Would disbarred Bill Lerach dare practice law again?

He’s now a pension consultant for lawyer wife

“Bill Lerach was no monster, but he had indeed gone after fraud by committing fraud.”
  • “Bill Lerach was no monster, but he had indeed gone after fraud by committing fraud.”
  • Image by Sarah Nee

San Diego’s most famous — and most infamous — attorney, Bill Lerach, is raising eyebrows again. Lerach, the onetime “King of Torts,” was known and widely hated for scaring the wits out of corporate executives and sucking money out of companies that would rather settle with him than spend even more money fighting him in court. Companies capitulating to his charges said they were “Lerached,” and the word found its way into the American business lexicon.

But Lerach committed fraud to fight fraud, and he pleaded guilty to obstructing justice and making material false declarations under oath. He admitted to paying fat kickbacks to dubious professional plaintiffs to gain an advantage in his multiple class-action suits.

Throughout his San Diego career, I agreed with Lerach on many points of smelly accounting and greed-sated corporate governance. But I thought many of his lawsuits were nothing more than blatant shakedowns.

He went to prison for a bit less than two years — a spell in which law enforcement became even more suspicious about his character. While he was serving time, his lawyer tried to get him committed to a residential drug-abuse treatment program. “Lerach has suffered for years with severe alcoholism and faces the substantial possibility of relapse without the treatment offered,” wrote the lawyer.

Then Lerach offered a prison guard his tickets to a Chargers game, and as a result spent two months in a small cell, stripped of many privileges, for making a material offer to an officer of the United States Bureau of Prisons.

When he emerged from prison in 2010, he attacked the United States justice and prison systems, saying his crime was in a “gray area” and kickbacks to plaintiffs were “industry practice.” He then said that in 2007, when his firm had been indicted, he had been about to go after then–vice president Dick Cheney and the company he headed — suggesting that the Justice Department, then in Republican hands, pursued him because he was a prominent Democrat.

Such statements enraged the judge who had sentenced him to two years plus a $7.5 million payment. The judge said Lerach had fooled the court by claiming he had remorse. The sentence was “way too lenient,” said the judge.

Because Lerach won enormous sums for cuckolded investors in his lawsuits (taking 30 percent or more for himself and his firms), he is now worth an estimated $700 million. He and his fourth wife, Michelle Ciccarelli Lerach, live on La Jolla Farms Road, on a six-acre estate that’s decorated with artwork worth millions of dollars. According to Zillow, the cliffside home has six bedrooms and 12 baths and is worth $32.4 million.

Michelle Ciccarelli Lerach is a graduate of the University of Kentucky College of Law, clerked for a Kentucky appellate court judge, and worked for law firms in Lexington and Louisville. She came to California in 1999 and practiced law with Bill Lerach’s former firm, working on Lerach’s team that recovered more than $7 billion for investors in the massive Enron fraud.

She has now formed a law firm, named with her own initials, MCL Law Group of La Jolla, specializing in “complex and class-action litigations [covering] fraudulent business practices, human rights abuses, and labor and employment violation” — just what she did when working for her husband’s now-defunct law firm.

Bill Lerach, meanwhile, has come out of retirement to form a La Jolla–based firm, Pensions Forensics, which says it “provides investigative expertise and economic analysis and consulting services to determine the source and nature of pension fund financial and actuarial problems, including funding shortfalls, investment losses and fiduciary mismanagement.” The last words of the firm’s promotion document are “Mr. Lerach was disbarred several years ago and no longer practices law.”

Lo and behold, according to Bloomberg.com, MCL Law Group and Pensions Forensics, Mrs. and Mr. Lerach, are now working together on a Kentucky case. She and some other plaintiff lawyers have accused two of Wall Street’s richest and most powerful institutions, KKR & Co. and Blackstone Group, of putting the Kentucky Retirement Systems’ pension plan into some hedge funds that are underperforming. Bill Lerach’s Pensions Forensics is the consultant for Michelle Ciccarelli Lerach and her fellow plaintiffs attorneys.

To those who have followed Bill Lerach’s career, including his time in prison and his admission to making false declarations under oath, the question arises: is he actually practicing law, defying his disbarment?

I asked an official of the California State Bar. “The state bar has no regulatory power over this guy. I can’t verify that there are any pending complaints against this gentleman. The state bar does not comment on potential cases,” says the official.

In 2010, authors Patrick Dillon and Carl Cannon, formerly of the Union-Tribune, wrote a comprehensive book, Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees. It was more laudatory than a book I would have written, but it was tough and balanced, concluding, “Bill Lerach was no monster, but he had indeed gone after fraud by committing fraud.”

Originally Dillon and Lerach were writing a book together. Then, when the criminal charges came, Dillon recruited Cannon to help him finish the book. Lerach appeared with Dillon at book signings, causing some to cock an eyebrow at the togetherness.

