Leading Class-Action Lawyer Is Sentenced to Two Years in Kickback Scheme

The New York Times reports on William Lerach:

Judge Walter said that he would have liked to sentence Mr. Lerach to a “substantially” longer prison term, but deferred to a plea agreement with prosecutors that was reached Sept. 18, which called for a maximum of two years. Had the case gone to trial, Mr. Lerach could have faced up to 50 years.

The judge said he was particularly concerned that Mr. Lerach and his paid plaintiffs had lied to judges.

“What Lerach and others did goes to the core" of the legal system, Judge Walter said, adding that Mr. Lerach, who accepted disbarment, would never again be able to do “what he was obviously so good at.”

Mr. Lerach, of La Jolla, Calif., admitted to an arrangement in which his law firm made payments to people to be on call as plaintiffs in class-action lawsuits that were filed against publicly traded companies when their stock dropped in price.

Prosecutors for the United States attorney’s office of the Central District of California, who worked on the case for seven years, say that Mr. Lerach and others lined up the plaintiffs ahead of time to gain an illegal advantage over other law firms engaged in the same suits. By being designated the lead plaintiff, the law firm stood to reap a larger share of any eventual lawyers’ fees.

In his guilty plea, Mr. Lerach admitted to concealing from federal judges his secret payments to one such plaintiff, Dr. Steven G. Cooperman.

Prosecutors say that in more than 150 of the firm’s class-action cases from the 1970s to 2005, the law firm earned more than $216 million in lawyers’ fees, paying $11 million to these on-call plaintiffs. The bases for the lawsuits were never in question.

“Mr. Lerach has stepped up and accepted responsibility,” Mr. Lerach’s lawyer, John W. Keker, of Keker & Van Nest in San Francisco, told the court.

An assistant United States attorney, Robert J. McGahan, prompted a testy exchange with the judge when he called the plea agreement a “reasonable compromise” and added: “In several respects, Mr. Lerach is a volunteer.”

Judge Walter responded: “Mr. Lerach was certainly not a volunteer. He didn’t come up and knock on the government’s door.”

“This whole conspiracy corrupted the law firm and it corrupted it in the most evil way,” Judge Walter added.

No word yet from John Edwards on this one.