By Carrie Johnson
Washington Post Staff Writer
Tuesday, October 30, 2007
The California plaintiff's attorney who helped turn class-action lawsuits into a lucrative trend pleaded guilty yesterday to a conspiracy charge stemming from his role in a wide-ranging kickback scheme.
William S. Lerach, 61, acknowledged in a Los Angeles courtroom that he and his former partners at the Milberg Weiss firm hid payments to people who served as repeat plaintiffs in their class-action suits.
According to federal prosecutors, the lawyers found people who held shares -- often only a few -- in companies that were accused of fraud. By getting those people to sign up as early plaintiffs in civil lawsuits against the companies, Lerach and his firm were able to exert greater control over the cases and reap additional fees. In all, the scheme infected more than 150 cases over the past two decades, bringing Lerach and his partners well over $200 million, according to court papers.
Under the terms of the plea agreement, Lerach will face as many as two years in prison when he is sentenced Jan. 14. He is scheduled to pay the government nearly $8 million in fines and penalties.
The arrangement ensures that he will be able to keep tens of millions of dollars, however, since he has yet to collect his share of a $7.2 billion settlement pool in the case he filed six years ago on behalf of Enron investors.
John W. Keker, a lawyer for Lerach, declined comment yesterday. Lerach, a flamboyant figure who wielded boxes of shredded corporate documents to seize media attention in his heyday, has maintained a low profile since the guilty plea this summer of his former law partner David J. Bershad.
Bershad's cooperation gave the investigation, which has been pending for seven years, a substantial jump-start. It prompted Lerach to begin his own settlement negotiations with prosecutors and to resign from his new law firm, San Diego-based Coughlin Stoia. Another former Lerach partner, Melvyn I. Weiss, is fighting criminal charges and has rejected settlement overtures from the government.
U.S. District Judge John F. Walter heard Lerach's guilty plea at a brief hearing yesterday. But the judge did not indicate whether he would agree to the prison term specified in Lerach's plea agreement with the government.
If the judge wants to send Lerach to prison for more than two years, Lerach could walk away from the deal and force prosecutors to prove criminal charges in a jury trial. Such an outcome is considered unlikely by people involved in the case, which has been plagued by technical issues including fights about when the statute of limitations expired on the kickback allegations.
Legal analysts said the plea agreement was generally favorable to Lerach, a longtime contributor to Democratic political candidates, because it calls for a relatively short prison term and guarantees that Coughlin Stoia and several partners there will not face criminal sanctions for their possible roles in the payment of plaintiffs in shareholder lawsuits.
Even so, pleading guilty to a felony is likely to cost Lerach his license to practice law and put an end to a career that has spanned four decades.
"Lerach's plea is a professional death sentence that permanently decimates his reputation," said Kirby D. Behre, a former federal prosecutor and author of a book on white-collar prison sentences. "However, his plea significantly limits his jail time from what he was facing, so in that sense is favorable."