— Because of his coarse and abrasive style, as well as the money he amassed chasing corporations, Lerach became the dartboard as Congress pursued 1995's Private Securities Litigation Reform Act. Krause remembers reading cartons of congressional testimony pointing to so-called abuses by Milberg Weiss and Lerach. The 1995 act "was a bill of attainder against Bill Lerach. He really pissed off too many people," a Silicon Valley lawyer told Fortune.

But Lerach and Milberg Weiss eventually prospered, because they had the manpower and reputation to get the large clients. "The so-called reform act was actually a wholesale assault on investor rights," says city attorney Mike Aguirre, who specialized in securities fraud before getting elected to his current post. "The attorneys alleged to have engaged in the worst abuses have prospered and grown wealthier after the reform act."

Ironies abound. Janine-Page points out that largely because of the 1995 reform act, John Moores, who sold off almost half a billion dollars' worth of Peregrine Systems stock during a period in which the books were cooked, has thus far flown under the regulators' radar. Moores is a friend of Lerach's. The act has permitted judges to let Moores and other purported outside directors skate in civil litigation, despite overwhelming evidence of negligence and insider trading.

However, the news may be improving. This spring, a superior court judge made an astonishing ruling that a case against former Peregrine directors would have to be tried under Delaware law because the corporation was based there. The plaintiffs filed a writ with the appellate court to reverse the decision. The California attorney general's office told the appellate panel that it strongly protested the judge's ruling. Recently, the appellate court ruled that the judge will have to show cause why she made the decision. It's a step in the right direction, although Aguirre says "we will need a miracle" to swing the nation back to the societal insight that engendered the tough antifraud securities laws that were enacted in the early 1930s.


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