Reaching for Gavels:

Class action suitors ply judges, securities officials with tax-exempt foundation

Convicted superstar lawyer William Lerach and colleagues at two of the nation's top securities class-action law firms used a tax-exempt foundation they controlled for more than a decade to cultivate relationships with key federal and state judges, and federal securities enforcement officials, an investigation by The Examiner found.

The foundation - the Institute for Law and Economic Policy (ILEP) headquartered in Philadelphia - was formed in 1996 to support aggressive class-action litigation against alleged corporate wrong-doing shortly after Congress passed legislation meant to remedy flaws in the legal system that favored plaintiffs attorneys like Lerach.

Many officials attending ILEP events held positions from which they could influence securities class action cases in which the two firms - Milberg Weiss and Lerach Coughlin - had significant legal and financial interests.

Lerach and two former Milberg Weiss colleagues have pleaded guilty to felonies in connection with more than $11 million in kickbacks to plaintiffs they recruited to bring more than 150 lawsuits that netted the firm at least $200 million in tainted legal fees, according to federal prosecutors

The firms represent class-action plaintiffs in suits against large companies typically alleging management corruption as the cause of stock losses by the firms' shareholders. Companies often settle out of court to avoid excessively costly litigation as defendants. Plaintiffs firms make millions of dollars in legal fees if a case is settled or litigated to a successful verdict.

At least 14 federal judges were reimbursed by the foundation for attending its events, including two on the Southern District of New York (SDNY) bench who presided over dozens of cases brought by the two firms. Neither of the judges responded to Examiner questions delivered to them by the SDNY clerk.

Several key executives of the foundation were Milberg Weiss lawyers, although, with the exception of Lerach, none was charged in the government's indictment of Milberg Weiss.

Attorney Sandra Stein was listed as ILEP's president on the group's 1997 IRS Form 990, and has been listed as executive vice president since 1999. Stein - who refused to be interviewed for this story - was described on ILEP literature as a Milberg Weiss attorney until joining Lerach Coughlin in 2004.

Contrary to ILEP's 1997 IRS filing, Edward Labaton of the New York-based Labaton Sucharow law firm told The Examiner that he has been president of ILEP since its founding, a claim that is included in his biography on the firm's web site.

Lerach was listed as ILEP's director from 2001 to 2005, according to the group's IRS filings. He did not respond to repeated requests for comment.

Stein's daughter, Laura, has been ILEP special counsel since 2002. Laura Stein is also an attorney with Lerach Coughlin - did not respond to repeated requests for comment.

From 1997 to 2004, ILEP's office address - 1845 Walnut Street in Philadelphia - was the same address as Milberg Weiss' Philadelphia office. After 2004, the ILEP address was also listed as Lerach Coughlin's office in Philadelphia.

The foundation's purpose, as described in ILEP's first IRS filing, is "to preserve, study and enhance access to the civil justice system by all consumers." But the group's aim was more specific, according to Duke University Law School Professor James D. Cox.

Cox is a member of ILEP's National Council of Academic Advisors and has attended every ILEP annual conference, often as a speaker. He said the foundation's purpose was "to give class-action lawyers a credible academic voice."

Cox's description was confirmed by former Securities and Exchange Commissioner Harvey Goldschmidt, who helped start ILEP and was the honoree at ILEP's 2006 symposium at the Atlantis Resort on Paradise Island in the Bahamas. He has attended or spoken at every other ILEP event. He said ILEP's purpose was always to be "a high quality and scholarly think tank" on behalf of class-action lawyers.

The conferences are invitation-only events, with an average of 60-70 attendees, including speakers. The program pace is not particularly intense. The 2007 conference at Los Cabos featured only four panels in two days. Conferences are held on Thursdays and/or Fridays, making it possible for attendees to enjoy the resorts over the weekend.

Academic papers presented at ILEP conferences predominantly reflect opinions and arguments that are strongly supportive of aggressive class-action lawsuits and legal theories designed to bolster the chances of success for such suits.

Attending an ILEP event isn't cheap. Hotel accommodations at Los Cabos, Mexico, cost $340 per night. Tuition ranged from $450 for regular attendees to as low as $175 for judges, academics, federal or state employees, and attorneys 65 years or older, according to the event program.

Other ILEP resort locales in recent years included Lake Las Vegas in Nevada, the Doral Gold Resort and Spa in Miami, and the Hotel Del Coronado in San Diego.

Mark Tapscott is the editorial page editor of The Washington Examiner.

Reaching for Gavels:

Class action suitors ply judges, securities officials with tax-exempt foundation

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