SAN FRANCISCO (Reuters) - His debt to society finally paid in full, William Lerach, the fiery shareholder litigator who exposed the excesses of Enron before running afoul of the law himself, warned of another wave of financial fraud emerging on an unregulated Wall Street.
Lerach, whose name for years sent shudders through many a corporate boardroom before his too aggressive tactics landed him a two-year jail sentence, became a free man this week, eager to again take America Inc to task.
He blasted Wall Street for everything from inflated salaries leading to risky behavior to a lack of responsibility to society, shareholders and even their own companies.
“There will be another financial fraud wave if serious changes aren’t made,” the 63-year-old disbarred lawyer said. “We keep repeating the same mistakes. There is no real legal or economic accountability of the people on Wall Street.”
He was pessimistic of any significant strengthening of financial regulation: “Nothing really meaningful, in my opinion, will happen on the regulation front.”
Lerach admits to serious missteps of his own. He served time for a kickback scheme in which shareholders were paid to act as plaintiffs in class-action cases.
In an exclusive interview, he said he regretted his mistakes but remained proud of his courtroom successes.
“We got caught up in a certain dynamic and we couldn’t stop,” Lerach told Reuters from his La Jolla home on Monday, the day he was officially released from custody. “I don’t have regrets about the career I pursued, the results I achieved and the things I stood up and argued for.”
Lerach has been under home confinement -- reading and spending time with his Chihuahua Tommy and two whippets -- since late last year, after stints in minimum-security facilities in California and Arizona.
The attorney with a bully’s reputation, a booming courtroom persona and deep pockets now wants to teach and work with progressive economic groups to brainstorm public policy.
As a star of Milberg Weiss, Lerach and partner Mel Weiss collected billions of dollars for investors defrauded by the likes of Enron and Worldcom. But their aggressive class-action securities lawsuits stoked the suspicions of federal prosecutors along the way.
A long-running government probe led to the 2006 indictment of the New York law firm, which collected $11.5 billion in legal settlements that year. Four of its former partners, including Lerach and Weiss, pleaded guilty to kickbacks.
Lerach sounded alternatively resigned and defiant in describing the U.S. financial meltdown that he watched unfold from afar -- the collapse of Lehman Brothers, he remembers monitoring on CNBC from inside an Arizona correctional facility. He has published opinion pieces in U.S. newspapers about how overpaid chief executives walked away with millions of shareholder dollars following the crisis.
“You have a compensation system of corporate executives and bank executives that really encourages them to take extraordinary risks,” he said. “There’s a lack of legal accountability both to the government, to the shareholders and to the corporation.”
Lerach is best known for defending shareholder rights in the wake of the collapses of Enron and Worldcom, in which creative accounting masked misdeeds.
But Lerach also became known as master of a type of class-action lawsuit once dubbed “legalized piracy” by then California Congressman Christopher Cox.
Lerach’s opponents accused him of suing companies whenever their stock tumbled, then demanding large out-of-court payouts to avert protracted and risky litigation.
Lerach says the tactics he used, while unethical, were practiced at other law firms as well.
His firm, once the top U.S. shareholder litigation practice, sought out clients with large stock portfolios and paid them to serve as plaintiffs when negative information surfaced about a company.
Having these plaintiffs on the payroll allowed the firm to be the first to the courthouse in order to win lead-counsel status -- and thus a higher share of fees.
In 2008, under a plea deal, Lerach’s firm admitted to paying millions of dollars to stockbrokers who referred shareholders -- who were also paid -- for scores of lawsuits, and to lying in court documents about a fee arrangement with a prominent expert witness who took inflated fees in some cases the firm won.
Lerach pleaded guilty in 2007 to one count of conspiracy. In addition to the two years, he paid $8 million in fines.
Lerach said America has “lost its appetite” for private civil litigation.
“It’s been viewed as too expensive and too inefficient a way to police corporate behavior or compensate plaintiffs,” he said. “The shame is that nothing will replace it.”
While in custody, Lerach spent hours poring over the Encyclopedia Britannica, reading books and writing a newsletter to family and friends.
He will not miss the frenetic life of a litigator, he said, calling his government-imposed early retirement a “blessing in disguise.”
Asked about his reputation as a bully, Lerach paused for a heartbeat before answering.
“There’s the myth and there’s the man and they’re not the same,” he said. “If you were to talk to a lot of the people on the other side, they would tell you that the public portrayal isn’t very accurate. Yeah, I can yell and scream but they knew I was someone they could deal with.”
Editing by Edwin Chan and Jeffrey Cane, Gary Hill
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