The Fifth Circuit bench of 2006: U.S. Court of Appeals for the Fifth Circuit, Federal Judicial Center, http://www.fjc.gov/history/home/.
Judge John F. Walter: Ibid.
“There’s certainly a significant”: United States v. Milberg Weiss Bershad & Schulman LLP et al., U.S. District Court, Central District of California, status conference, September 21, 2007.
four ex–Merrill Lynch executives: Alexei Barrionuevo and Vikas Bajaj, “Fastow Testifies Lay Knew of Enron’s Problems,” New York Times, March 9, 2006. 399
“The only personal benefit”: “U.S. Court Overturns Convictions in Enron Case,” Reuters, August 2, 2006.
“Let’s hope we don’t draw”: William S. Lerach, interview by PD, January 22, 2009.
The duty to inform Andy Fastow: Paul Howes, interview by PD, January 15, 2009.
“Jeff got twenty-four years”: Ibid.
Now that he was doing five years: Douglas Axel, interview by PD, January 13, 2009.
Lerach was also circumspect: William S. Lerach, interview by PD, October 15, 2008.
Alan Schulman … Robert Sugarman: Ibid.
“saddened”: Molly Selvin, “Unsettling Days for the King of Class Action,” Los Angeles Times, July 23, 2006.
Patti and Judge Irving: Hon. J. Lawrence Irving, interview by PD, April 15, 2008.
Still another matter: Michelle Ciccarelli, interview by PD, March 12, 2009.
The stone walkway: PD, personal observations.
house on the hill: Seth Lubove, “San Diego’s Most Expensive Homes,” Forbes.com, October 10, 2002, http://www.forbes.com/2002/11/08/cz_sl_1108feat.html.
previous owners: William S. Lerach, interview by PD, October 28, 2007.
as he made his rounds: PD, personal observations. 404
Flanking the villa: William S. Lerach, interview by PD, October 15, 2008.
Among the guests: Michelle Ciccarelli, interview by PD, March 12, 2009.
Chihuahua: Kathy Lichnovsky, interview by PD, February 18, 2009. 405
“Wonder how much they paid”: Michelle Ciccarelli, interview by PD, March 12, 2009.
added three plaintiffs: William Greider, “Cheney and HAL,” Nation, June 22, 2006.
already-wary Paula John: Ibid. 406
“Due to the strong manner”: Roger Parloff, “Lerach Firm Ejected.”
Scott called Lerach: William S. Lerach, interview by PD, January 22, 2009.
Boies signaled his willingness: Daniel Fisher, “Battle of the Class-Action Titans,” Forbes.com, November 28, 2006.
The plaintiffs decried: Parloff, “Lerach Firm Ejected.”
The petition was filed: Roger Parloff, “Client Yearning to Fire Attorney Lerach Says Fortune Story Was Last Straw,” Fortune online, CNNMoney.com, December 13, 2006.
“When you take a guy”: Ramzi Abadou, interview by PD, January 16, 2008.
“He shouldn’t have told”: Ibid.
CHAPTER 27: A NARROW DEFINITION OF DECEIT
drew three judges’ names: Charles R. Fulbruge III, interview by PD, January 29, 2009.
Jerry Smith: For Judge Jerry Edwin Smith biography, see http://www.1b5.uscourts.gov/judgebio/FifthCircuit/.
James Dennis: For Judge James W. Dennis biography, see http://www.1b5.uscourts.gov/judgebio/FifthCircuit/.
He was happy: William S. Lerach, interview by PD, January 22, 2009.
Rhesa Barksdale: For Judge Rhesa H. Barksdale biography, see http://www.1b5.uscourts.gov/judgebio/FifthCircuit/.
“I look forward to going”: Quoted in Rick Atkinson, The Long Gray Line (New York: Henry Holt and Company, 1989), p. 144.
Bush tapped him: Tony Mauro, “The Right Stuff,” American Lawyer, November 3, 2008.
the two Barksdales: Christopher Patti, interview by PD, February 19, 2009. 411
Jim Barksdale: William S. Lerach, interview by PD, January 22, 2009. 411
Speed was essential: Eric Isaacson, interview by PD, February 28, 2009.
E. Grady Jolly: Paul Howes, interview by PD, February 15, 2009.
Their solution was to cook: Gregory A. Markel and Gregory G. Ballard, “In re: Charter Communications (Stoneridge),” Securities Regulation Law Review 33 (2006), p. 246.
