The Ten Roads to Riches

by Ken Fisher

  3. Ibid.

  4. U.S. Bureau of the Census at www.census.gov; “The Forbes 400 Real-Time Rankings,” Forbes, http://www.forbes.com/forbes-400/list/#version: realtime (accessed September 7, 2016).

  5. “The Forbes 400 2016,” Forbes, http://www.forbes.com/forbes-400/list/# version:static (accessed October 6, 2016).

  6. “Bobby Murphy Profile,” Forbes (September 14, 2016), http://www.forbes.com/profile/bobby-murphy/ (accessed September 14, 2016).

  7. “Evan Spiegel Profile,” Forbes (September 14, 2016), http://www.forbes.com/profile/evan-spiegel/ (accessed September 14, 2016).

  8. Jennifer Wang, “The Youngest Moneymakers on the Forbes 400: 17 Under 40,” Forbes (September 29, 2015), http://www.forbes.com/sites/jenniferwang/2015/09/29/the-youngest-moneymakers-on-the-forbes-400-17-under-40/#3d4d3a57b3ab (accessed September 14, 2016).

  9. “Julio Mario Santo Domingo, III, Profile,” Forbes (October 6, 2016), http://www.forbes.com/profile/julio-mario-santo-domingo-iii/?list=forbes-400 (accessed September 6, 2016).

  10. “The Forbes 400 2016.”

  11. Geoffrey Gray, “Tough Love,” New York Magazine (March 19, 2006), http://nymag.com/relationships/features/16463/ (accessed April 14, 2008).

  12. Geoffrey Gray, “The Ex-Wives Club,” New York Magazine (March 19, 2006), http://nymag.com/relationships/features/16469/ (accessed April 14, 2008).

  13. Gray, “Tough Love.”

  14. Gray, “The Ex-Wives Club.”

  15. Catherine Mayer, “The Judge’s Take on Heather Mills,” Time (March 18, 2008), http://www.time.com/time/arts/article/0,8599,1723254,00.html (accessed April 14, 2008).

  16. Forbes staff, “The 10 Most Expensive Celebrity Divorces,” Forbes (April 12, 2007), http://www.forbes.com/2007/04/12/most-expensive-divorces-biz-cz_lg_0412celebdivorce.html (accessed April 14, 2008).

  17. Davide Dukcevich, “Divorce and Dollars,” Forbes (September 27, 2002), http://www.forbes.com/2002/09/27/0927divorce_2.html (accessed April 14, 2008).

  18. CNBC.com and Roll Call, “Who Are the 10 Richest Members of Congress?,” Christian Science Monitor (October 25, 2012), http://www.csmonitor.com/Business/2012/1025/Who-are-the-10-richest-members-of-Congress/Sen.-John-Kerry-D-Mass (accessed September 14, 2016).

  19. Mark Feeney, “Julia Thorne, at 61; Author, Activist Was Ex-Wife of Senator Kerry,” Boston Globe (April 28, 2006), http://www.boston.com/news/globe/obituaries/articles/2006/04/28/julia_thorne_at_61_author_activist_was_ex_wife_of_senator_kerry/ (accessed April 14, 2008).

  20. Ralph Vartabedian, “Kerry’s Spouse Worth $1 Billion,” San Francisco Chronicle (June 27, 2004), http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/06/27/MNG4T7CTRN1.DTL (accessed April 14, 2008).

  21. “The Forbes 400 2016.”

  22. Ibid.

  23. Erika Brown, “What Would Meg Do,” Forbes (May 21, 2007), http://www.forbes.com/business/global/2007/0521/058.html (accessed May 29, 2008).

  24. “How Much Is Marilyn Carlson Nelson Worth?,” Celebrity Net Worth (2016), http://www.celebritynetworth123.com/richest-businessmen/marilyn-carlson-nelson-net-worth/ (accessed September 14, 2016).

  25. S. Graham & Associates Website found at http://www.stedmangraham.com/about.html.

  26. “Oprah Winfrey Reveals Why She Has Never—and Will Never— Marry Stedman,” News.com.au (September 27, 2013), http://www.news.com.au/entertainment/celebrity-life/oprah-winfrey-reveals-why-she-has-never-8212-and-will-never-marry-stedman/story-fn907478-1226728692752 (accessed September 14, 2016).

  27. “The Forbes 400 2016.”

  28. MSNBC staff, “Oprah Leaves Boyfriend Stedman out of Her Will,” MSNBC (January 9, 2008), http://www.msnbc.msn.com/id/22578526/ (accessed June 17, 2008).