I contacted Dillon, who is now making wine in Sonoma County. “Based on what I know, Bill would not be doing anything that would arouse suspicion,” he says. “Bill is too smart. Once burned, he wouldn’t risk anything now.”

Matt Anderson, senior vice president, global public affairs, for Blackstone, wouldn’t comment on the Lerach-Lerach hookup but says the suit’s “claims are baseless.” The hedge funds that were recommended are outperforming peers, he says.

I explained a hypothetical situation, not identifying the Lerachs, to Bob Fellmeth, University of San Diego professor who specializes in ethics. “Is this a law practice or not? It is a tricky situation,” he says, particularly since the married couple could inadvertently discuss legal aspects of the case at home. Fellmeth thinks the pension consultant should get a third-party expert to give him advice on whether he is crossing the line into the practice of law. “He is okay if he is not practicing law,” says Fellmeth.

I made multiple calls and sent emails to both Lerachs (who have different phone numbers and email addresses) and got no responses.

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There would be fewer questions asked if she just did her thing and he stood quietly in the background. Setting up a consulting firm attracts attention to him and might bring some other clientele, but it also draws the wrong sort of attention. He better watch it.

In the Kentucky case, they probably are onto something that smells bad. Those big firms like Blackstone are treated as if they can do no wrong, and some less-than-sophisticated fund managers in Kentucky could easily have fallen for some poor investments.

Visduh: I think Lerach is walking on thin ice. I agree with Bob Fellmeth that he should have hired a consultant to tell him what he can and cannot do in this case. For all we know, he did hire a consultant. However, he is not known for taking advice.

Lerach was a very successful lawyer in his day, but he made money filing too many suits and collecting payoffs. He did too many things illegally, such as lying under oath. He is probably the ideal person to figure what these big Wall Street firms have done to Kentucky. But he should watch where he steps. Best, Don Bauder

We should also find out what happened to our SD City and County pension funds and investments. The market is sky high and they continue to lose ground. Something like $6 BILLION underfunded? Wasn’t it $4 BILLION a couple years ago?

jv333: Do you think the city and county would hire Lerach? Best, Don Bauder

A consultant is a person with a business card a briefcase and no job.

AlexClarke: That is an astute observation, but there is a big difference here: Lerach doesn't need a job. He is already worth $700 million and lives in one of San Diego County's classiest homes. Best, Don Bauder

Right....so maybe retirees are actually getting royally screwed? How about column about the over-all health of public pensions nationwide?

jv333: I wrote a lot about pensions when I joined the Reader in 2003 and in the years immediately beyond. In recent years, you are right: I haven't dug into it deeply for a number of years. Best, Don Bauder

Look .. Wall St and the investment firms hate this guy... whatever you think of Mr Lerach, most of the public pension funds were in find shape prior to 2000. Most of the corporate pensions screwed workers long ago. If the Kentucky pension fund only has about 14% of the amount needed to pay their retirees when all is added up, then something is messed up. Where did the money go? Moreover, I have read that if you total up all the public pension funds nationwide, the number approaches about $6 TRILLION in unfunded liability. We know that Wall Street likes to ‘kill the messenger’ ... I hope the merits of this case, and others like it, are heard and determined for the sake of the screwed workers out there. Let’s all learn about “Black Hole” hedge funds and Wall St fraud as well!

jv333: I don't know if $6 trillion is right, but it may be close. It seems a lot for public pension funds; however, it doesn't seem a lot for the liabilities of both public and private funds. However, I may be far wide of the mark on this, because it is a. subject I have spent little time on in recent years. Best, Don Bauder

PS ... if you don’t think there is, and has been, a ton of stock fraud and manipulation, ‘pump and dump’ schemes, embezzlement, theft, fraud and a ton of other crimes commited in major financial institutions here and abroad, i have a bridge i’d like to sell you. The LIBOR scandal alone probably siphoned a minimum of $1.5 TRILLION into major banks over at least 20 years. One guy went to prison. We have short memories about what led up to the Wall Street collapse of 2008. Go back and see the Oscar-winning documentary, “Inside Job”, “Enron” and others. If these pension funds were in decent shape prior to 2000 and now $6 Trillion under water, don’t blame Mr Lerach!

jv333: If you think I don't realize there have been tons of financial fraud for decades, you haven't been reading my stories and columns for both the U-T and Reader. I have covered San Diego for 48 years and have specialized in financial fraud. Best, Don Bauder

jv333: I found out about this by reading one Bloomberg story, but this is a very interesting followup. Best, Don Bauder

Peter Peters: Lerach believes Wall Street is made up of a bunch of scumbags. I agree with him on that. He correctly criticizes executives whose only concern is running up their stocks to dump them at the peak. But Lerach used scumbag methods to chase the scumbags. Best, Don Bauder

