The American Prospect magazine and Campaign for America are jointly hosting a daylong conference at the National Press Club tomorrow on “The Failure of Conservatism.” The purpose of the conference, according to organizers, is to argue that “Republican candidates are facing an unsolvable problem,” namely “how conservatives get the government, the economy, the family and the world wrong.” But it was not this litany of worldly woes these two liberal groups ascribe to conservatives that caught our editorial eye. Rather, it was the program’s inclusion of “Bill Lerach, leading securities lawyer” on the panel discussing “how conservatives failed the economy.”
Giving William Lerach so innocuous a title is akin to calling Ivan Boesky “a noted philanthropist.” Such lame descriptions don’t even begin to tell readers the real significance of the person. For Lerach, something like “glorified ambulance chaser” would be more appropriate. Lerach has devoted himself since 1978 to becoming rich from contingency fees won in legions of class action lawsuits that engendered the “jackpot justice” system now estimated to cost American consumers more than $246 billion annually, or more than 2 percent of the nation’s annual gross domestic product. America has the most expensive legal system in the world, thanks in great part to Lerach and his colleagues in the trial lawyers community.
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For most of his career, Lerach was co-chairman of Milberg Weiss Bershad Hynes & Lerach, the fabled New York law firm most often associated with pioneering the class-action lawsuits that have terrorized corporate America and swamped the nation’s courtrooms. Lerach left Millberg Weiss in 2005, but not before keeping his firm in the headlines for bagging multimillion-dollar settlements and verdicts, usually against Fortune 500 corporations and Wall Street securities firms. More recently, the Justice Department indicted Milberg Weiss on charges of conspiracy, racketeering conspiracy, money laundering conspiracy, obstruction of justice, aiding and abetting an act to be done and criminal forfeiture. The indictment was the first ever against a law firm as a collective unit. Lerach was not named individually in the indictment and has denied any wrong-doing. The case is scheduled for trial in January 2008, but guilty pleas and agreements to cooperate with the government have already been entered by key players in the actions that led to the firm’s unprecedented indictment.
Whatever the ultimate outcome of the Justice Department action against Lerach’s former firm, it is clear that among the chief effects of jackpot justice is the chilling effect on economic innovation of the “fraud on the market” legal doctrine closely associated with Milberg Weiss during Lerach’s tenure with the firm. That doctrine holds corporate officers liable for shareholders’ losses caused by allegedly false or too-optimistic forecasts. Effectively, the doctrine makes any decline in stock value cause for class action law suits. Merely threatening suchsuits often forces companies to accept costly settlements to avoid even more expensive litigation. Such suits can even drive good companies out of business, costing people their jobs and pensions. Perhaps a journalist covering Lerach’s panel tomorrow will ask him how lining plaintiff lawyers’ pockets in this manner is good for the rest of us in the economy.
