NEW YORK – The law firm suing Trump University was founded by a wealthy San Diego lawyer with close ties to the Clintons who served a two-year sentence in federal prison for his role in a kickback scheme to mobilize plaintiffs for class-action lawsuits.
William Lerach, best known for winning more than $7 billion in legal settlements of a class action suit he brought against Enron, was found guilty in 2007 of a kickback scheme in which he his firm used intermediaries to pay clients with large stock portfolios a percentage of the law firm’s $11.3 million profits for agreeing to be plaintiffs in 225 class action and shareholder lawsuits, spanning the period 1979 to 2005.
Lerach’s former law firm, the once prestigious New York-based Milberg, Weiss, Bershad & Schulman, made an estimated $250 million in the criminal class-action scheme.
WND reported documents released Wednesday in the lawsuit accusing Trump University of fraud confirmed the law firm behind the suit paid Bill and Hillary Clinton a total of $675,000 for speeches.
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In addition to prison, Lerach was ordered to pay a $250,000 fine and to complete 1,000 hours of community service for agreeing to plead guilty as charged.
On Dec. 21, 2007, the California Bar declared Lerach “not eligible to practice law,” and he later was disbarred and prohibited from practicing law in California by order of the California Supreme Court.
The participants in the Milberg Weiss scheme agreed to allege as lead plaintiffs in the class action lawsuits that they suffered losses because executives misled them about a company’s financial condition.
Targeted in Lerach’s scheme were some of the nation’s largest corporations of that era, including AT&T, Lucent, WorldCom, Microsoft and Prudential Insurance.
The Associated Press reported that also pleading guilty in the case was Seymour Lazar, then 80 years old, a client of Milberg Weiss who was paid an estimated $2.6 million by the law firm between 1976 and 2004 for agreeing to be a repeat plaintiff in stock fraud cases brought by the firm against targeted corporations.
“Lerach’s huge class-action wins – against R.J. Reynolds Tobacco Co., AT&T Corp., Honeywell International Inc. and Apple Computer Inc., among others – made him unpopular with corporate executives, who slammed his cases as meritless shakedowns,” the Los Angeles Times reported in 2007. “Success also made him a millionaire many times over (his fees in suits against Enron Corp. alone could ultimately total more than $1 billion) and a generous Democratic campaign contributor.”
The Washington Examiner reported in 2008 that Lerach attempted in a letter inadvertently made public by his own attorneys to excuse his criminal behavior by claiming that “everybody was paying plaintiffs” kickbacks when he was practicing.
The Washington Post reported that year the Milberg Weiss firm agreed to pay the federal government $75 million to avoid criminal prosecution by settling a Department of Justice criminal investigation against the law firm in the kickback case.
In total, seven Milberg Weiss lawyers, including three former partners, pleaded guilty to criminal charges in the case.
Big-dollar contributions to Democrats
The New York Post reported in 2008 that Lerach, characterized as “a heavyweight donor,” had contributed up to $250,000 to the Clinton Foundation. The newspaper noted that Lerach was “a former San Diego trial lawyer serving a two-year sentence for his roll in a kickback scheme” in which he pleaded guilty the previous February “to paying clients of his firm to file stock-fraud cases.”
Lerach’s relationship with Bill Clinton traces back to the 1990s, when Lerach leveraged large contributions to Clinton and other Democratic Party candidates to win President Clinton’s agreement to veto legislation that threatened to impinge upon Lerach’s profitable class-action lawsuit racket.
“Lerach and his fellow buccaneers have ample reason to want to thwart the will of Congress,” Forbes wrote on Aug. 26, 1996.
“Between 1989 and 1994, Lerach and his ilk have launched class actions against 53 of California’s top 100 high-tech companies,” Forbes continued. “The cases rarely go to trial: To save time, money and productivity-draining aggravation, the targeted companies usually settle.
