Class-action nonsense

Lawyer-turned-presidential candidate John Edwards — who managed to sandwich in a term as U.S. senator from North Carolina — would have us believe the life of a trial lawyer consists mainly of helping crippled plaintiffs win some help with their medical bills from greedy corporations whose willful wrongdoing or (at the least) heartless negligence caused their injuries.

Yes, many Americans are injured. They all deserve to consult an attorney; the willingness of members of the trial bar to work “on contingency” facilitates access to the civil courts for those of lesser means.

But there’s another side to that equation — a temptation for creative legal shills to gin up injured “classes” of plaintiffs out of thin air, offering a minnow’s share of the take to their supposed “clients” while they pocket the bulk of the booty in an operation that can cross the line into outright extortion.

On Monday in Los Angeles, Melvyn Weiss, co-founder of the prestigious New York law firm previously known as Milberg Weiss Bershad & Schulman, pleaded innocent with two co-defendants to federal charges relating to such a major class-action kickback scheme.

One of the co-defendants, Seymour M. Lazar, faces more than a dozen charges, including money laundering, conspiracy and mail fraud. One of Mr. Lazar’s attorneys, Thomas Bienert, said outside the courthouse Monday that his 80-year-old client would plead guilty later this week to three charges, including obstruction of justice and subscribing to false tax returns.

Prosecutors charge the nation’s largest class-action law firm made an estimated $250 million by filing class-action lawsuits against some of America’s largest corporations, including Lucent, Microsoft and AT&T. These “securities class-action lawsuits” claimed investors were “misled” into expecting to make more millions than they actually did.

Prosecutors say the firm enlisted people to take part in more than 225 class-action and shareholder lawsuits by secretly paying them millions in kickbacks. (Plaintiffs in such lawsuits are not permitted to receive payments beyond those awarded by the courts.)

Last week, former partner in the firm Steven Schulman, 56, pleaded guilty to a racketeering conspiracy charge. He agreed to forfeit $1.85 million to the government and to pay a $250,000 fine. He could face up to 20 years in prison.

Prosecutors also say William S. Lerach, a former top attorney with Milberg Weiss, agreed to plead guilty to conspiring to obstruct justice and making false statements under oath.

Lerach, who is awaiting arraignment on Oct. 29, will forfeit $7.75 million to the government, pay a $250,000 fine and accept a sentence ranging from one year to two years in federal prison, prosecutors said.

The seven-year investigation “is significant — and controversial,” The Wall Street Journal reports, “because it targets one of the nation’s most aggressive and successful law firms. Milberg Weiss … won tens of billions of dollars in settlements and judgments against companies accused of defrauding investors.”

Lerach, who split off from Milberg to form his own firm last year, sued many Silicon Valley companies for supposedly misleading investors, and also represented Enron investors who sued the company for fraud, winning more than $7 billion from Enron bankers including J.P. Morgan Chase, Citibank and Canada’s CIBC.

As the guilty pleas cascade, it’s hard to maintain a presumption that no wrongdoing occurred here — that these high-rolling trial lawyers were merely representing innocent widows and orphans who’d been conned into investing their life savings in barrels of snake oil.

What a bunch of fly-by-nights: Lucent, Microsoft, AT&T.

As paying off such courthouse raiders has become a “standard cost of doing business” in America, can anyone doubt that extortion on such a scale begins to have a negative impact on the entire economy? How many factories could have been built — how many jobs created — with the billions pocketed by these shingled hucksters?

A handful of attorneys get their come-uppance. Fine. But does anyone believe Milberg Weiss Bershad & Schulman was the only bad apple in this barrel — that no one else is out there working versions of the same racket, while our smiling judges offer to help pass the moneybags?

The public statements of corporate officers before and during stock offerings are already tightly regulated — sometimes absurdly so. Where were the judges — the supposed gatekeepers of the system — who should have been throwing out these lawsuits on their ears, with stern warnings to these attorneys not to come back till they’d found themselves some real plaintiffs who had suffered real harm?