WASHINGTON -- John Edwards launched his slight public career -- one Senate term, two presidential candidacies -- with the money and reputation he made as a trial lawyer. Today he is the candidate of a small fraction of the electorate but a sizable portion of America's trial lawyers. Edwards says Washington is "corrupt." Well.
Within Edwards' lucrative trial bar constituency, there has been a flurry of criminal indictments. Their target has been what Fortune magazine calls the law firm of Hubris Hypocrisy and Greed. (See Peter Elkind's jaw-dropping report in the issue of Nov. 13, 2006.) The real name of the nation's foremost securities class-action firm is Milberg Weiss.
It has been indicted as a "racketeering enterprise" that obstructed justice and committed perjury, bribery and fraud while collecting about $250 million in fees from about 250 cases using paid plaintiffs, which is illegal. Several of the firm's members, past and present, also have been indicted.
Since 1965, the firm has won, often by tactics indistinguishable from extortion, $45 billion from corporations -- more than $1 billion a year for plaintiffs claiming to have been cheated as investors. Plaintiffs firms such as Milberg Weiss are paid contingency fees -- they are paid only if they win, but up to 30 percent of what is won. Mel Weiss, whose case is going to trial, and his former partner, Bill Lerach, who specialized in volatile stocks of Silicon Valley companies in the 1990s and is now going to jail, each pocketed -- it would be strange to say they earned -- more than $100 million in the 1990s. The firm itself has been charged with paying $11.4 million to three serial plaintiffs who testified in 180 cases over 25 years, claiming to have been repeatedly defrauded.
For Milberg Weiss to land the lucrative role as lead counsel, in charge of a case, it had to be first to file suit -- to win the "race to the courthouse." The firm's tactic was to store a few plaintiffs in its pantry. They would buy small amounts of stock in many companies, so they were poised to sue any of the companies whose stock lost substantial value.
Lead plaintiffs must swear that they are not getting special payments. According to prosecutors, some of Milberg Weiss' phony plaintiffs were getting millions of dollars in kickbacks -- generally about 10 percent of net attorneys' fees -- for their charade as injured investors.