt that Mr. Lerach’s fall signals a flood of similar criminal charges.
We also want to draw your attention to an irony of the case. Many saw the PSLRA as a way to punish and possibly kill Milberg Weiss. Apparently, proponents thought that giving a leg up to institutional investors would result in whiter shoe firms representing class plaintiffs instead of renegades like Milberg Weiss. But it didn’t work; in fact, the PSLRA had the opposite effect, catapulting Milberg Weiss into more and bigger cases as they successfully cultivated relationships with huge pension funds and other large investors.
So, in a way, we can see the point of those who would criticize the government for doing through prosecution what Congress failed to do through legislation. But neither can we excuse criminality.