“Bill Lerach was no monster, but he had indeed gone after fraud by committing fraud.”
San Diego’s most famous — and most infamous — attorney, Bill Lerach, is raising eyebrows again. Lerach, the onetime “King of Torts,” was known and widely hated for scaring the wits out of corporate executives and sucking money out of companies that would rather settle with him than spend even more money fighting him in court. Companies capitulating to his charges said they were “Lerached,” and the word found its way into the American business lexicon.
But Lerach committed fraud to fight fraud, and he pleaded guilty to obstructing justice and making material false declarations under oath. He admitted to paying fat kickbacks to dubious professional plaintiffs to gain an advantage in his multiple class-action suits.
Throughout his San Diego career, I agreed with Lerach on many points of smelly accounting and greed-sated corporate governance. But I thought many of his lawsuits were nothing more than blatant shakedowns.
He went to prison for a bit less than two years — a spell in which law enforcement became even more suspicious about his character. While he was serving time, his lawyer tried to get him committed to a residential drug-abuse treatment program. “Lerach has suffered for years with severe alcoholism and faces the substantial possibility of relapse without the treatment offered,” wrote the lawyer.
Then Lerach offered a prison guard his tickets to a Chargers game, and as a result spent two months in a small cell, stripped of many privileges, for making a material offer to an officer of the United States Bureau of Prisons.
When he emerged from prison in 2010, he attacked the United States justice and prison systems, saying his crime was in a “gray area” and kickbacks to plaintiffs were “industry practice.” He then said that in 2007, when his firm had been indicted, he had been about to go after then–vice president Dick Cheney and the company he headed — suggesting that the Justice Department, then in Republican hands, pursued him because he was a prominent Democrat.
Such statements enraged the judge who had sentenced him to two years plus a $7.5 million payment. The judge said Lerach had fooled the court by claiming he had remorse. The sentence was “way too lenient,” said the judge.
Because Lerach won enormous sums for cuckolded investors in his lawsuits (taking 30 percent or more for himself and his firms), he is now worth an estimated $700 million. He and his fourth wife, Michelle Ciccarelli Lerach, live on La Jolla Farms Road, on a six-acre estate that’s decorated with artwork worth millions of dollars. According to Zillow, the cliffside home has six bedrooms and 12 baths and is worth $32.4 million.
Michelle Ciccarelli Lerach is a graduate of the University of Kentucky College of Law, clerked for a Kentucky appellate court judge, and worked for law firms in Lexington and Louisville. She came to California in 1999 and practiced law with Bill Lerach’s former firm, working on Lerach’s team that recovered more than $7 billion for investors in the massive Enron fraud.
She has now formed a law firm, named with her own initials, MCL Law Group of La Jolla, specializing in “complex and class-action litigations [covering] fraudulent business practices, human rights abuses, and labor and employment violation” — just what she did when working for her husband’s now-defunct law firm.
Bill Lerach, meanwhile, has come out of retirement to form a La Jolla–based firm, Pensions Forensics, which says it “provides investigative expertise and economic analysis and consulting services to determine the source and nature of pension fund financial and actuarial problems, including funding shortfalls, investment losses and fiduciary mismanagement.” The last words of the firm’s promotion document are “Mr. Lerach was disbarred several years ago and no longer practices law.”
Lo and behold, according to Bloomberg.com, MCL Law Group and Pensions Forensics, Mrs. and Mr. Lerach, are now working together on a Kentucky case. She and some other plaintiff lawyers have accused two of Wall Street’s richest and most powerful institutions, KKR & Co. and Blackstone Group, of putting the Kentucky Retirement Systems’ pension plan into some hedge funds that are underperforming. Bill Lerach’s Pensions Forensics is the consultant for Michelle Ciccarelli Lerach and her fellow plaintiffs attorneys.
To those who have followed Bill Lerach’s career, including his time in prison and his admission to making false declarations under oath, the question arises: is he actually practicing law, defying his disbarment?
I asked an official of the California State Bar. “The state bar has no regulatory power over this guy. I can’t verify that there are any pending complaints against this gentleman. The state bar does not comment on potential cases,” says the official.
In 2010, authors Patrick Dillon and Carl Cannon, formerly of the Union-Tribune, wrote a comprehensive book, Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees. It was more laudatory than a book I would have written, but it was tough and balanced, concluding, “Bill Lerach was no monster, but he had indeed gone after fraud by committing fraud.”
Originally Dillon and Lerach were writing a book together. Then, when the criminal charges came, Dillon recruited Cannon to help him finish the book. Lerach appeared with Dillon at book signings, causing some to cock an eyebrow at the togetherness.
I contacted Dillon, who is now making wine in Sonoma County. “Based on what I know, Bill would not be doing anything that would arouse suspicion,” he says. “Bill is too smart. Once burned, he wouldn’t risk anything now.”
Matt Anderson, senior vice president, global public affairs, for Blackstone, wouldn’t comment on the Lerach-Lerach hookup but says the suit’s “claims are baseless.” The hedge funds that were recommended are outperforming peers, he says.
I explained a hypothetical situation, not identifying the Lerachs, to Bob Fellmeth, University of San Diego professor who specializes in ethics. “Is this a law practice or not? It is a tricky situation,” he says, particularly since the married couple could inadvertently discuss legal aspects of the case at home. Fellmeth thinks the pension consultant should get a third-party expert to give him advice on whether he is crossing the line into the practice of law. “He is okay if he is not practicing law,” says Fellmeth.
I made multiple calls and sent emails to both Lerachs (who have different phone numbers and email addresses) and got no responses.