From today’s Wall Street Journal, “The Firm,” an editorial urging the Justice Department to continue its investigations into the crimes:
The firm perfected what’s known as a “strike suit,” in which a corporation is sued over a dubious claim of “fraud” merely when its stock price falls. Milberg now admits that, over 30 years, seven former partners (three remain unnamed) paid secret kickbacks to plaintiffs in 165 suits. Those suits earned the firm some $240 million in fees.
The plea deal itself reveals how elaborate these strike-suit cons were. In addition to paying plaintiffs, Milberg was also funneling kickbacks to New York-area stockbrokers who referred clients for Milberg suits. One of these was Paul L. Tullman, who received some $9 million in finder’s fees over 24 years. Milberg Weiss was also illegally paying at least one class-action expert witness, a man named John Torkelsen, on a contingency-fee basis. Torkelsen, now serving jail time for defrauding the government, was famous for providing the court with estimates of the “damages” owed to shareholders. Since he was getting a cut, he had every incentive to pump up the numbers.
In short, Milberg was a corrupt enterprise that perpetrated a vast fraud on our system of justice.
While the Journal calls for continued Justice Department enforcement, Paul Kamenar of the Washington Legal Foundation asks, where’s the Securities Exchange Commission? Writing in The Examiner, he argues:
While Reps. John Boehner and Lamar Smith recently have called for congressional investigations into this massive criminal racket that affected the markets, the obvious question is, where has the Securities and Exchange Commission been in all of this? Ironically, in 1995, SEC Chairman Christopher Cox — then Rep. Cox — was responsible for enacting the Private Securities Litigation Reform Act to curb these class-action abuses. Yet the SEC’s silence on these harmful criminal practices — which Lerach unapologetically admitted was “industry practice” by the class-action bar — has been deafening.
Congressional leadership certainly has shown no inclination toward oversight.
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