Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘securities litigation’

Bernard Madoff and Milberg Weiss, cont’d

A week ago I briefly noted that now-imprisoned securities class action king Mel Weiss appeared on the list of Bernard Madoff victims (163-pp. PDF courtesy WSJ, via Christopher Fountain) and observed how ironic it seemed that someone who made great claims to expertise in sniffing out stock fraud should have been taken in by it.

According to correspondence from New York securities lawyer (and longtime Weiss critic) Howard Sirota, however, there might be to the story than that:

I wouldn’t be so quick to jump to the conclusion that Mel Weiss [fouled] up investing with Madoff.

Weiss’ wife and son Stephen A. Weiss invested with Madoff, as did [Milberg Weiss partners] David Bershad and Pat Hynes.

In addition, convicted serial Milberg plaintiff Howard Vogel invested with Madoff.

Buchbinder Tunick, Milberg’s accountants and ironically Milberg’s principal forensic accounting experts, appear on the list, although the entries may be clients of the Buchbinder firm.

Class action firms Wolf Popper and Wolf Haldenstein also appear.

Sirota believes that other persons and entities on the Madoff victims list have also served as lead plaintiffs in securities litigation or as plaintiffs in other litigation handled by class-action firms. All of which could be mere coincidence, or could suggest that either Madoff himself or others in his circle might have played some role in funneling lead plaintiffs to the class-action bar. (Particularly in the “race to the courthouse” era that preceded the Private Securities Litigation Reform Act, having a stable of cooperative repeat plaintiffs was vital to the success of many plaintiff’s firms.)

One way to check this thesis, Sirota suggests, would be to check the names on the Madoff victims list against those on the list of plaintiffs maintained by the Stanford Law School securities class action clearinghouse to see whether there are any other noteworthy matches and if so whether they follow any particular pattern. He also asks whether some of the law firms that have been organizing task forces to recruit and represent plaintiffs in the Madoff scandals — they include the Milberg firm and Wolf Haldenstein — have adequately disclosed to potential clients in their literature that their firms’ own names figure on the Madoff victims list. More: Gary Weiss, Larry Ribstein.

Further: Yet more views. And in comments, a visitor says Wolf Haldenstein is on the list because clients of the firm invested with Madoff, not because the firm itself did.

Filed under: , , , , ,

“Judge Slashes Attorney Fees in GM Stock Settlement”

Hey, we took a risk suing the ailing auto giant on behalf of its investors, say the entrepreneurial lawyers. The company might have gone bust while our suit was pending, and then where would our payday have come from? But a judge cut the fees from a requested $60 million to a mere $45 million. “That adds up to a rate of $1,825 per hour, said U.S. District Judge Gerald Rosen for the Eastern District of Michigan,” notes AP. At least they’re not overpaid executives.

Filed under: ,

Grim portent on Madoff clawbacks

In the Bayou case, the most notable recent case of massive investment fraud, lawyers had some success going after investors who’d pulled money out of the fund before its collapse — but according to Bloomberg News, quoting investor lawyer Carole Neville, $20 million of the $33 million they recovered went to pay legal fees. The piece quotes law professor Lynn LoPucki, now of Harvard, being scathing on the subject: “Bankruptcy trustees ‘spend huge amounts of money trying to get money from some investors and give it back to other investors,’ LoPucki said. ‘The incentive of the trustee and the lawyers is to churn, to bring lots of cases, spend lots of time and charge lots of fees.'”

Filed under: ,

Securities law webcast tomorrow

Has there been a more dramatic year than 2008 in the securities-law world since the 1930s? I’ll be among the participants tomorrow (Tuesday) afternoon at 2 p.m. Eastern in the first of an ongoing series of webcasts on a new “Securities Litigation and Enforcement Channel” being launched by prominent securities-law blogger Bruce Carton. It’s free, but registration is required: details here. I’ll be the relative amateur, with the other seats at the table held by some very highly qualified observers of the securities law scene: Lyle Roberts (The 10b-5 Daily), Kevin LaCroix (D&O Diary), Francine McKenna (re: The Auditors), and Thomas Gorman (SEC Actions), as well as Carton (cross-posted and updated from Point of Law, where I do most of my blogging on the subject).

Filed under:

It’s 8:00 pm, But The Sun Hasn’t Risen

Reuters:  No deluge of lawsuits – yet- in Madoff case.  Reuters is surprised that an army of plaintiffs hasn’t sprung from the ground to destroy whatever is left of Madoff Securities and anything else in its vicinity.  Reuters reports this as though it’s news.

