This is extremely important. It is the tail end of the alledged Gradient/Rocker scheme. He will talk, now, about "all the people behind him."
Securities lawyer Lerach departs firm
LEAVES UNDER CLOUD; VALLEY SHEDS NO TEARS
By Troy Wolverton
Mercury News
San Jose Mercury News
Article Launched:06/01/2007 02:05:44 AM PDT
Don't be surprised in coming days if you hear Silicon Valley executives
breaking out into songs of joy.
The source of their likely merriment? Reports that securities attorney Bill
Lerach, 61, is leaving his San Diego firm.
Lerach is surely one of the most controversial figures in the valley for the
numerous securities lawsuits he's filed against technology firms. He was the
primary force behind California Proposition 211, a 1996 ballot initiative
that would have made it easier for shareholders to sue companies. It lost at
the polls. But technology leaders formed the industry group TechNet in the
1990s partially out of a sense that they needed to push back against Lerach.
"There will not be a lot of love lost in Silicon Valley for Bill Lerach,"
said Joseph Cotchett, whose Burlingame firm, Cotchett Pitre Simon &
McCarthy, is a rival of Lerach's.
Lerach's apparent departure comes as one of his former partners, who has
been indicted by federal prosecutors, has reportedly agreed to cooperate
with the government in a probe of kickbacks the firm allegedly made to
clients. Lerach's former firm, Milberg Weiss, and two of its partners have
been indicted in the investigation.
Lerach has long been a foil for valley companies, first as a partner with
Milberg Weiss, then after his departure to form his own San Diego-based
firm, Lerach Coughlin Stoia Geller Rudman & Robbins. His reputation was
built on his aggressive lawsuits charging stock manipulation.
Valley companies frequently found themselves in his cross hairs,
particularly during the technology boom in the 1990s and in the subsequent
bust earlier this decade.
"Clearly he sued a lot of us," said Floyd Kvamme, a partner emeritus at
venture capital firm Kleiner Perkins Caufield & Byers. Expressing a common
belief in the Valley, Kvamme, who was a founding director at TechNet, added,
"He didn't have shareholders in mind. He looked for settlements that
enriched the plaintiffs bar."
Lerach had a reputation for being quick to file lawsuits. Under the
securities laws in place prior to the mid-1990s, firms that filed a suit
first often became the lead plaintiffs in a case, thus earning the lion's
share of the fees.
But the practice, which Lerach was better at than most, drew the ire of
Valley companies in particular. As they were often competing in emerging
markets, those companies often saw their earnings and stock prices fluctuate
wildly.
"Anytime a company in the valley experienced a significant enough shortfall
in its stock price coupled with heavy trading volume, that was a recipe for
getting sued, regardless of what the underlying merits turned out to be,"
said Meredith Landy, an attorney in Menlo Park who heads O'Melveny & Myers'
litigation practice.
"Undoubtedly there's some Schadenfreude on behalf of many Silicon Valley
company officers and directors who have been sued," she added, using a
German word that means enjoyment of others people's misfortunes.
To be sure, Lerach's practices changed as the law changed. Securities law
reforms in the 1990s raised the bar for such lawsuits and gave precedence to
firms representing the biggest clients, not the first ones to file. Lerach's
response was to cultivate relationships with big institutional investors
such as pension funds.
That paid off after the stock market crash and the corporate scandals
earlier this decade, when Lerach led the charge on behalf of former Enron
shareholders, recovering some $7.3 billion from defendants such as Enron's
directors.
"Obviously his tactics are viewed by some as oppressive, but he's an
excellent lawyer and that's what people forget," Cotchett said.
And valley companies shouldn't celebrate his departure for too long, legal
experts say. Not only does his firm have plenty of capable lawyers, but so
do many other rival firms.
"It's easy for the valley to focus on Lerach, because he's so out front, but
there's a whole lot of other people behind (him)," said Dale Barnes Jr., an
attorney in San Francisco and co-chairman of Bingham McCutchen's securities
litigation practice.
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Staff Writers Scott Duke Harris and Nicole Wong contributed to this story.
Contact Troy Wolverton at (408) 920-5021 or
twolverton@mercurynews.com.
