Lerach Is Sentenced to 2 Years in Prison

By Dealbook

William Lerach, a former partner at a prestigious New York law firm, was sentenced Monday to two years in federal prison for his role in a lucrative kickback scheme involving class-action lawsuits against some of the nation’s biggest corporations.

Mr. Lerach, 61, was also sentenced to two years probation, fined $250,000 and ordered to complete 1,000 hours of community service.

“This whole conspiracy corrupted the law firm and it corrupted it in the most evil way,” Judge John Walter of federal district court said during the hearing.

Authorities said Mr. Lerach’s former firm, now known as Milberg Weiss, made an estimated $250 million over two decades by filing legal actions on behalf of professional plaintiffs who received kickbacks.

The firm paid $11.3 million in kickbacks to people who became plaintiffs in lawsuits targeting companies such as AT&T, Lucent, WorldCom, Microsoft and Prudential Insurance, prosecutors said.

Seven people, including three former partners at the firm, have pleaded guilty in the case.

Mr. Lerach, whose high-profile legal victories included a $7 billion judgment against the now-defunct energy giant Enron, pleaded guilty in October to one count of conspiracy to obstruct justice and make false statements.

“I pleaded guilty in this case because I was guilty,” Mr. Lerach said before sentencing. “It was, as they say, felony stupid.”

Prosecutors had recommended a two-year prison sentence along with two years probation and a $250,000 fine. Probation officials’ proposed that he be imprisoned for 15 months.

Go to Article from The Associated Press via The New York Times »

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Dave February 11, 2008 · 3:29 pm

So it does pay to be a felon. Lerach made tens if not hundreds of millions personally by this scheme and yet he is fined the cost of a stay at the Holiday Inn, in relative terms. Lerach will serve a meager two years in prison and will most likely get out early for good behavior at which point he will be free to live off the proceeds of his criminal behavior.

Left unanswered is how Lerach knew which companies to target.

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Jacob February 11, 2008 · 3:42 pm

This guy fraudulently steals billions of dollars, affecting untold numbers of people, and gets 2 years in prison?

A minority youth gets caught with a gram of cocaine and spends the same if not more time in prison?!?!?!

the justice system works, when you have ALOT of money to make it work for you.

– Student from Los Angeles.

chad G February 11, 2008 · 3:48 pm

2 years of probated time means after his 1000 hours of community service he won’t even feel the slap on his wrist.

jim karr February 11, 2008 · 3:51 pm

there are thousands of business people who engage in this kind of sharp practice–but being targeted and caught is the crime–federal prison can be a good place to make connections and come out a better prepared business person-one learns that public relations is a necessity when the profits are over the $20 million mark–one needs to look like a concerned public-spirited citizen–even the Gambino family know that..I wish Mr lerach much success in his future business life–I’m sure he will do better than 99.9 % of the general business community because he’s a risk taker–

Jimmy Hwang February 11, 2008 · 3:53 pm

The laws are written by people, interpreted by people and enforced by people. It is the people not the laws that run the system. Unless you are the one who write the laws, interprete the law or enforce the law, there is nothing you can do about it.
Life is not fair, get used to it.

Paula E. Lopossa February 11, 2008 · 3:54 pm

I believe that under federal criminal law, Mr. Lerach can be required to disgorge the profits from his criminal behavior.
The United States Attorney can ask the Judge to so order Mr. Lerach.

alfred mason February 11, 2008 · 3:55 pm

mr. lerach was a game player, has opponents are game players?
the law favors game player, they made the laws.

romath February 11, 2008 · 3:58 pm

It was worse than this. Millberg Weiss played games by not notifying eligible class participants of settlements and impending deadlines. I was a victim of their games, even though I had been proactive in checking with them on the status of a case and making sure they had my correct home and email address.

Steve February 11, 2008 · 4:02 pm

As was previously reported, the terms of his plea agreement include forfeiture of $7.75 million. So he will pay a whole lot more than $250 K.

texasgardener February 11, 2008 · 4:06 pm

Well, as a convicted felon, his law license is toast. When he gets out of jail he will never again be able to practice law. The second crime is that he was able to keep the proceeds of this criminal conspiracy which rightfully should be donated to the Victim’s Compensation fund. Why haven’t his assets been frozen?

elbee February 11, 2008 · 4:10 pm

What I’d like to know is, what fool uttered those famous words ‘ crime doesn’t pay ‘ ?

Brian February 11, 2008 · 4:14 pm

Mr. Lerach did not “steal” anything. He illegally bumped his status to lead attorney in securities class actions.

Doug February 11, 2008 · 4:14 pm

My criminal law professor told the class that no crime is worth the punishment, except for white collar crime (i.e, embezzelment). I will commit a giant embezzelment the very moment I have the opportunity.

