Lerach and Weiss in trouble

It looks like Bershad’s turned, and so it may be fan-hitting time for Lerach and Weiss. Here’s the WSJ Law Blog, linking relevant docs, and an earlier post by Fortune's Roger Parloff.

Two quick comments. First, it’s interesting that the statement indicates the witness/plaintiff payments were disguised as referral fees (the plaintiffs went to intermediate firms, those firms referred to MW, MW paid a referral fee which was really a disguised fee to the plaintiffs).

Bruce Kobayashi and I discuss in The Hypocrisy of the Milberg Indictment the inconsistency in how the law treats various kinds of litigation payments, specifically payments to plaintiffs and witnesses on the one hand, and the government’s “payments” in the form of plea bargains on the other. Now add the further complication that it’s ok for referring law firms to get paid, but not plaintiffs.

I am definitely not defending any law-breaking that may have existed here (indeed, just the opposite - see below), just raising a policy question about what the law should be in the first instance. Bruce and I argue that the illegality of witness payments drives the conduct underground, making it more difficult to detect and regulate.

Second, if Lerach did what he’s being accused of, he's arguably a worse miscreant than many of the firms he’s sued for securities fraud over the years. Certainly worse than the peripheral actors in the Enron case Lerach's been trying to get the Court to hear. After all, this isn’t really about agency costs within his firm and those who allegedly aided and abetted it.  Lerach and Weiss are accused of trying to make their firm richer. This is about lying to the court. Strong liability, perhaps criminal liability, is arguably more necessary for this type of conduct because it's otherwise difficult to detect and discipline.

Comments

[Richard Painter]

Along the lines that Kobayashi and Ribstein argue more generally, it is ironic to have a legally "bought" witness now help convict his former law partners of illegally buying lead platiniff witnesses in securities fraud cases. The issue of jail time is still apparently up in the air. Will this turn on how effective a witness he is for the prosecution? Is Bershad being told that available accomodations at the Club Fed are either a single room for himself or a double for Lerach and Weiss, and that it is up to him to arrange the booking (no pun intended)?

Expert witnesses in civil ligigation get paid a fixed amount -- usually an hourly rate -- regardless of how effective their testimony is for the party that retains them (or at least they should be). A contingent fee for an expert witness would be unethical. Should testimony- contingent sentencing of prosecution witnesses be allowed?