WorldCom Slayer Coffey May Be Shareholder Suit King (Update1)
By Edvard Pettersson
Nov. 13 (Bloomberg) -- Bill Lerach's guilty plea in a kickback probe won't mean corporate executives can drop their guard just yet. John Coffey, a former Navy commander, is seeking to fill the void as the king of shareholder lawsuits.
Coffey, who hunted for Soviet submarines in the Atlantic before law school, took on WorldCom Inc. underwriters and won a $6.15 billion settlement for investors and a $336.1 million fee for his firm, Bernstein Litowitz Berger & Grossmann, and their co-counsel. With Lerach retired, the 6-foot-4 Coffey, 51, is emerging as the top lawyer in the securities litigation bar.
``He's one of the best plaintiffs' lawyers in the securities bar in the country,'' said Robert Giuffra, a partner with Sullivan & Cromwell in New York who is up against Coffey in the HealthSouth Corp. litigation. ``He's a very good courtroom lawyer, he makes credible presentations, he's smart.''
Billions of dollars in legal fees are at stake for whoever takes on Lerach's mantle. A wave of lawsuits has been filed by securities lawyers, including Coffey's firm, against lenders such as Countrywide Financial Corp. and Citigroup Inc. over the collapse of the subprime mortgage market.
The opportunity for Coffey, who is known by his nickname, Sean, and other lawyers to take a bigger role in the industry stems from the scandal that enveloped Lerach and his former law partner Melvyn Weiss. The two men and their firm were the subject of an eight-year Justice Department probe of whether clients were paid kickbacks for bringing cases. Lerach pleaded guilty to one count of conspiracy, and Weiss was indicted on federal charges Sept. 20. Weiss, 72, has pleaded not guilty to the charges.
New Clients
``It's fair to say that we've been approached by a number of institutions that are concerned about some of the things that went on and that have come to light as a result of the investigation,'' said Coffey, who graduated from Georgetown University Law Center with honors in 1987. ``It's fair to say there have been a few more opportunities.''
Even with restrictions on securities litigation that Congress passed 12 years ago, Lerach and Weiss's firm, then called Milberg Weiss Bershad Hynes & Lerach, collected $1.7 billion in legal fees and expenses between 1995 and 2005, according to a study commissioned by the U.S. Chamber Institute for Legal Reform. The firm also handled 43 percent of the 755 shareholder class actions that settled.
Coffey's Bernstein Litowitz; Grant & Eisenhofer; and Shiffrin, Barroway, Topaz & Kessler are some of the firms that are attracting large institutional investors that want to avoid the ``slash and burn'' approach that Lerach became known for, said James Cox, a securities law professor at Duke University.
Lerach `Flamboyance'
Lerach's flamboyant style and his aggressive pursuit of technology companies with questionable accounting practices may have led to him becoming a target of federal prosecutors, Cox said.
``Anybody else would not have been prosecuted,'' Cox said. ``His flamboyance got Lerach in the cross hairs of the prosecution.''
Coffey's background as a former military aide to then Vice President George H.W. Bush, federal prosecutor and corporate lawyer, make him a good choice to lead the industry after the scandal. One client says his steady demeanor can be misleading.
``Sean is actually more aggressive than he appears,'' said Bill Kelley, general counsel with the Retirement Systems of Alabama, who hired Coffey's firm to recover the fund's HealthSouth losses. ``Just because they always act with civility doesn't indicate they aren't tough.''
Bush Phone Call
While he gave $4,600 to Hillary Clinton's presidential campaign this year, Coffey remains close to Bush. After announcing part of the settlement with banks, underwriters and accountants in the 2005 WorldCom case, he received a congratulatory call from the former president.
``I went to law school at night while I was his naval aide, and he and Mrs. Bush were very supportive of that,'' Coffey said. ``Mrs. Bush had seen my picture in the New York Times in connection with the settlement of the JPMorgan piece of the case for $2 billion and mentioned it to President Bush. And he just picked up the phone and called.''
Kelley said one of Coffey's strengths is a willingness to take a case to trial rather than settle. Coffey is currently working on cases involving HealthSouth Corp., Omnicom Group Inc. and bankrupt Refco Inc.
Coffey ``has the confidence and the ability to take a case before the jury,'' Kelley said. ``We didn't quite walk away from the table, but we conveyed on several occasions that their proposals weren't in the ballpark.''
`Not Pilgrims'
Coffey recalls founding partner Max Berger's description of Bernstein Litowitz attorneys.
``We're not pilgrims,'' Berger said.
``What's a pilgrim?'' Coffey asked.
``Early settler.''
None of this means that Coffey will have an easy path to the top of the securities litigation bar. Other lawyers predict Wilmington, Delaware-based Grant & Eisenhofer, one of three firms that combined to win a $3.2 billion securities settlement from Tyco International Ltd. and PricewaterhouseCoopers, will have prominent roles in several cases.
And even without Lerach's name on the door, the San Diego firm he started after leaving Milberg Weiss in 2004, Coughlin Stoia Geller Rudman & Robbins, is still the largest law firm specializing in representing shareholders, with 180 lawyers.
Coughlin Stoia last year outranked Bernstein Litowitz in the number of settlements it won, 30, and in the total amount of money it recovered for investors, $7.3 billion. The firm, which wasn't part of the Milberg Weiss probe, said it hasn't lost any clients after Lerach's plea and has even attracted new institutional investors that had been wary of his reputation.
``We've got associates drafting up new complaints fast and furious,'' said Paul Geller, a partner with Coughlin Stoia in Boca Raton, Florida. ``We're growing, we're hiring new lawyers, we're opening new offices.''
To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net .
Last Updated: November 13, 2007 10:38 EST |