This story is a classic example of why journalists shouldn’t report on serious legal matters without some training, perhaps to 2L, or at least long experience as a crime beat reporter.  Of course Madoff hasn’t been sued.  Most of the likely law firms that could sue it are wondering whether they’re potential defendants, or which of the potential defendants they already represent.

Madoff was a heavily capitalized hedge fund with sophisticated investors, perhaps fifty billion dollars worth of investors.  Each and every one of those sophisticated investors had, or has, heavy legal talent among the New York, Chicago, London, and Los Angeles bigfoot law firms that would be best qualified to bring a suit against Madoff, its auditors or accountants, and the brokers who steered business its way.  The investors themselves, and the auditors, accountants, and brokers, who were generally investing other people’s money, are looking at their lawyers asking, “How did I let myself do this?”  For that matter, some of the law firms are looking at themselves and asking, “Why did I let my client do this?”  Or they’re reaching out to their banking and hedge fund clients and asking, “Wouldn’t you like to know that you’re not responsible for doing this?  I can tell you why.”  Or they’re so conflicted among their various clients that they’re asking themselves, “What do we do?”

And then there are the insurers.  And the reinsurers.  And their lawyers.  Finally, don’t forget that most of these firms have a few very sharp white collar criminal defense attorneys, who are also getting calls.  The white collar crime-only boutique firms will have a field day.

The conflict checking alone among the bigfirms probably isn’t finished.  As for firms specializing in class actions and securities litigation for plaintiffs, well, some of their best, such as Dreier and Associates and what’s left of Milberg Weiss, have been having troubles of their own.

The Madoff lawsuits will come, and the schadenfreude will flow.  As a wise man once said, “Patience, grasshopper.”

Filed under: , ,

Labaton Sucharow rebuffed again

“For the second time in less than a week, class action law firm Labaton Sucharow has been reprimanded for overreaching in its attempts to lead a major securities fraud action.” Having attained lead counsel status in one class action against American International Group, the firm sought to combine that case with others pending elsewhere that raised quite different claims against the much-sued insurer.

“As is readily apparent here, lead plaintiff’s Motion for Leave to Amend to add unrelated claims is a calculated attempt at judge shopping,” [Southern District of New York federal judge John] Sprizzo wrote. “It seems apparent that lead plaintiff is trying to usurp lead plaintiff status over claims which are properly in front of other judges.”

The decision came just three days after Southern District of New York Judge Jed S. Rakoff admonished Labaton Sucharow attorneys for perhaps not “fulfill[ing] their professional responsibilities” in their proposal of a co-lead plaintiff in In Re Monster Worldwide Securities Litigation, 07 Civ. 2237.

(Mark Fass, “Labaton’s Newest Bid to Lead Major Securities Fraud Action Rejected”, New York Law Journal, Jul. 22).

Filed under: , ,

Mere “pawn of counsel”

Class actions of the lawyers, by the lawyers, for the lawyers? To quote the Law.com summary: “A federal judge has rejected a proposed co-lead plaintiff for the Monster Worldwide securities fraud class action because the representative knew nothing about the case. Southern District of New York Judge Jed Rakoff had some pointed words for lead plaintiffs counsel Labaton Sucharow, saying the Steamship Trade Association International Longshoremen’s Pension Fund was ‘simply the willing pawn of counsel’ because it ‘has no interest in, genuine knowledge of, and/or meaningful involvement in this case.'” Judge Rakoff noted that pension fund co-chairman Horace Alston had represented himself under oath as the fund’s most knowledgeable person about the suit. “However, Mr. Alston then testified that he did not know the name of the stock at issue in this case, did not know the name of either individual defendant, did not know whether STA-ILA ever owned Monster stock, did not know if an amended complaint had been filed, did not know whether he had ever seen any complaint in the action,” leading Judge Rakoff to declare that he would “not be party to a sham.” (Mark Hamblett, “Lead Plaintiff Pick Rejected as Merely ‘Pawn of Counsel'”, New York Law Journal, Jul. 17).

Filed under: , , ,

Chicken-catchers and chicken-pluckers, international securities edition

Plaintiffs firm Berman DeValerio sued attorneys Eran and Susan Boltz Rubenstein, former Coughlin Stoia attorneys, for breach of contract; in their counterclaim, the Rubensteins claim they were hired on a contingent fee basis to wrangle international clients to serve as plaintiffs in securities class actions. Lyle Roberts has the details, and the complaint and counterclaim. Alas, the case settled before details of this interesting arrangement came to light in discovery or other court filings, and it is perhaps too much to ask for questions to be asked in the nonexistent Congressional investigation of the practices of the securities class action bar.

Filed under: , , ,