The Smoke-Filled Room: Cash Machinist

Neurnayr, George

"The Smoke-Filled Room: Cash Machinist" by George Neumayr Cash Machinist In the hi-tech corridors of California's Silicon Valley, it's difficult, if not impossible, to find anybody with something good to say...

...Though Lerach did not return this reporter's phone calls, he has in the past justified his lucrative practice as the noble work of a crusader for investors' rights...
...Howard Metzenbaum (D-Ohio), again as an investigator...
...Faced with a multi-million dollar nuisance suit, the companies will more often than not cut their losses and settle out of court, often at GEORGE NEUMAYR is a reporter for The American Spectator...
...The American Spectator • January r 9 9 6 53...
...and former state controller Gray Davis are among the 'many liberals indebted to Lerach...
...Bill Lerach and Brian McTigue may be just the ticket for Boxer: If Lerach shovels the cash, and McTigue shovels the dirt, Boxer might just survive in 1998...
...But Feinstein's more liberal California counterpart, Barbara Boxer, did...
...As Daniel R. Fischel, a University of Chicago law professor, told the House Judiciary Committee last January, the securities fraud attorneys are blowing smoke: "Like other powerful interest groups, the plaintiffs' securities bar uses the rhetoric of public welfare—protecting defenseless consumers and investors—to advance their ends...
...The orchestrator of the Metzenbaum inquiry, Brian McTigue, has a particular incentive to succeed...
...As the San Francisco Chronicle put it, the Cox hearing "set the stage for early skirmishes between Cox and Senator Barbara Boxer, a California Democrat who could face a possible electoral challenge from the fast-rising GOP star...
...McTigue did not return phone calls for this article...
...McTigue was evidently trying, in a roundabout way, to elicit damning information on Drexel from Kroll's Gibbons...
...Richard Harwood seemed to draw the same conclusion in the Washington Post: The New York Times recently has been involved in a collaboration with one of the Senate's most partisan exhibitionists, Howard Metzenbaum, the Ohio Democrat...
...And a 1992 fundraiser at Lerach's $2.1 million home even brought a visit from Bill Clinton...
...Given McTigue's less than pristine background, Boxer's decision to hire him suggests he may have a role to play in her upcoming re-election race...
...While investigating an S&L deal, Metzenbaum was accused of leaking privileged information to the New York Times 44 What better way to ingratiate herself with the big-spending Lerach than by going to the wall for him and the plaintiff's bar...
...His own reputation was tarnished, and he was dismissed from his congressional job last year for involvement in the unethical taping of a committee witness...
...McTigue had authorized the taping in connection with the subcommittee's probe of the operations of Drexel Burnham Lambert, at that time a client of Kroll, the New York–based international corporate investigating firm...
...But with the Republican takeover of Congress, Lerach's star is dimming...
...One study estimates that 93 percent of class action securities suits are settled out of court...
...These people now know they have a remedy if they've been cheated...
...Congressional observers may recall that in 1989, McTigue got fired from his investigator's job on John Dingell's House Energy and Commerce Subcommittee on Oversight and Investigation for ordering a secret tape recording of a call made to a Kroll Associates investigator, John C. Gibbons...
...But Boxer's out-front position on securities litigation reform may not be the end of her work for Lerach...
...The reason for the hatred is simple: The bushy-headed, buccaneering barrister, along with his San Diego/New York–based law firm, Milberg, Weiss, Bershad, Hynes & Lerach, makes hundreds of millions—perhaps even billions—from securities class action suits against hi-tech firms like Apple and Seagate...
...We cannot continue to deliver sensitive and protected documents to your subcommittee in the face of the exclusive agreement "to share" this information with a member of the press...
...But no matter how passionate the rhetoric, claims made by the private securities bar concerning pending legislation should be recognized for what they are—pleading from a group with its own economic self-interest in mind...
...Brand pointed out that one of Metzenbaum's investigators, Brian McTigue, had recently been fired from his position with Dingell...
...Stanley Brand, a lawyer defending one of the prinicipal parties in the deal, filed an ethics complaint with the Senate Select Ethics Committee...
...And Lerach loves it...
...Rodgers, president and chief executive of Cypress Semiconductor, describes Lerach as a "predator" and a member of a "sub-species...
...1in exchange for strategic publication of the scoop the day before a congressional hearing...
...Milberg, Weiss, Bershad, Hynes & Lerach confirmed that McTigue once worked there, but declined to give more specific information...
...Together they are generating a bountiful harvest of publicity from intersecting investigations of a questionable savings and loan transaction...
...The measure requires losing plaintiffs in meritless securities cases to pay defendants' legal costs, mandates a court-appointed "guardian" of the shareholder class, limits "professional plaintiffs" to five class-action lawsuits every three years, and requires plaintiffs to demonstrate, with a higher degree of specificity than is currently required, the defendant's intention to commit fraud...
...Another executive calls him simply "a drag on society...