“Total take from the companies: well over $600 million, of which the lawyers probably got about $200 million,” Forbes summarized. ”Bill Lerach himself makes between $7 million and $10 million a year. In the California high-tech community there’s even a new verb: to ‘lerach’ (leh-RACK), meaning to extort money from a company legally. Think of ‘leraching’ as a kind of tax on American high tech and other industries.”
The Washington Post reported that President Clinton attended a $400,000 fundraising event hosted by Lerach, a man the newspaper characterized as “much-hated in this land of computer nerds and high-tech wizards.”
“Lerach, a major Democratic contributor is regarded as the king of securities-action lawsuits, litigation that has won him few friends among the corporate elite who dined here Friday night with Clinton and his wife Hillary Rodham Clinton,” the Washington Post said. “When a stock falls in price, many executives here say they fear a Lerach lawsuit is not far behind.
“Today, it was Lerach at Clinton’s side for a Democratic Business Council lunch raising $ 400,000 in Rancho Santa Fe near San Diego,” the Post continued. “‘Look,’ Lerach told the group, “It’s time for Democrats, fund-raisers, officeholders to roll up their sleeves and go to work and stand up to an ugly witch hunt to drive from office one of the best and most popular presidents in history.’”
On Sept. 20, 2007, the Associated Press reported When then-presidential candidate Sen. John Edwards learned Lerach had pleaded guilty in the Milberg Weiss case, he donated to charity the $4,600 Lerach had contributed to his campaign. But Edwards refused to return the rest of the $81,000 Lerach collected from members of Milberg Weiss to contribute to his campaign.
Ironically, Edwards made his fortune as a personal injury lawyer specializing in medical malpractice lawsuits.
The Lerach legacy
In 2004, Lerach left Milberg Weiss to become a partner in a split-off San Diego firm initially formed as Lerach Coughlin Stoia Geller Rudman & Robbins LLP. It dropped Lerach’s name and morphed into Coughlin Stoia Rudman & Robbins after Lerach was indicted. Coughlin Stoia was the predecessor firm to today’s Robbins Geller Rudman & Dowd LLP, the firm suing Trump University.
In 2014, the Colorado Springs Gazette observed that Lerach’s legacy remains with the firm. The paper commented in an editorial about a case in which “the notorious securities litigation firm Robbins Geller brought a shareholder suit against Boeing, accusing its management of illegal misrepresentations based on the word of a confidential witness inside the company.”
In a sanctions order deciding the Boeing case, U.S. District Judge Rueben Castillo wrote that Robbins Geller had committed “repeated misconduct throughout this litigation,” sanctioning the law firm for what the Class Action Reporter on Oct. 9, 2014, characterized as “the use of a false witness.”
The Gazette editorial concluded the Boeing case demonstrated “how class-action investor litigation is often used as a form of legal extortion: ‘Settle now and we’ll go away.’”
Writing about the Boeing case, Legal Monitor Worldwide characterized Robbins Geller as “the plaintiffs firm created by discredited tort kingpin Bill Lerach out of the ruins of Milberg Weiss, which fell apart in 2006 after its partners were indicted.”
Legal Monitor described Robbins Geller’s witness misconduct in the Boeing case as follows:
In 2009 they [Robbins Geller] filed a securities fraud suit charging that Boeing withheld information about delays in producing the 787 Dreamliner that caused the company’s stock to fall. Robbins Geller based the suit in large part on a confidential witness who it said had inside dope on Boeing’s conduct. One problem: The witness’s details were either incorrect or concocted by the plaintiffs’ attorneys, who filed the complaint before speaking to the witness. After the claim was dismissed for lack of specificity, the firm dug up the confidential witness and used him to buttress its revised filing with details to suggest the source’s personal knowledge and access within the company. When the confidential witness was ultimately interviewed by the defense, they found he was not even a Boeing employee but a contractor who worked on a different aircraft than the Dreamliner. He disavowed nearly every statement the plaintiffs had attributed to him.
Legal Monitor Worldwide noted it was the fourth time Robbins Geller had been called out by federal courts for misconduct.
“It’s a shame [Robbins Geller’s] lawyers are still allowed to practice,” the Legal Monitor Worldwide concluded.