  29. Charles Kelly, “Drowning of Heiress Left Many Questions, Rumors,” Arizona Republic (May 23, 2002), http://www.azcentral.com/news/famous/articles/0523Unsolved-Buffalo23.html (accessed April 14, 2008).

  6

  STEAL IT—LIKE A PIRATE, BUT LEGALLY

  Ever wish you could just take the money? Would you like some to see you as a hero? And others fear you? This is your road.

  In literature and mythology, thieves are often villain-heroes—Robin Hood and Jesse James—stealing from the rich, giving to the poor. Sounds romantic, even if it is fiction. But wait, you can legally steal and be a hero as a plaintiffs’ lawyer (PL)—today’s Robin Hood. Idolized by Hollywood, PLs posture themselves as crusaders for the helpless—fighting big bad business to save the little guy—winning huge awards in well-publicized show trials big on headlines and emotion. My apologies to other lawyers and law students if this sounds harsh, but it’s true: Most plaintiffs’ law is a perfectly legal twist on thievery and thuggery.

  Other lawyers do OK financially. Most work too hard for OK (or even very good) hourly pay on fairly dull but necessary functions, like estate planning, contract or transaction law, regulatory law, or labor law. A lifetime of hard work, some frugality, OK investment returns (Chapter 10)—and they may end up with $2 million to $30 million. But at what cost? Family life can suffer, since most lawyers bill by the hour, so many work endlessly. The big money is in legal stealing—plaintiffs’ work.

  CRUSADER OR PIRATE?

  Question: Are these guys crusaders or pirates? The original crusaders left comfy European castles to reclaim the Holy Land from those they saw as godless and evil. Are PLs bringing evildoers to justice—fighting the big and mean to help the little and poor? No, they’re pirates seeking booty. And if they had their way, they’d rarely set foot in court.

  What they really want is to bring an action and settle out of court—be paid to go away—basic thuglike extortion with huge payouts and little work. If you sport a bit of the dark side and part of you likes playing the heavy, this is the best possible road for you. And you needn’t think of yourself as bad. PLs always, always convince themselves they’re crusaders and feel great about themselves. Go down this road and you will, too.

  But if PLs were really crusaders for truth and justice they wouldn’t blackmail. They wouldn’t set up cases just to get paid to go away. Real crusaders would take cases all the way through the conclusion of a trial, always, for justice. That PLs overwhelmingly seek to be paid to go away—and usually are thereby extorting their targets—demonstrates the fallacy in their crusader self-image. They’re thieves. In their bones!

  That’s a great part about this road—that part of our society with a thieving bent can take this road, steal legally, make a boatload of money, and feel great about themselves at the same time. You can do it, too. Be a hero! There’s no other road linking all these qualities. Other roads are about voluntary transactions. Not this one.

  Simply Swashbuckling!

  If you’ve always had a childhood fantasy to be a pirate, but don’t like the physical risk—or maybe just get seasick—this road has all the other benefits. You can scare the hell out of people. You can force folks to pay you the same basic way mafia protection rackets used to. You can swagger and loot. Huge chunks of society will see you as a crusading savior. And you will believe your victims deserved it—that is, if you go about this correctly, as I will describe. And it’s exciting—simply swashbuckling! One of the most famous PLs of all time, Bill Lerach (now an ex-con living the life of Riley in La Jolla—details later), openly bragged of scotch drinking being his prime exercise when he wasn’t terrorizing CEOs.1 He claimed a great scotch arm—just like a pirate at the wharf pub. Arrr, matey!

  Pirates couldn’t care less about pedigree. Forget fancy schools. Their success isn’t about a degree; it’s about who they are (pirates). Top PLs often went to mediocre colleges and lackluster law schools. Fact: You won’t need a fancy school, either. You needn’t go to law school at all to pass the bar exam in California, Maine, New York, Vermont, Virginia, Washington, DC, and Washington.2 No law degree required to blackmail, extort, loot, pillage, and raid. And what is a pay-to-go-away class action suit if not a raid?

  RAIDER’S ROAD

  Law sc
hool is a popular choice today, but many law school graduates don’t become lawyers! Why? Again, most law requires grueling hours. Graduates ask, “Do I really want to do this?” Yet, despite so many choosing law school but not a law career, the number of lawyers has grown staggeringly. In 1972, we had one lawyer for every 572 Americans. In 2016, one for every 247.3 Do we need so many? Don’t know, but there is endless competition now. I won’t describe how to become a normal lawyer, pick law schools, apply, pass the state bar, or even get that first job. There are lots of books on all that. No, this chapter and road isn’t about being a normal lawyer. It is about being a PL. But in contemplating that and why being a PL is a road to riches, it’s worthwhile to see why normal lawyers don’t normally get super rich.

