Lerach's plea bargain

Per the WSJ, Lerach "agreed to forfeit $7.75 million to the government, to pay a $250,000 fine and to accept a sentence ranging from one to two years in federal prison." But he evidently did not agree to cooperate in the government's ongoing case against Schulman or possible case against Mel Weiss. See WSJ Law BLog and Bloomberg.

Why no cooperation deal? Maybe the government's been reading my and Kobayashi's article on the Milberg case. We note the "hypocrisy" of the government using "incentive 'payments' [i.e., a plea deal] to induce the cooperation of Howard Vogel in order to prosecute Milberg’s incentive payments to Vogel to be a lead plaintiff." This point would have been even more obvious –- to the public, the court approving the deal, and the jury hearing any case in which Lerach ultimately testifies -- if the government also offered a plea deal in exchange for cooperation to a main target of the investigation.

But it's still possible that the government made an implicit, non-disclosed deal with Lerach, as arguably happened with Fastow in the Enron case, as we discuss in the article. We might yet see Lerach testifying against his former colleagues, and we might also see him getting easy time or a lighter sentence.

As we point out in the article, the only reason for distinguishing government deals with witnesses and conduct like Lerach's is that the government discloses and gets court approval. Obviously that distinction is out the window when there's no full disclosure.

Now, there's no evidence that that's happening here. But I, for one, will be watching for further developments.

Comments

[M.D. Fatwa]

Unfortunately, I haven't had the chance to read your article yet, so maybe it's already addressed. But couldn't another difference be just a policy reason, that one is a criminal matter (with a higher proof threshold and a broader societal interest in deterring crime) and the other is not only a civil lawsuit, but a class-action with an already distorted incentive system in place?

[Larry E. Ribstein]

Wouldn't we want to be even more careful about witness incentives in a criminal matter, given the penalties? The higher proof threshold doesn't do much good if the government can "buy" the proof.