Tort Law Firm Scandal Grows

The Chicago Tribune reports:

For the last three decades, whenever a major corporation has been accused of cheating its stockholders, the powerhouse New York law firm of Milberg Weiss hasn't been far behind with a class-action lawsuit.

The firm was so successful at recovering millions for investors that a raft of competitors sprang up to enter this new realm of class-action law it pioneered. Critics also mobilized, spearheading a law to curtail a wave of stock-fraud lawsuits they blamed for driving up prices on everything from electricity to coffee cake.

The 1995 legislation radically changed the legal landscape. Before, the first attorneys to file a lawsuit were typically chosen to lead it. Now the lawyers representing the biggest investors stand to get the lucrative role of lead attorney.

The new rules, which supporters said would stop law firms from drumming up dubious cases, instead set off an intense competition among Milberg Weiss and its rivals to sign pension funds--huge investors in stocks--as clients.

That search for new plaintiffs brought Milberg Weiss to Illinois, where its partners forged a profitable alliance with a well-connected Springfield lawyer named William K. Cavanagh, longtime legal adviser to some of the state's largest public and private pension funds.

Soon, with Cavanagh and some of his Illinois union pension clients at its side, the firm sued a half-dozen U.S. corporations for stock fraud. Four have so far settled, earning the lawyers millions.

But a Tribune review of records and interviews with experts raise questions about the firm's recruitment tactics in Illinois and the propriety of its relationship with Cavanagh, who says he received more than $750,000 in fees for work he chose not to keep track of in the cases.

The Democratic party may need to get someone else for campaign contributions.