<<"The fees in the Enron case could be in the hundreds of millions. It is going to be the grandaddy of all securities class-action cases and that will dictate the size of the fees.">>
THE LAWYER
Attorney Seeks Enron Pursuit
By LESLIE WAYNE
The New York Times
January 23, 2002
WASHINGTON - The lawyer William Lerach was all over the television news today as he lugged a large carton of shredded Enron (news/quote) documents to the courthouse in Houston. Amid a sea of microphones, Mr. Lerach gave the impression he was leading the charge for angry shareholders in their legal battle against Enron.
In reality, it is a job he wants but does not yet have. Instead, Mr. Lerach, perhaps the most famous and flamboyant lawyer for shareholders, is engaged in a pitched three-way battle to be named chief legal counsel for all Enron shareholders, a job that could end up netting legal fees in the hundreds of millions of dollars for the firm selected.
Just who will be named chief counsel for the class-action suit will be determined by a federal judge next month.
In the meantime, Mr. Lerach is campaigning, appearing on morning talk shows and making dramatic statements to reporters on the courthouse steps as he filled the airwaves today.
He wants the job so badly that he has even jettisoned some clients, most famously, Amalgamated Bank of New York (news/quote), in the hopes of staking his fortune with even bigger ones — one of the criteria for deciding the lead counsel.
"Bill Lerach puts himself in the forefront in terms of publicity and fees and everything else," said James M. Finberg, a lawyer with a San Francisco firm that is also vying to be named chief counsel. "But the decision of who becomes lead counsel will not be made by who has the most press attention, but will be made by a judge." His firm's clients include the City of New York pension fund and a State of Florida pension fund.
In the world of shareholder litigation, Mr. Lerach, who did not return calls for comment, is well known. He has won over a billion dollars for shareholders in two big financial scandals involving junk bonds and savings and loans, and brought frivolous cases like litigation over the lip- synching duo, Milli Vanilli.
Mr. Lerach has made a personal fortune and gained the lasting hatred of corporate America by bringing more than 600 suits against companies whose stock price has dropped. His firm, Milberg Weiss Bershad Hynes & Lerach, accounts for about half of all shareholder suits against corporations and has won $6 billion for its clients.
For this Mr. Lerach earned the name the "king of strike suits," and corporations talk about having been "Lerached."
His firm once agreed to pay $50 million to settle a case in which someone he sued accused him of abusing the legal system and a federal jury agreed.
"He is a controversial figure of historic dimensions," said John Coffee, a securities law professor at Columbia University. "Those who do not like him say he behaves as an extortionist, is threatening and shakes people down. Others say he is more zealous than the lazier plaintiffs' attorneys. He is the most controversial figure in a field of litigation known for its egos and flamboyant types."
Some say Mr. Lerach's boldest move to date may be in giving the impression in the Enron case that he already has the job he wants: "Lerach is running around like it's his case," said one law school professor, who insisted on not being identified. "Why is this man smiling? He thinks he has the case, and it is not clear that he does."
In reality there are three legal teams vying to be selected as the lead counsel for the shareholders — mainly large pension funds who bought Enron shares, but also individual investors. Mr. Lerach's big client is the University of California Regents, which has lost about $144 million. Another is Mr. Finberg's firm, Lieff Cabraser Heimann Bernstein, whose two clients, the New York and Florida pension funds, have a combined total of $440 million in losses and which feels it has something extra. "We have a very sympathetic group," Mr. Finberg said. "We represent a lot of the families of people who died in the World Trade Center."
A third group is composed of public pension funds from Georgia, Ohio, Washington and Alabama and is represented by a law firm in Delaware and one in Atlanta. This group is claiming losses of $330 million. Lawyers for the two firms, Grant & Eisenhofer and Chitwood & Harley, did not return calls.
Under federal securities reform legislation enacted in 1995, the criterion for selecting a lead lawyer was changed. Rather than the firm that filed a class-action case first (one of Mr. Lerach's specialties), the lawyer who represents the plaintiffs with the greatest losses, among other factors, is now favored.
The lead lawyer's firm decides on the legal strategy, directs all other lawyers and gets the biggest slice of the fees, as well as determines how much lawyers for the other plaintiffs will be paid. These fees can run into the hundreds of millions — the $3.2 billion class-action settlement against the Cendant Corporation (news/quote) is expected to net legal fees of over $270 million.
"The lead law firm does most of the work and gets most of the fees," said Brian Borders, a spokesman for the Association of Publicly Traded Companies, which represents small and midsize companies. "The fees in the Enron case could be in the hundreds of millions. It is going to be the grandaddy of all securities class-action cases and that will dictate the size of the fees."
At the moment, Mr. Lerach is doing some fancy footwork to get the lead position. In court today, he argued that the selection of the lead counsel should be changed from the law firm whose clients, as a group, suffered the biggest losses to the firm with the single client who has lost the most. By the first calculation, Mr. Lerach's firm would be in third place.
By the second calculation, he contends, he would be in first place, as he says the California Regents' $144 million was the single largest loss. While the Florida pension fund lost more, $300 million, Mr. Lerach argued that Florida should be disqualified as a lead plaintiff because it brought more class-action lawsuits over the last three years than allowed by federal law. But lawyers for the State of Florida say this law does not apply to institutional investors.
To back up his legal theory that the lawyer for the single-biggest plaintiff should get the nod, he asked his other client, Amalgamated Bank, to step down, and the bank, with only $10 million in losses, agreed.
"This is something that we agreed to do so that Bill Lerach could become the lead attorney on the case," said Melissa Moye, chief economist for Amalgamated Bank, who reasoned that if stepping back was the only way to get Mr. Lerach selected to represent the whole class of shareholders, it would.
"We did this by mutual consent. We want the California Regents to be named as the lead plaintiff," Ms. Moye said.
In fact, some see Mr. Lerach's action's today, especially his courting of the press, as a smart marketing move intended to draw even bigger clients to him.
"He's been courting the pension funds by saying, you ought to pick Milberg Weiss as the lead counsel," said Mr. Borders of the publicly traded companies group. "It's all about marketing." |