Well ... i wish more plaintiffs lawyers get after it ...A quarter of all public company deals may involve some kind of insider trading, according to the study by two professors at the Stern School of Business at New York University and one professor from McGill University. The study, perhaps the most detailed and exhaustive of its kind, examined hundreds of transactions from 1996 through the end of 2012. https://www.cnbc.com/2014/06/17/study-asserts-startling-numbers-of-insider-trading-rogues.html

jv333: I have no doubt illegal insider trading is rampant. The SEC doesn't have the money to pursue it. Wall Street and large corporations have far more resources than any government agency. Wall Street lobbyists make sure Congress does not give sufficient funds to regulatory agencies. Also, the illegal activities are pulled under the cover of complexity. If you are smart enough to cut through the smog, you will work on Wall Street for big bucks rather than work for the government.

I was the first, I believe, to come up with this truism: the essence of white collar fraud is contrived complexity. Best, Don Bauder

Mike Murphy: The Bar makes lawyers whose ethics are questioned to take (or re-take) an ethics course. Both Lerach and Steigerwalt got into trouble for unethical behavior, and possibly had to take the test. I think those records should be available on the Bar website. Best, Don Bauder

in their cases, they may have use the info they gleaned in the classes to carry on the practice .

Murphyjunk: Possible. Best, Don Bauder

Three things worth remembering about Bill Lerach:

Shortly after the courts dismissed his hard-fought shareholders suit against Worldcom for not proving there was accounting fraud - his suit that was was decried as a shakedown - the Securities and Exchange Commission investigated the company and found pretty much that Lerach was right. Massive fraud. The corporate officers were never held accountable and the company went into bankruptcy. Thousands of shareholders lost all their savings.

When CalPERS, the state retirement fund, realized its enormous losses from Worldcom, it sought and retained Lerach, who recovered $200 million from the financial professionals that enabled the Worldcom fraud.

In the 1990s, Lerach's firm represented a large group of former General Dynamics/Convair workers in San Diego (the company made them all ''managers') after the company withdrew the retirement benefits promised to the managers. For free. He lost but laid the legal groundwork for the follow-up lawsuit. He took no money.

Lerach's firm sunk tens of millions of their own dollars into the 'Joe Camel' Big Tobacco lawsuits because he was outraged by cigarette companies pandering to children - future addicts. They fought tenaciously at their own expense for years - a whole floor of a downtown building for documents - until the Attorney Generals from a bunch of states joined in and extracted huge settlements for public benefit. Every time you hear the county is using 'tobacco money,' that's money the public wouldn't have but for Lerach and his firm.

He also recovered a huge sum in the early 80s for senior citizens who were screwed financially by the United Methodist Church...setting off an uproar. 60 MINUTES sent Morley Safer to San Diego and provided national exposure of the fraud and deceit. No wonder the establishment dislkes Lerach. He challenged them and won on most every occasion.

martygraham619: This column brought responses from many who side with Lerach. Unfortunately, most of those were in the form of sending emails to me personally, and thus did not get on this website. Lerach did many courageous things and has to be considered a very good lawyer.

However, he committed fraud to chase fraud, ad he admitted it. As I said in the column, I admired Lerach's view of Wall Street, corporations, and weak government regulators. But I also thought he was filling some frivolous suits that never made it to court because the company figured it was wiser just to settle than to spend even more money fighting him.

So there are two views of Lerach, and I wish we had more people expressing their opinions on this blog. Best, Don Bauder

Don, I hold both views. He did illegally pay his plaintiffs, who otherwise would have done the work of two lawyers for free. And there were dubious suits. But he also was a champion for people who were cheated and against monstrous corporate behavior. A person actually can see it both ways.

martygraham619: He also lied under oath. Best, Don Bauder

Well i’d like to know what the lie was. Lerach had a Bush-appointed federal judge presiding. Before getting appointed to the bench, Judge John Walter and his corporate defense firm had many high tech clients, many i’m sure were sued by Lerach and other class action attys. Does anyone think that if Lerach had gone to trial that it would have been a level playing field? No way. One has to keep in mind that the Bush/Cheney WH put the Ken Starr team on Lerach and his colleagues. He was going after Cheney for the huge losses he caused as Halliburton CEO. Cheney had never run any kind of business let alone a Fortune 500 publicly-traded corporation. Their stock plunged during his tenure. http://www.nytimes.com/2002/05/22/business/under-cheney-halliburton-altered-policy-on-accounting.html

jv333: I think Cheney is a dishonest and incompetent person who used deceptive tactics to drag the country into the most immoral war in the nation's history. However, he may not have been responsible for the decline of Halliburton stock while he was CEO, if there was such a decline. Stocks rise and decline for various reasons, many of which make no logical sense. Best, Don Bauder

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