Charles La Bella honored by trial lawyers

San Diego attorney Charles “Chuck” La Bella has become a fellow of the American Colllege of Trial Lawyers, which only admits one percent of the total lawyer population in a state or province. According to a press release, members are admitted “by invitation only and only after careful investigation.” (Italics mine.)

When John Moores was trying to get San Diego taxpayers to subsidize his Padres stadium, he was caught showering gifts on Valerie Stallings, a councilmember. Among the gifts, Moores cut her in on a hot stock and told her when to sell it (near the peak.) La Bella was Moores’s lawyer, and got his client off completely. Stallings got a wrist slap that was later expunged.

Moores was the long-time chairman of Peregrine Systems, which in the early part of this century became the biggest corporate fraud in San Diego’s history. Moores, long-time chairman of the company who had recruited many of its top officials, dumped $650 million worth of Peregrine stock, almost all he controlled, in the life of the company, and $487 million during the fraud period. (He had paid 33 to 59 cents for each share he had.) As the company was collapsing, Moores suggested that Peregrine should bring in his personal attorney, La Bella. It happened.

Peregrine was basically an accounting fraud. Civil suits clearly showed that board members, including Moores, knew of accounting irregularities. As it turned out, sales had been inflated through various ruses by half a billion dollars from 1999 through early 2002. The Board of Directors, published by The New York Times, declares, “When sales figures are inflated, the board has ultimate responsibility.” That goes for profits, too, and Peregrine’s earnings were also grossly inflated. The board of directors is responsible for corporate accounting. That’s well established. But during the fall, with La Bella heading the legal work, Peregrine sued its accounting firm, claiming, “Peregrine’s board of directors and audit committee were completely unaware (italics mine) of the accounting irregularities.”

I asked La Bella about that at the time. After some prodding, he finally condeded, “The board does have responsibility. The audit committee does have responsibility.”

In 2005, a new Peregrine chief executive told the New York Times, “When I joined the company there was no accounting system.” The reporter was incredulous. The executive explained, “The company was organized in a very complex labyrinth of international subsidiaries…organized clearly to to optimize the tax issues for the company.” Five of those so-called foreign operations were in the tax havens of Barbados, the Cayman Islands, and Switzerland.

But La Bella quarterbacked a study by the law firm of Latham & Watkins that exonerated the Peregrine board. It was denounced as a whitewash by creditors and stockholders. As Peregrine executives who had sold small amounts of stock were sentenced to prison, a judge would not permit defense lawyers to bring up Moores’s half-billion-dollar windfall in court. In the end, board members collectively only paid $55 million — a drop in the bucket.

The Securities and Exchange Commission lawyer in charge of the Peregrine case embraced the Latham & Watkins study. Not long after that, this government lawyer took a high-paying job with…you guessed it…Latham & Watkins.

And that brings us to another question about La Bella: the revolving door. Investigative reporters have long questioned this practice: lawyers go to work for a government agency, and learn the tricks of the trade. Then they take a job with a white shoes law firm for a salary of about $2 million a year. La Bella started out in the U.S. Attorney’s office (eventually heading the San Diego office), then went into private practice and took on the lucrative John Moores account, then went back with the government, and is now back in private practice in San Diego.

I asked San Bernardino’s Robert Warford, the trial lawyers' regent from Southern California, about La Bella. Warford explained that any candidate is assessed by numerous other lawyers — opposing lawyers, judges, those who have worked with him. La Bella got a supermajority of the voters. “A lawyer is ethically bound to give clients ethical representation,” says Warford, noting that Johnnie Cochran, who represented O.J. Simpson in the murder case, was a member of the college.