The Wall Street Journal-20080212-Lerach Gets Two

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Lerach Gets Two

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Tort baron Bill Lerach was sentenced to two years in prison yesterday, and he can consider himself a lucky man.

His defense team had sought six months in the slammer and six months of home confinement for admitting that he had paid kickbacks to plaintiffs for helping him gin up securities class actions in the 1990s. The sentencing guidelines call for a slightly stiffer sentence, but 24 months is what the prosecution had requested as part of the forgiving plea deal he agreed to last year. He was also fined $250,000 on top of the $8 million in disgorgements and penalties in the plea -- though he stands to make as much as $50 million as part of the Enron class action settlement.

Mr. Lerach's lawyers also contended that he had accepted responsibility for his misdeeds. This is how he defined that "responsibility" in an op-ed piece published in the Washington Post last November after this newspaper declined the submission: "I'm on my way to prison because, in my zeal to stand up against this kind of corporate greed over the years, I stepped over the line."

Mr. Lerach built an entire lawsuit industry and grew very rich on the back of illegal payments. The resulting proliferation of strike suits has reduced the returns for investors large and small. Yet in Mr. Lerach's view, secret, illegal payments to professional plaintiffs in trumped-up shareholder class-actions are a foot-fault.

Mr. Lerach's op-ed mentioned the architects of the Enron fraud, but passed over the many decades worth of prison sentences handed out in that case and others, such as WorldCom. Instead, he offered up the following gem: "It turns out that the legal system is a lot tougher on shareholder lawyers than it appears to be on Wall Street executives." We doubt WorldCom's Bernie Ebbers, serving not two but 25 years, agrees.