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Legislators Call For Controversial Reforms Following Lerach Sentencing

Legislators on Capital Hill reintroduced the "Securities Litigation Attorney Accountability and Transparency Act" last week. The Act, which was initially introduced in 2006, would permit courts to award successful defendants their attorneys’ fees in federal securities class actions when it is determined that the plaintiffs’ position was not “substantially justified,” require the disclosure of conflicts of interest between plaintiffs and their counsel, and allow courts to appoint lead counsel through a competitive bidding system.

The act was reintroduced after William Lerach was sentenced earlier this month to two years in prison for his role in the alleged kickback scheme at Milberg Weiss. Prosecutors claimed that Milberg Weiss shared legal fees with clients to induce them to quickly file securities class actions. In an interview published earlier this month by the Wall Street Journal, Lerach stated, "Believe me, it was industry practice. We kept it quiet because obviously if a judge knew about it you're not going to get appointed as lead counsel."

Reaction to Mr. Lerach’s sentencing has been predictably both passionate and mixed. The Wall Street Journal’s Law Blog quotes T.J. Rodgers, the founder and chief executive of Cypress Semiconductor as stating: “He’s getting what he deserves. I once likened Lerach to low life form, somewhat below pond scum. Thank goodness he’s met my highest expectations.” On the flip side, the Law Blog quotes Ralph Nader as stating: “Given the corporate crimes that Mr. Lerach has brought to justice during his long career, his crimes pale by comparison. His success is partially a reflection of the repeated failure of government enforcement agencies to protect millions of defenseless investors from fraud.”

Full post as published by OverRegd - Securities Regulation and Litigation Blog on February 28, 2008 (boomark / email).