  You graduate law school and go work for a major law firm. It will be subdivided into practice areas like litigation, estate planning, securities law, and general business law. Different firms have different specialties. The biggest firms tend to cover the waterfront. Each practice area is managed by one or several partners, and the firm is managed relatively collegially by partners. Fresh out of law school you’re what’s called an associate. If you’re really good, in seven to nine years they may make you a partner. If not, you probably leave.

  Average 2015 associate pay at the 20 top-paying US law firms was in the $200,000 range.4 That’s for third-, fourth- and fifth-year associates. Seem good? Remember, first you pay for law school and likely have huge school debt. You suffer negative cash flow and then endure the grueling first few years of legal work—infamous for 80-hour weeks. Only then might you make $200,000—if you’re average at a top-paying firm. What if you’re below average at a midtier firm? It’s tough, competitive, and these folks work hard.

  Worse, top firms are in the biggest, most expensive cities. And top lawyers aren’t typically that frugal—but you must be and invest well to build a nest egg as a normal lawyer. Consider this: Median pay for all lawyers is $115,820 (as of September 2016).5 Less than you’d think. Yes, this includes government lawyers, charity and pro-bono lawyers doing social work (who often are real crusaders), self-employed lawyers who can’t get clients, and first-year associates at lousy law firms in tiny towns. Many lawyers make not all that much. Even the better-paid ones are still working by the hour. It isn’t poverty, but with these salaries you must save and invest well to retire with $2 million to $30 million. It’s possible, but no more or less than anyone with an OK income on the “Road More Traveled” (Chapter 10).

  Being a normal lawyer is a good way to earn a nice income, but is not necessarily a road to riches.

  Bigger bucks come from becoming a law firm partner—which is tough! It takes an average of seven to nine years, and few associates make it at all. Many firms have “up or out” cultures—if you haven’t made partner by year nine, they can boot you. Yet 77 percent of associates don’t make it past year five!6 Odds are worse at the top firms. But if you make it, the pay is good. Top partners might bill $500 an hour or more. Five firms’ top partners now bill near $1,500 an hour, with fees growing 6 to 7 percent a year.7

  I’m just showing you the clear demarcation among the bulk of the legal profession, which requires the Road More Traveled and doesn’t get you mega-rich—versus the one area that does.

  THE RICHEST LEGAL ROAD

  For the biggest lawyer bucks, there’s only one road—plaintiffs’ law—dealing only with civil cases or the “tort” system. It’s huge—tort costs totaled $265 billion in 2011—almost 2 percent of US GDP!8 (Double the average of other developed nations.9 America is a PL’s dream!) Of that, only 22 percent actually goes to reimburse victims. PLs get an additional 50 percent more than their clients—collecting 33 percent of the $265 billion!10 A piece of that can be yours.

  Other lawyers bill by the hour. Example: You run over your neighbor’s petunias. She sues. Your defense lawyer gets paid by the hour. Your neighbor’s PL gets a percentage of any judgment received—20 to 40 percent typically, plus expenses. Suppose they convince the judge the petunias were so rare and the suffering sufficiently acute to merit a $10 million verdict. The PL might get $3.5 million, plus expenses. No one in law makes more than PLs when they do it right—nobody. (One potential exception is a legal counsel to a startup firm that booms hugely, getting rich off options as a ride-along—see Chapter 3.)

  Case in point: The late Joe Jamail (net worth $1.5 billion before he passed in 2015)11 was fabled as the “King of Torts”—a legendary PL. He won huge verdicts, including one for $3.3 billion—his fee there was about $400 million.12 What case? Who cares! Four hundred million! (OK—he represented Pennzoil against Texaco for screwing up its planned 1980s Getty Oil merger.)

  Almost as impressive, Jamail won $6 million for a client paralyzed in a collision with a commercial truck. Sound easy? Maybe so, except Jamail admitted in court, on the record, his client was drunk—completely pluto-ed—his blood alcohol content fully triple the legal limit. Yet Jamail convinced the jury that, though sloshed, his client was otherwise driving responsibly, therefore not at fault.13 That takes some serious skills. Arrr, matey!