Charter ran this shady arrangement: Stephen Taub, “Former Charter CFO Pleads Guilty,” CFO.com, January 28, 2005.
a classic example of scheme liability: Markel and Ballard, “In re: Charter Communications (Stoneridge).”
a similar set of facts: Gregory A. Markel and Gregory G. Ballard, “In re Charter Communications, Inc. Securities Litigation and Simpson v. AOL Time Warner Inc.: Circuits Split Over the Validity of ‘Scheme’ Liability Under Section 10(b),” Securities Regulation Law Journal, Winter 2006, p. 246.
identifying the alleged chicanery: Vaughn Marshall, “Simpson v. AOL Time Warner: The SEC and the Definition of Primary Liability under Rule 10b-5,” The RacetotheBottom.org, June 6, 2007.
how they might rebound: Jaclyn Jaeger, “‘Secondary Actor’ Lawsuit Hits Fever Pitch,” Compliance Week, June 26, 2007.
Steve Schulman asked: Ashby Jones, “Steve Schulman Resigns from Milberg Weiss,” Wall Street Journal Law Blog, December 8, 2006.
“This was his decision”: quoted in Julie Creswell, “Partner at Law Firm Resigns to Focus on Criminal Charges Against Him,” New York Times, December 9, 2006.
“vigorously fight the indictments”: Elizabeth Goldberg and Justin Scheck, “Name Partner Exits Milberg Weiss,” Law.com, December 11, 2006.
Under his arm he carried: Patrick Coughlin, interview by PD, January 16, 2009.
strode solemnly to their chairs: William S. Lerach, interview by PD, January 22, 2009.
This alarmed him: Patrick Coughlin, interview by PD, January 16, 2009.
So the plan was: Ibid. 415
it felt as though the judges: Ibid.
evidence of Mardi Gras: Byron Georgiou, interview by PD, February 28, 2009. 415
Nola, a happening new restaurant: Ibid.
“We want to thank y’all”: Michelle Ciccarelli, interview by PD, March 9, 2009.
“I suspect we’ve lost”: William S. Lerach, correspondence to PD, February 24, 2009.
“Presuming plaintiffs’ allegations”: Julie Creswell, “Court Rejects Suit Against Enron Banks,” New York Times, March 20, 2007.
“The effect of the opinion”: Isaiah J. Poole, quoting Al Meyerhoff, “A License to Commit Fraud,” TomPaine.com, March 28, 2007.
“Executives owe honest services”: Peter Lattman, “Fifth Circuit: No Class Action in Enron Shareholders’ Suit,” Wall Street Journal Law Blog, March 19, 2007.
“a gut shot”: Paul Howes, interview by PD, January 15, 2009.
“I’m probably less disappointed”: Ben Hallman, “Oh, The Hours They Would Have Billed,” American Lawyer, May 2007.
“What this pretty much means”: Julie Creswell, “Court Rejects Suit.” 417
“We are going to seek review”: William S. Lerach, interview by PD, January 22, 2009. 417
Lerach tried not to project: Ibid.
“anything unethical, immoral”: Roger Parloff, “Lerach Firm Ejected as Lead Counsel in Fallout from Milberg Weiss Indictment,” Fortune, February 26, 2007.
that claim would have been: William S. Lerach, interview by PD, January 22, 2009.
“You’re a higher profile”: Ibid. 419
“But without Dave”: Ibid.
“Dave won’t give Mel up”: Ibid.
Coughlin’s engagement party: Patrick J. Coughlin, interview by PD, January 16, 2009.
“Bill, you could be hurting”: Ibid.
“I just got off the phone”: William S. Lerach, interview by PD, January 22, 2009. 420
“That was Mel”: Ibid.
“We’re done”: Michelle Ciccarelli, interview by PD, March 4, 2009. 420
“I thought I was safe”: William S. Lerach, interview by PD, January 22, 2009.
keeping legal pads: Ibid.
She recited the facts: Michelle Ciccarelli, interview
by PD, March 6, 2009. 421
“We can fight this”: Ibid.
“He got paid”: William S. Lerach, interview by PD, January 22, 2009. 421
“I could kill Dave”: Ibid.
“I can fight this”: Ibid.
“I could be gone for twenty”: Ibid.
“Jon, we found out”: Jonathan W. Cuneo, interview by PD and CMC, February 12, 2009.
“I have a black heart”: In re: United States of America v. William S. Lerach, U.S. Federal Court, Central District of California, February 12, 2008, sentencing memo. 422
no real evidence: Richard Robinson, interview by PD, January 19, 2009. 422
“direct and very helpful”: Douglas Axel, interview by PD, January 13, 2009.
Lerach paced: John Keker, interview by PD, March 6, 2002.
“How much time”: Section 11c1c of the Federal Sentencing Guidelines, http://www.ussc.gov/guidelin.htm.
“I’ll do three years”: John Keker, interview by PD, March 6, 2002. 423
“That’s what they’ll want”: Ibid.