David February 11, 2008 · 4:15 pm

C’mon guys. The $250,000 does not begin to measure the penalties this guy will pay. He’ll be settling civil suits until long after all the money is gone (assuming he does not have a palatial homestead in Florida, which he would get to keep). And he’ll lose lot’s more — community, lifestyle, good family life. Relax, he will be well punished.

Stephen Andrus February 11, 2008 · 4:21 pm

Can I get the same deal? It would be the best thing that could ever happen to me in my whole life. If you say yes I promise to start planning the crime right now.

Les Huber February 11, 2008 · 4:24 pm

Lerach, his ex-partner Mel Weise and their brethern have been a peculiarly American form a parasite. They have cost American corportantions & thereby millions of individual American shareholders billions of dollars with trumped up class action suites, which we now learn were part of conspiracies with paid plaintiffs.

He clearly deserves a much more severe punishment, but if this contributes to stamping out this dispicable tax on American business, it will be an important step forward.

Jon February 11, 2008 · 4:38 pm

I don’t believe Mr. Lerach will be requried to disgorge any other monies, outside of the 250k and the $7.5 million that was agreed to as part of his plea arrangement.

Although he gamed the system by utilizing professional class action plaintiffs, which is certainly illegal, his professional malpractice does not seem to have any bearing on the merits of those class action lawsuits that the firm won. Perhaps it impacted the firm’s decision-making (because they were able to control the lead plaintiff’s, making the case entirely lawyer driven), but I don’t believe it goes to the heart of the class’s claim.

In short, I find it likely that Mr. Larich has quite a bit of money tucked away. He will pay his small fine, and the rather massive $7.5 million required by his settlement agreement, but, will probably be left with a few million. That he has been disbarred may hurt his pride, but let’s face it: Mr. Lerach is 61. He can just retire to said palatial homestead in Florida.

Perry February 11, 2008 · 4:39 pm

The key is to steal enough to be able to afford the best defense. Go big

Edward Pita February 11, 2008 · 4:41 pm

As a high school teacher I am amazed at the penalty this person received. Many kids get 7,10,15 years for drug possession, DWI, and come out losing the best years of their lives and no future in mind. This man receives two years and gets to keep most of his money, home, etc. Wow, money does help. E. Pita

lydgate February 11, 2008 · 4:41 pm

Brian makes a good point. As I understand it, the real victims of Lerach’s crimes were other plaintiffs’ lawyers, not the defendant companies. And as those most exultant about Lerach’s downfall tend to hate all plaintiffs’ lawyers, you might ask why they care, except that they are just so delighted about Lerach finally getting his.

Paul February 11, 2008 · 4:55 pm

He belonged to the Weiss firm that deprived Holocaust survivors of fair compensation against the German and Swiss companies. The victims received “peanuts” to quote a well known ex-US judge who was also involved in the settlement. If you know of a competent and honest firm that will take on our cases, those who opted out, please have a
heart and contact us; it is the human and decent thing to do.

Rick A February 11, 2008 · 4:56 pm

As the joke goes, “It’s a start…”

Dave February 11, 2008 · 4:57 pm

David, problem with that line of reasoning, it requires the individuals to generate civil class actions. Consider, in 2001 Eliot Spitzer and regulators fined Wall Street $1.4 Billion for fraud. At the end of the day each admitted this was a fraction of the real fraud but stated that the injured could sue in civil court. Problem was, the Judges were throwing out the civil complaints left and right ultimately securing the penalties to Wall Street at $1.4 Billion.

The court system is a joke. Since November three SEC cases presented to a US judged resulted in favor for the crooks. In addition, the NY Supreme court ruled last week that the state of NY could not force a stock manipulator to pay the $1 Million fine he received from the regulators and failed to pay.

Bring matters back to this case, Lerach should have received near 10 years, the same Anthony Elgindy and FBI Agent Royer received.

Dave February 11, 2008 · 6:59 pm

Earlier I asked how Lerach and Milberg Weiss knew about what companies to infiltrate with a lead plaintiff. The answer may be as simple as in a timecard.

The link below will bring you to a copy of a Gradient Analytics (Copper River) timecard. Gradient is being sued for ghost writing hatchet jobs at the behest of short interest hedge funds. The hatchet jobs drive the market down and a lead plaintiff becomes ornary and files a suit on the allegations released within the hatchet report.

Check out the item on the bottom, just below Office Management. Milberg weiss has their own personal on a Gradient timecard.

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David Farrell February 11, 2008 · 10:48 pm

Greedy, Greedy, Greedy. Did you see what they said in the article? He had a $7 BILLION dollar win against Enron. This guy couldn’t pay for his new Bentley with judgments like that? He had to go for more?