Circle of Greed

reviewed by Pamela A. MacLean

Back in 1988, Bill Lerach pushed his way into a crowded elevator in San Diego federal court with respected veteran defense lawyer Stuart L. Kadison, saying, "Kadison, this case is going to bring an ignominious end to your mediocre career!"

Instead, the ignominious end came 20 years later - to Lerach, when he admitted a conspiracy to obstruct justice and lie in federal proceedings. The charges stemmed from years of paying kickbacks to a stable of repeat securities class action plaintiffs and a pay-for-performance deal with his favorite expert witness. And the duplicitous dealings had begun even before he leveled the elevator insult at Kadison. Lerach and his East Coast mentor and partner, Mel Weiss, cooled their heels in prison for two years before both were released earlier this year.

Pulitzer Prize?winning authors Patrick Dillon and Carl M. Cannon pull back the curtain on Lerach's bullying, arrogance, ruthlessness, scheming, and hyperbole in a new book, which is a riveting read for lawyers and lovers of backroom drama. The book's shortcoming arises from the Lerachian world view that permeates the tale and leaves plenty of questions unanswered. (Lerach cooperated in the research.)

At one point the authors recount a suggestion by Lerach that 9th U.S. Circuit Court of Appeals Judge Joseph Sneed acted unethically by failing to recuse himself from a 1999 landmark case involving Silicon Graphics. Just 18 days after the 2?1 ruling - which made it tougher for plaintiff cases to survive - Sneed's daughter, Carly Fiorina, now the Republican candidate for U.S. Senate, was named CEO of Hewlett-Packard. Though HP was not involved in the case, Lerach complained to Weiss, "But this is so corrupt." What the authors neglect to note is that the entire 28-judge 9th Circuit examined whether the ruling should be reconsidered en banc and refused, with just five dissenting votes (see In re Silicon Graphics, Inc., 195 F.3d 521 (9th Cir. 1999)).

Keeping readers glued to the pages are the delicious details. When Lerach's firm pursued Enron investment losses on behalf of the University of California, he claimed that UC regent and Republican insider Gerald Parsky took him aside to get assurances that the attorney would not "take this case into the [Bush-Cheney] White House."

The authors do a good job of explaining the significant role D&O insurance played in the 1980s assembly line of shareholder settlements that poured into Milberg Weiss. With a "dishonesty exclusion," a carrier would be exempt from paying claims if the insured company was found to have committed fraud or willfully violated securities law. But a company that settled claims without admitting dishonesty could still collect on a D&O policy, a huge incentive to settle even the most spurious claim.

But we don't hear much from the seamier side. How did the law firm insiders guard against being extorted over the secret deals? And didn't Lerach monitor the earliest stages of the federal probe far more closely than he lets on? Perversely, Lerach's success in getting companies to settle will keep us from ever knowing the true extent of corruption in the corporate marketplace.

Pamela A. MacLean, a freelance writer based in the Bay Area, has reported on state and federal courts for 25 years.

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