  TORT US AND THE SCARE

  So how can you steal in PL mode, make big bucks, strike fear in some folks’ hearts, while seeming like Robin Hood to others and having the media adore you? First, you need a client folks sympathize with. Kids, sick ones, are great. (Or kids with the possibility of being maybe exposed to something maybe dangerous. Maybe.) Deadly maladies are great—better if work-related or “created” by a big corporation. Clients needn’t actually be sick. You can build a huge class action suit with one guy who died from possible exposure to Chemical X—though he was 89. But Chemical X may have added to his untimely death! From him you build a class of others who may have been exposed. Then extort Chemical X’s maker for the possibility all those folks may die.

  There’s no other profitable way to steal legally.

  The extortion part comes in because the publicity and accusations of the chemical maker’s culpability will damage the firm as they drive shareholders and customers away to other vendors. To stop the losses, the chemical maker settles—pays you to go away. It pays part of what it estimates you can do in damages from lost business—plus a piece of the not-insignificant legal costs it would spend defending itself. Even a small class action will cost at least $2 million to defend and will drag on for at least two years for the defendant—incurring opportunity cost on top! Usually, the company will pay a piece of that just to have you sail away.

  Your subject matter should also be confusing, murky, with little-tested, archaic laws applied in perhaps unintended ways. Gray areas are best. Complicated chemicals. Rare medical diseases of which scant is known about the definitive cause. Cancers linked to industrial building products, like mesothelioma. Drugs with side effects like alopecia. Big, complex, multisyllabic technical terms jurors can’t quite fathom—always use “alopecia” instead of “hair loss.” Sounds more science-y. The more obscure and complex, the more the trial ends up about whom the jury likes more. Possibilities are endless. Work-related suits are good because big business always has a bad image and employment laws across America are often foggy, gray, and vary by state. And workers are about as all-American and sympathetic as you can get!

  Exploiting Kids for Fun and Profit!

  Using sick kids is tried and true—and immortalized in Julia Roberts’s Oscar-winning role in Erin Brockovich. If you saw the movie, you know Ms. Brockovich as a plucky nonlawyer, down on her luck, working at a two-bit law firm. She stumbles across a pattern of medical oddities in Hinkley, California, and investigates. That Erin! No legal background, no investigative training, but she’s got grit, determination, and . . . well . . . if you’ve seen the movie, you know.

  She convinces her boss to take the case. Lo and behold, evil Pacific Gas & Electric (PG&E) had been intentionally dumping hexavalent chromium (multisyllabic, complicated chemical compound) in Hinkley’s drinking water. Some kids there had cancer. (Sick kids!) Why woul
d PG&E do it? (In movies, businesses are always evil.) In this film, it was because they knew Hinkleyans were too poor and powerless to fight back. Powerless—until they met Ms. Brockovich and boss—real crusaders—who won them a big boodle in court. Then Ms. Brockovich got a big raise, a new car, and endless hot pants. Hooray! Roll credits.

  In reality, this case settled in private arbitration and never saw the inside of a courtroom. Were they real crusaders, Brockovich and boss would have tried the case. PG&E admitted no guilt. I’m not saying PG&E was guiltless and kids didn’t get sick. I don’t know. Most scientists say hexavalent chromium, when ingested as alleged, is not toxic to humans. It just passes through.14 But “facts” and “science” aren’t the issue. A trial takes years, generates huge negative publicity for the stock, and drives away customers and general goodwill. PG&E’s side of the story doesn’t make a sexy movie.

  PG&E paid $333 million to make them go away. Ironically, damage to their reputation from Steven Soderbergh’s fictional movie must have been massively bigger—but it would have been bigger still with a trial. Note: This is a $31 billion market valuation stock with $15 billion in annual sales. The settlement seems big, but not settling likely would have hurt more. To prevail in a trial like that would have taken years and years. En route, they would have been dragged through the mud publicly. People recall accusations more than when a court finally, quietly, rules for the defendant. There’s no news then. Nothing happening is not news.

  But for Brockovich and boss, you, or another PL, that’s a fine payday. According to their contract, they got 40 percent plus $10 million for expenses—$143.2 million in all. And there were sick kids, whether hexavalent chromium caused it or not. What did they get? Class members with documented medical complaints reported getting only $50,000 or $60,000—not much when you’re suffering from cancer.15 Where did the rest go? Class members seem confused about that.16 But you can bet Julia Roberts isn’t concerned about having deceived the public. She played a classic Robin Hood role. America loved her for it.