“We can negotiate”: William S. Lerach, interview by PD, October 29, 2007. 423
“No. They want you”: William S. Lerach, interview by PD, January 22, 2009.
“My client”: Ibid.
“Fat chance of getting a change”: John Keker, interview by PD, March 6, 2009. 424
the prosecutors had been seriously debating: Richard Robinson, interview by PD, January 19, 2009. 424
“If my client makes”: Ibid.
Cardona was in no mood: John M. Broder and Nick Madigan, “Charges Are Dropped in Spy Case Involving Woman and FBI Agent,” International Herald Tribune, June 8, 2005.
prosecutors were contemplating: Richard Robinson, interview by PD, January 19, 2009.
“if the Supreme Court”: “Frank and Conyers File Amicus Brief in Stoneridge Case,” Lerach, Coughlin, Stoia press release, June 30, 2007.
“been running this more”: Kara Scannell, “Big-Money Battle Pits Business vs. Trial Bar,” Wall Street Journal, October 9, 2007.
“Achilles’ heel”: Stephen Labaton, “Treasury Chief Urges ‘Balance’ in Regulation of U.S. Companies,” New York Times, November 21, 2006.
“For America’s global”: John Engler, “Washington’s Biggest Decision,” Washington Post, July 2, 2007.
“by general consent”: Kevin LaCroix, “Why Stoneridge Matters,” D&O Diary, October 8, 2007.
“We think the SEC”: Marcy Gordon, “President Weighed In on Case; Outcome Will Impact Enron Investors,” Associated Press, June 13, 2007.
“equally legally viable”: Paul D. Clement, interview by CMC, March 15, 2009. 427
“unnecessary lawsuits”: Ibid.
thirty-six-page brief: In re: Stoneridge Investment Partners v. Scientific-Atlanta, Inc., et al., “Brief for the United States as Amicus Curiae Supporting Affirmance,” Paul D. Clement, Thomas G. Hungar, and Kannon K. Shanmugam, August 2007. 427
“Congress considered”: Ibid.
Grundfest published a paper: Joseph A. Grundfest, “Scheme Liability: A Question for Congress, Not for the Court,” working paper, Stanford Law School, September 9, 2007.
the Ivy League Joe Valachi: “U.S. v. Milberg Weiss … David Bershad Is the New Joe Valachi,” Sirota & Sirota website, http://blog.sirotalaw.com, January 14, 2007.
detailing for prosecutors: Richard Robinson, interview by PD, January 19, 2009.
“cooperate fully”: In re: U.S. v. David J. Bershad, U.S. District Court, District of Central California, Exhibit A: Statement of Facts in Support of David J. Bershad Plea Agreement, July 10, 2007.
began making plans: William S. Lerach, interview by PD, January 22, 2009. 429
he was redoubling his defense: Roger Parloff, “Only Mel Weiss Can Save Milberg Weiss Now,” Fortune Legal Pad, July 10, 2007.
In the war room: Richard Robinson, interview by PD, January 19, 2009.
“For Christ’s sake, Mel”: William S. Lerach, interview by PD, January 22, 2009.
“I just don’t understand”: Ibid.
As they waited: Tara Lazar, interview by PD, March 11, 2009. 430
“Mel, I’m going in”: William S. Lerach, interview by PD, January 22, 2009.
The wedding commenced: Tara Lazar, interview by PD, March 11, 2009.
“Let’s get a photograph”: William S. Lerach, interview by PD, January 22, 2009.
CHAPTER 28: A BROAD DEFINITION OF DECEIT
“a cheat”: Star Soltan Lerach, “Letter to the Sentencing Judge,” November 28, 2007.
“Dad, I need to know”: William S. Lerach, interview by PD, January 22, 2009.
judicial mediation: John Keker, interview by PD, March 6, 2009.
A. Howard Matz: Ibid. 434
the magic number: Ibid. 434
Cardona agreed: Richard Robinson, interview by PD, January 19, 2009.
“William S. Lerach, formerly a name partner”: U.S. Attorney’s Office Press Release No. 07–114, September 18, 2007.
Gleeful voices: Jeff Nash and Carleen Hawn, “Legal Eagle Grounded by His Own Kickback Schemes,” Financial Week, September 24, 2007.
“For the past two decades”: Chris O’Brien, “Pioneering Class-Action Suits Leave Lasting Impact on Silicon Valley,” San Jose Mercury News, September 19, 2007. 435
“He’s obviously had”: Ibid. 435
“Bill, are any”: William S. Lerach, interview by PD, April 16, 2008.
prosecutors informed Brafman: Peter Elkind, “Mel Weiss Is Sinking His Firm,” Fortune Legal Pad, September 24, 2007.
