Recently in Securities Litigation Category

Disgraced securities fraud trial lawyer Bill Lerach thought he had a great idea. Teach a class at UC Irvine's law school called "Regulation of Free Market Capitalism -- Are We Failing," and burn off some of the community service time that went along with his two-year prison sentence.

As Paul McCartney once said, the judge did not agree and he told him so.

In fact, according to Law.com, U.S. District Judge John Walter in Los Angeles devoted several minutes during a hearing Monday reciting public statements in which Lerach appeared to display a lack of remorse for his crime. As a result, Walter said, the only message Lerach could offer students was this: "Don't get caught."

Walter oversaw the criminal case that federal prosecutors brought against Lerach's former law firm, now called Milberg LLP, and several former partners involving kickbacks to lead plaintiffs. Lerach pleaded guilty to one count of conspiracy. Walter sentenced him to two years in federal prison, a $250,000 fine and 1,000 hours of community service. Lerach completed his prison sentence earlier this year, paid his fine and another $7.75 million in forfeitures, and is in the process of finishing his community service.

...Walter then cited several recent newspaper articles in which Lerach appeared to indicate that he wouldn't have done anything differently, despite having served a prison sentence, and that the case was simply a "political prosecution."

Lerach "still denies that he did anything wrong," Walter said. "He misled and fooled the court into believing he had remorse at the time of his sentencing." Walter said that he now believes the sentence was "way too lenient" and regretted having accepted Lerach's plea deal.

You can read the entire article here. (sub req'd)

A recent report found that federal securities class action activity has fallen to the lowest semiannual level since the first half of 2007. But there's a good reason, said the author of the report.

"The securities fraud litigation wave stimulated by the credit crisis now appears to be history. We have an inventory of cases waiting to be dismissed, settled, or tried, but to borrow a phrase from the current Gulf oil spill crisis, it seems that this flow has largely been capped," said Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse.

You can read more about the report's findings here.

There's a great piece today from Bloomberg on how the four disgraced securities lawyers from Milberg Weiss are adjusting to life after prison. Needless to say, with the money the four pocketed during their years of raiding corporate America over fluctuations in stock prices, they're doing a lot better than most of us.

Melvyn Weiss reports that he's "enjoying my freedom" and playing lots of golf in Florida. Bill Lerach is enjoying a ski vacation in Steamboat Springs, Colorado, and is planning future trips to go trout fishing in Alaska and exploring his roots in Bavaria. David Bershad is enjoying life in suburban New Jersey.

The fourth convicted trial lawyer, David Schulman, refused to comment.

Prosecutors said the men, who industrialized the filing of securities fraud class actions, secretly paid clients to pursue such cases, bringing the firm $251 million in attorney fees from 1979 to 2005. All four pleaded guilty. Their old firm, now Milberg LLP, agreed to pay $75 million to end the case.

You can read the full article here, and an account from the WSJ Law Blog here.

Is the era of securities class-action lawsuits coming to an end? According to a study issued by Stanford Law School and Cornerstone Research, securities-fraud class-action suits fell 24% in 2009 as litigation related to the credit crunch began to dry up.

"That pig has moved through the python," Stanford Law School Professor Joseph Grundfest told Bloomberg. "All of the major cases that were profitable have already been filed. The pool is in effect fished out."

The number of companies sued on stock-fraud claims dropped to 169 from 223 in 2008, compared with an annual average of 197 cases over the previous decade, according to The Wall Street Journal Law Blog.

The study also found there was a longer delay from the time of the fraud, as alleged in complaints, to the filing of suits. More than 60% of claims with such a time-lag of more than six months were filed by Bill Lerach's former firm, Coughlin Stoia, according to the study.

Lerach was sentenced to a two-year term in prison in 2008 for his role in an alleged scheme to pay kickbacks to clients who agreed to take the lead in securities fraud litigation. He was released into a halfway house in Southern California a full six months before his release date.

The American Lawyer's Brian Baxter noted several other tidbits from the Stanford report: only 53 securities class action filings in 2009 involved the subprime/liquidity crisis, a sharp drop from the 100 such suits filed in 2008; the percentage of filings against foreign issuers declined for the second straight year to 12.4%, compared to a high of 16.4% in 2007; and 4.6% of companies in the S&P 500 index were sued in a securities class action last year, compared with 9.2% in 2008.

The study can be found by clicking here.

"Let's be honest -- fish gotta swim, birds gotta fly, and plaintiffs' lawyers make their living filing lawsuits," writes Kevin M. LaCroix on his web blog, The D&O Diary. "The very idea that the plaintiffs have run out of targets is a flawed conclusion built on a faulty premise."

LaCroix was referring to recent news reports showing that the number of securities class action lawsuits declined during the first half of 2009 compared both to last year and to historical norms. (See this National Law Journal story for more details.)

But, LaCroix notes, "it's not as if the plaintiffs' lawyers were idle - they were just otherwise occupied. ...The way I look at it, the plaintiffs' lawyers have not had a shortage of targets, they have just had a shortage of time. But evidence suggests that they are getting caught up and they are now getting around to working off the backlog that has been accumulating. The one thing I know for certain is that they will continue to file lawsuits. Consider how reliable the birds and fishes are, and I think you will see what I mean."

Big enough to derail a train. But too vague to keep a lawsuit on track. That's the story of the 400-page (not including exhibits), 1,000-paragraph (who counted them?) securities class action complaint dismissed by U.S. District Judge Marsha J. Pechman in the state of Washington.

In her May 15, mere 33-page opinion (posted on Michael J. Hassen's Class Action Defense Blog), Judge Pechman described the complaint as a "verbose and disordered pleading," and wrote that, "Remarkably, Plaintiffs make no effort to connect a particular statement made by any defendant with allegations as to why that statement was false or misleading." The opus, in her words, "never offers a cohesive presentation of the required elements for securities fraud."

The case is In re Washington Mutual, Inc. Securities, Derivative & ERISA Litig., ___ F.Supp.2d ___ (W.D. Wash. May 15, 2009) [Slip Opn., at 1-3, 5].