...perhaps to neutralize that challenge, Boxer has added to her staff a former member of Bill Lerach's firm, counsel Brian McTigue...
...Unsurprisingly, Lerach's money talks...
...Lerach isn't just watching out for his self-interest, though...
...Then he plays sugar daddy to the Dems...
...Whatever you call it, it works...
...52 January 1996 • The American Spectator lawyers are lying with intent to deceive to protect their racket...
...Her attempt to torpedo the legislation failed, and the Senate version of the bill passed overwhelmingly, 70-29...
...As he once candidly told the Los Angeles Times, "We make as much as we can...
...Furious with the foul play of Metzenbaum's staff, Brand wrote the senator: It now appears indisputable that investigative information gathered by your subcommittee over a period of months was deliberately and inappropriately released and traded to a major national newspaper in order to obtain favorable press coverage on a desired day...
...Whether her vote represented an effort to distance herself from the charge of cronyism or a recognition that Lerach and his friends are sticking it to vital hi-tech firms in her backyard is unclear...
...Political campaigns need money—and negatives about the opposition—to spread around...
...And again controversy followed...
...The Democrats have reportedly pocketed between $800,000 and $1 million of Lerach's cash...
...The tape was withdrawn, and Dingell publicly apologized to Gibbons—and unceremoniously dumped McTigue...
...Chris Cox, a Republican congressman from California's Orange County, presented to the House in March a securities litigation reform bill designed to hit Lerach and his cohorts in the plaintiff's bar where it hurts...
...At a hearing of the finance subcommittee of the House Commerce Committee in early 1995, Cox decried frivolous securities fraud cases: "There is a lawsuit epidemic: Multimillion-dollar Bill Lerach makes a fortune with nuisance suits against hi-tech firms...
...The following year McTigue landed on the staff of Sen...
...According to PC Week, more than 15o hi-tech companies have "felt the wrath of Lerach and his firm...
...In McTigue, Boxer gets two resources for her upcoming Senate race: a possible key to Lerach's treasure chest and a foot soldier who could take out her challenger...
...Brand's implication was that McTigue had leaked the information...
...While such an arrangement is good for the attorneys, it is less so for investors, particularly those innocent clients with actual losses to recover...
...But it is how he milks his cash cow that fuels resentment in boardrooms across Silicon Valley...
...But Washington being Washington, the incident didn't end McTigue's congressional career...
...McTigue's gambit blew up in his face...
...And then he fingered Lerach—"This is how Bill Lerach makes his money," Cox told the hearing...
...Apparently, the money is rolling in so fast that, Forbes reports, Lerach recently "set to work building a huge villa with matching dog house...
...The technique, as Cypress's Rodgers has called it, is "gun-tothe-head carjacking...
...His bill passed easily with a 325-99 vote...
...Chris Cox is likely to challenge Boxer in 1998 for her Senate seat—what better way to ingratiate herself with the big-spending Lerach than by going to the wall for him and the plaintiff's bar...
...I've represented a lot of clients," Lerach told the New York Times...
...After he gave Dianne Feinstein $79,000 for her unsuccessful 1990 gubernatorial campaign, Feinstein returned the favor after being elected to the Senate by giving him a seat on a committee that reviews judicial nominees for her...
...unseemly sums...
...When Dingell tried to use the secret tape against Gibbons at a committee hearing, Republicans pointed out that the recording had been made in violation of California law...
...He was trying to leverage into Drexel files," Gibbons says...
...The bottom line is: Feinstein didn't do Lerach's bidding...
...It's a fitting construction for the man the New York Times dubbed "the Pit Bull of Silicon Valley...
...THE SMOKE-FILLED ROOM by George Neumayr C ash Machinist In the hi-tech corridors of California's Silicon Valley, it's difficult, if not impossible, to find anybody with something good to say about Bill Lerach, the prominent San Diego attorney and Democratic Party sugar daddy...
...Indeed, she staked out her turf on securities litigation reform just after the Republican electoral victory of 1994, firing off ominous warning letters to Newt Gingrich and Bob Dole claiming that a reform bill would "do great injustice to the investing public...
...Forbes estimates that Lerach's 1994 salary was $7 million...
...In June the legislation moved to the Senate, but Dianne Feinstein didn't ride to her friend's rescue, voting instead in favor of the Senate companion of Cox's bill...
...he's also looking out for the Democratic Party...
...But is it a remedy...
...Boxer took a strong position on the Cox bill, claiming it would make the market a "safe place for crooks...
...In 1992 his firm ranked among the top 20 lawyer and lobbyist contributors to federal candidates for office, donating 99 percent of its $146,700 to Democratic candidates...
...It may even have enhanced it...
...When a firm's stock value goes down, as it frequently does in the volatile, profit-taking high-technology industry, Lerach and his cronies come calling, threatening a class action suit on behalf of "cheated" investors...
...Ralph Nader (Lerach gave his Public Citizen Foundation $5,500), Willie Brown, and California Lt...

Vol. 29 • January 1996 • No. 1


 
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