Schulman agreed to testify: Douglas Axel, interview by PD, January 13, 2009. 436
the complaint outlined: “Top Class Action Lawyer Indicted: Melvyn Weiss Charged in Long-Running Federal Probe Against Law Firm That Sued Companies,” CNN/Money, September 20, 2007. 436
Urgent phone calls: Patrick Coughlin, interview by PD, February 2, 2009.
motion to distribute $7.2 billion: In re: Enron Litigation, U.S. District Court, Southern District of Texas, Houston Division, Helen Hodges, Declaration in Support of Lead Counsel’s Motion for Attorney’s Fees.
On the main floor: Details of Lerach’s home office and his reaction to Stoneridge decision observed by PD, January 15, 2008.
some curious developments: Kara Scannell, “Big Money Battle Pits Business vs. Trial Bar,” Wall Street Journal, October 9, 2008.
both justices owned somewhere: Tony Mauro, “Issue of ‘Strategic Recusals’ Arises in Key Supreme Court Case,” Legal Times, August 20, 2007.
Roberts had reentered: Tony Mauro, “Chief Justice Back in the Stoneridge Case,” Law.com, September 21, 2007.
“Absolutely ridiculous”: PD, observations, January 15, 2008.
the ultimate payout: William S. Lerach, interview by PD, January 15, 2008.
petitioned to have Kennedy removed: SCR Code of Judicial Conduct Chapter 60.01, governing recusals: “Member of the judge’s family” means the judge’s spouse, child, grandchild, parent, grandparent and any other relative or person with whom the judge maintains a close familial relationship.
“Most of them”: William S. Lerach, interview by PD, January 12, 2008.
more than 150 reference letters: Letters to the Court, Sentencing Memo to U.S. District Court Judge John Walter, Central District of California, case no. CR 07-00964-JFW.
“competing interests”: Robert Monks and Nell Minow, Watching the Watchers (New York: John Wiley, 1996), p. 36.
“One thing I might suggest”: PD, observations, January 15, 2008. 444
Friends joined him: PD, observation of details of gathering at the Beverly Wilshire Hotel, February 10, 2008.
There was resilience in his voice: PD, observation of details of gathering at Ivy Hotel in San Diego, November 16, 2008.
even as limos were dropping off guests: Frank Cucinotta, interview by PD, February 11, 2008.
“You should probably”: PD, observation of Lerach meeting with defense lawyers in Los Angeles, February 11, 2008. 4
45
“The judge will take this deal”: Ibid.
Gravely, Lerach mounted the steps: PD, observation of sentencing hearing for William S. Lerach, February 11, 2008.
Judge Walter took the bench: United States v. William S. Lerach, reporter’s transcript of sentencing hearing, February 11, 2008.
“It’s the judgment of the court”: PD, observation of sentencing hearing for William S. Lerach, February 11, 2008.
The celebration was subdued: Robert McGahan, interview by PD, February 22, 2009.
EPILOGUE
“You are about to read”: Bill Lerach, “I Am Guilty,” Portfolio, July 2008.
Sean Coffey, along with his senior partner: Brian Grow, “The Kings of Class Actions,” Business Week, May 16, 2005.
“It is bad enough”: Joe Nocera, “Serving Time, But Lacking Remorse,” New York Times, June 7, 2008.
“The risk-reward ratio”: William S. Lerach, “How Tort Reform Paved the Way for the Financial Meltdown,” Executive Council, February/March 2009.
“Simply put, the behavior”: William S. Lerach, “The Chickens Have Come Home to Roost,” Milberg Weiss, Hynes & Lerach internal document, 2002.
“Nothing makes lawyers”: Quoted in Jonathan D. Glater, “Financial Crisis Provides Fertile Ground for Boom in Lawsuits,” New York Times, October 17, 2008.
“Some people look at sub-prime lending”: Quoted in Eric Lipton and Stephen Labaton, “The Reckoning: Deregulator Looks Back, Unswayed,” New York Times, November 16, 2008.
“systematically trying”: Josh Meyer, “FBI Can Focus Only on Biggest Cases of Financial Bailout Fraud, Official Tells Senate Panel,” Los Angeles Times, February 12, 2009.
“We may not be perfect”: William Greider, “Is This America’s Top Corporate Crime Fighter?” Nation, July 18, 2002.
“It’s no small irony”: Stephanie Mencimer, “The Fall of a Corporate Crime Fighter,” Mother Jones, February 14, 2008.
Copyright © 2010 by Carl Cannon and Patrick Dillon
All rights reserved.
Published in the United States by Broadway Books, an imprint of the Crown Publishing Group, a division of Random House, Inc., New York.
www.crownpublishing.com
Circle of Greed Page 59