A sense of redemption, even outright glee, surely abounds among lawyers who defend against shareholder suits and their corporate clients. Ticker tape parades dance in their heads; champagne corks pop in rhythmic chaos. Justice reigns.
Victory is theirs in the long, brutal war against two of the most aggressive, most hated, most admired and most successful securities plaintiffs' lawyers in the country, former partners Melvyn Weiss and William Lerach.
Lerach last week admitted he helped scheme to pay plaintiffs to sue and will head to prison for it. He had already left the firm he founded in San Diego when he split off from the Milberg Weiss firm in 2004.
Indicted on six criminal charges, Weiss says he is innocent and left the law firm he co-founded to seek exoneration.
The corporate defense bar, not to mention competitors in the plaintiffs' bar, have material to keep them gloating for years. It's plentiful in the multiple indictments and plea agreements in the case. Two other former named partners have also admitted guilt, as have others.
Some plaintiffs have admitted they looked specifically for companies that appeared headed for trouble and, instead of shorting the stock, bought it so they could lose money and then sue for securities fraud, according to the government's evidence.
The Milberg firm thus had plaintiffs ready and waiting so it could sue at the drop of a share price. By arriving first at the courthouse door, the firm could secure the spot as lead counsel, guaranteeing itself higher fees and control of the litigation.
All the better, their critics claim, to extort huge settlements regardless of the merits of their cases.
Certainly there were plenty of companies that deserved to be sued by the most aggressive lawyers around. I'm thinking Enron Corp., whose investors hired Lerach. With the company bankrupt, his firm wrung some $7 billion out of investment banks and lawyers accused of assisting in Enron's fraud.
"Yes, there was real fraud" committed by some of those sued by Weiss and Lerach, says Michael Perino, securities law professor at St. John's University in Jamaica, New York. "But there were a lot of other cases that were really, really questionable."
The government isn't attacking the merits of any of the cases. By attacking the lawyers methods, prosecutors show that some lawsuits were prompted not by the stink of fraud or the losses of ripped-off investors. They were driven by a sense that money could be had if the lawyers hurried, regardless of whether securities fraud had actually occurred.
From 1979 to 2005, the firm took in $251 million in fees from 225 lawsuits in which they paid plaintiffs, according to the Weiss indictment.
So successful was the firm, and so dubious its tactics, that business interests persuaded Congress to limit class-action securities suits in 1995. The law clearly made it illegal to hire so-called professional plaintiffs, limited the number of suits an individual could file and required more specific allegations of fraud in the first court filing.
Still, Milberg Weiss kept paying plaintiffs and kept lying about it, Lerach and others now admit. Even after they knew the feds were investigating, they kept at it.
You could argue, as Weiss surely will, that this is a crime without victims. The kickbacks, as prosecutors call them, came from attorneys' fees, not from money that should have gone to the other plaintiffs in the class action.
It's true the harm isn't quantifiable. The conduct merely debased the integrity of the legal system. The kickbacks created conflicts of interest, and the secrecy surrounding them prevented judges from accurately assessing the ability of plaintiffs to stand in for the entire class or the lawyers' right to become lead counsel, as the government says.
Lawyers lied and got their clients to, also, when they had to swear that there were no payments. Anytime you have a lawyer pulling cash from a safe to avoid a paper trail, or instructing a client to enlist another lawyer to act as a pass-through for the payment, you have a lawyer who knows he is lying, cheating, breaking the law.
But that isn't the only harm done by what happened here. These lawyers were the best in the business when it came to uncovering evidence that companies were deceiving their investors. When regulators were lax, when shareholders wanted to collect at least some pennies for the dollars they lost, these were the guys to see.
Now, through the conduct revealed in this case, those same lawyers have given comfort to powerful interests who have been saying for years that Weiss and Lerach were simply greedy, acting out of cynicism, not idealism.
It used to be easier to dismiss those accusations when they came from the very interests that lost whenever Milberg Weiss won. Now, not so much.
Those interests aren't resting.
"A couple of high-profile attorneys going to prison isn't going to fundamentally change some of the problems in the system," says Bryan Quigley, a spokesman for the U.S. Chamber of Commerce's Institute of Legal Reform.
The camber wants more restraints on litigation, and the revelations from the Milberg case will surely fuel the effort.
There are plenty of lawyers who don't cheat. But the fact that some of the best-known lawyers who sued cheating companies turned out to be cheaters themselves can only hurt the cause they used to advocate.
Woolner is a Bloomberg news columnist.