Bill Lerach: A Robin Hood who lined his own pockets

San Diego class action attorney William Lerach became known as the scourge of Silicon Valley high tech outfits and Fortune 500 corporations elsewhere because of his incredible success with "strike suits" filing against companies at the first drop in their stocks' value.

The flamboyant lawyer first found fame with New York's Milberg Weiss firm, whose senior partner Mel Weiss had pioneered such litigation as an extraordinarily lucrative technique for extracting millions of dollars from companies that preferred to pay huge settlements rather than face the prospect of a potentially far more expensive jury verdict later.

At one point, a federal judge in Texas - noting that Lerach was filing new class action suits on average once a week - refused to appoint his firm as lead plaintiffs counsel in a widely publicized case.

In 1993, Lerach bragged to Forbes magazine that "I have the greatest practice of law in the world, I have no clients."

When Congress passed the Private Securities Litigation Reform Act (PSLRA) of 1995 aimed at reducing groundless strike suits, Lerach and his Forbe quotes were cited in the official congressional report as evidence why the legislation was needed.

Lerach's fame was magnified further because President Clinton vetoed PSLRA a few days after the high-flying attorney spent a night at the White House. Congress then repassed the bill over Clinton's veto.

All of these facts were public knowledge when the Institute for Law and Economic Policy was formed in 1996, headed by Milberg Weiss attorneys and controlled by them for years. Lerach was ILEP's director from 2001 to 2005.

Things started going bad for Lerach in 1999 when Lexecon Corp., one of his litigation targets, counter-sued and got a $50 million out-of-court settlement from Milberg Weiss.

Then, in 2002, it was widely reported in the national media that a federal grand jury was investigating Milberg Weiss on allegations of kickbacks and other illegal activities in its securities suits.

Lerach and Weiss had a falling out, reportedly stirred by the federal probe, and Lerach started his own firm, Lerach Coughlin, in San Diego in 2004. That same year, Lerach was rejected as lead plaintiffs counsel by a federal judge who questioned whether Lerach and his firm had played a role in causing the defendant company's drop in stock value.

Finally, in 2006, the Justice Department indicted Milberg Weiss and two of its named partners, David Bershad and Steven Schulman, on charges of violating anti-racketeering statutes originally used against organized crime. Also indicted were "Partner A" and "Partner B," who were widely thought to be Weiss and Lerach.

Their identities were confirmed in 2007 when the government refiled its indictment against the firm and named Weiss and Lerach, along with those previously named, as participants in an illegal kickback scheme that began in or about 1979 and resulted in more than $200 million in legal fees being paid to the firm in at least 150 cases.

Following guilty pleadings by Berschad and Schulman, Lerach pleaded guilty in September 2007 to felony charges of conspiracy to obstruct justice and making false statements to federal judges. He agreed to make nearly $8 million in restitution to the government. He was sentenced Feb. 11 to a two-year federal prison term.

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

Bill Lerach: A Robin Hood who lined his own pockets

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