ON JAN. 11, Roy Cohn, cheerful and naughty as ever and fresh off a jet from Acapulco, arrived at the Wall Street law offices of Hughes Hubbard & Reed carrying a bag full of what he said was fan mail from the recently broadcast profile of him on CBS's "60 Minutes." He was there to "settle" one of his more recent PR extravaganzas -- the suit he'd brought in April 1978 charging Henry Ford with misappropriating Ford Motor Co. funds and accepting a $750,000 bribe from a food concessionaire who was anxious to operate his concessions at Ford factories. Cohn, ebullient over the $100,000 settlement check his firm was about to receive, passed around to Ford's Hughes Hubbard lawyers a letter to Cohn from the producer of the "60 Minutes" segment, playfully jabbing at Cohn's bad guy image and telling Cohn what terrific reaction the story on him had generated.
The Ford lawyers didn't need to see the letter. They already knew about Cohn's way with the press. he'd just used those same skills to squeeze $100,000 from their client.
Event #1: A lawyer, using his partner's children as the aggrieved "shareholders," decides to bring a shareholders' derivative suit against a company, charging the chairman with stealing. The charges are so scandalous and the company and its chairman so well known that the suit makes headlines.
Event #2: After he files the suit he tells a reporter, as he waves various papers in the air, that he has "an open and shut" case on all the charges.
Event #3: The suit has not been filed in the right jurisdiction. It is thrown out.
Event #4: The lawyer vows to file the suit in the right jurisdiction.
Event #5: Telling the other side that he plans to file again, and that this will mean a rehash of the charges in the press, the lawyer inquiries if a "settlement" might be possible. c
Event #6: The company, which has denied all the charges but is beset by bad publicity on other fronts, including a criminal trial for allegedly having made dangerous products, gives the lawyer $100,000 in "legal fees" on the condition that he not bring the suit in the right jurisdiction. His co-counsel receives another $100,000 in "legal fees."
Event #7: The lawyer and his co-counsel declare that "it now appears" that the company chairman was not guilty of any wrongdoing.
The lawyer's supposed clients -- the shareholders -- get nothing. Nor do they give up anything: the shareholders can sue againn on the same charges. It's just that the headline-making lawyer can't represent them. Nor does any judge have to approve this settlement. With the first suit thrown out and the second one only threatened, there is no suit pending and, therefore, no judge with jurisdiction.
In short, the lawyer, having filed a claim in the wrong jurisdiction, having produced no proof and having now admitted that the charges were unsupportable, gets $100,000 in return for dropping his client and not generating any more bad headlines.
In many circles this would be called extortion. At Hughes Hubbard & Reed, it is called a "settlement." And Cohn's $100,000 is called "legal fees," although Hughes Hubbard lawyers say that his time and work were not documented in any way.
How can it be a "settlement" if no suit was pending and if the shareholders can sue again on the same charges?
"Because we weren't buying off the lawsuit," says Hughes Hubbard senior partner Jerome Shapiro, who negotiated the deal with Cohn. "We were buying off Roy Cohn. It's Cohn we were interested in, and what he could do to us in the press if he started the suit again in Michigan [the correct jurisdiction]. Cohn has a special relationship with the press," Shapiro continues. "He can get a headline in The Wall Street Journal or The New York Times by picking up a phone . . . These papers printed uncritical, big-headline accounts of Cohn's charges."
Yet the press' weakness for a good headline doesn't absolve Shapiro and other members of the bar of all responsibility.
After trying to justify Cohn's $100,000 fee as payment for the "motion practice" Cohn had done, Shapiro reminded himself that the "motion practice" had been over the jurisdiction question, a problem of Cohn's own making. "No, he doesn't deserve this as a fee, and it doesn't make me happy that he's received anything," Shapiro concludes. Then won't this just encourage him to go after other big-business targets? "Of course it will," Shapiro says, "but I represent the Ford Motor Company, not the next guy. And from a corporate standpoint you have to look at the detriment -- the expense, both legal and PR-wise -- against the benefits. I have a very narrow balance sheet to look at."
Roy Cohn seems to make his way in the world by counting on everyone's having a narrow balance sheet to look at. Conditioned by self-fulfilling profiles, such as the one on "60 Minutes," that marvel at how influential and "tough" Cohn is, lawyers and their clients get scared and settle. Case by case, settling seems to be easier than fighting Cohn.