NEWSMAKER-William Lerach, corporate nemesis or investor hero?
By Martha Graybow
NEW YORK, Aug 28 (Reuters) - To corporate America, shareholder lawyer William Lerach has long been public enemy No. 1.
Lerach, who is retiring from his law firm amid an investigation into improper payments to clients, was once dubbed a "bloodsucking scumbag" by Wired magazine and is perhaps the most feared and loathed lawyer in the executive suite.
He's also a hero to aggrieved shareholders such as union and public pension funds that he's represented in scores of class-action lawsuits against big corporations.
Best known for winning billions in legal settlements for Enron investors, the 61-year-old lawyer has created a booming business in bringing securities fraud claims against companies that he accuses of accounting misdeeds and other chicanery.
More recently, however, federal prosecutors have been investigating allegations that the firm he previously worked for, Milberg Weiss, paid clients who then acted as plaintiffs in class action cases.
Lerach said his retirement from his more recent firm, Lerach Coughlin Stoia Geller Rudman & Robbins LLP, would let him focus on "this matter" and allow the firm to move on with its work.
Companies have long viewed Lerach with disdain, complaining he is little more than a bully who sues whenever a stock tumbles, then demands corporations make large out-of-court payouts or risk the costs and uncertainties of going to trial to defend themselves.
A 1995 federal law designed to rein in frivolous lawsuits was dubbed the "Get Lerach Act," but it hardly put him out of business.
Instead, it paved the way for Lerach and other plaintiffs' lawyers to represent bigger clients, such as public retirement funds, rather than individual stockholders. That's because courts now typically grant lead plaintiff status in securities class-actions to the investor with the largest losses, rather than the first shareholder to sue.
While Lerach has spent a career going after wealthy corporate executives, the San Diego-based lawyer himself has become enormously rich in the process, amassing a personal fortune estimated in the hundreds of millions of dollars.
A stocky man with a head of curly, whitish hair, Lerach has a hyper-aggressive, flamboyant style and a lot of media savvy.
When Enron collapsed, Lerach sued investment banks and other defendants accused of helping aid the energy trader's financial shenanigans.
His crowning moment was in January 2002, when he arrived on the steps of the federal courthouse in Houston to a crowd of waiting reporters and camera crews, clutching a box of shredded documents purportedly destroyed by Enron employees.
The pictures of Lerach toting the paper shreds became the defining image of the Enron scandal.
Lerach negotiated legal settlements of more than $7 billion with several large investment banks in the Enron case.
But earlier this year, two remaining defendants, Merrill Lynch and Co. Inc. MER.N & and Credit Suisse Group (CSGN.VX), won a huge victory when the Enron investors' $40 billion lawsuit was thrown out by an appeals court before trial. Lerach is hoping the Supreme Court will reinstate the case.
Lerach spent years working with his mentor, Melvyn Weiss of New York-based plaintiffs' firm Milberg Weiss, heading the firm's West Coast operations. In 2004, the two split, and Lerach formed his own practice, Lerach Coughlin Stoia Geller Rudman & Robbins LLP.
His name will be dropped as he retires, and the law firm will call itself Coughlin Stoia Geller Rudman & Robbins LLP.
He started his career as a corporate lawyer in his native Pittsburgh, but a meeting with Weiss put him on a different path. He jumped to Milberg Weiss in 1976 and quickly gained a reputation as relentless and creative in his pursuit of fraud cases against corporate defendants.
Lerach has been a major supporter of the Democratic party, and in an interview with Reuters in February he accused the Republican-controlled Justice Department of playing politics in its handling of the Milberg Weiss criminal case.
He said at the time that the Wall Street banks that were defendants in the Enron case "are big supporters of the Bush administration," whose Justice Department is pursuing the criminal case against Milberg Weiss. The U.S. Attorney's Office in Los Angeles has denied any political motivations in the case.
Lerach Coughlin has outstanding shareholder cases against an array of companies, including Home Depot (HD.N), UnitedHealth Group Inc. (UNH.N) and Yahoo (YHOO.O).
In 2006, the firm was the top U.S. class-action practice in terms of total settlements, collecting more than $7.3 billion, mostly from Enron-related pacts that were finalized during the year, according to shareholder advisory firm Institutional Shareholder Services.
