Fraud lawyer says deregulation fueled recession
When he spoke in Pittsburgh three years ago, William Lerach warned his audience of massive accounting irregularities lurking just beneath the surface of the nation's securities markets.
At the time, critics called him a crank. It was, after all, a time before the dot-com bubble burst and before companies like Enron and WorldCom became synonymous with scandal.
On Thursday, in Pittsburgh again, speaking to the Allegheny County Bar Association, Lerach outlined a pattern of government deregulation that fueled the current economic recession. The Pittsburgh native and University of Pittsburgh law school graduate is in town to give the commencement address at Pitt's law school graduation Saturday.
"Corporate treasuries were literally looted of billions of dollars in executive bonuses," Lerach said. "The truth is, we have witnessed the greatest upsurge of financial fraud since the 1920s."
Lerach, 56, has filed more than 600 class-action lawsuits during his legal career. He is so feared in corporate board rooms that "to be Lerached" is now Silicon Valley slang for being sued.
Now, when Lerach speaks, people are more apt to listen. Securities and Exchange Commission charges against Enron, WorldCom, Health South and Tyco are almost identical to charges Lerach made against the same companies in civil lawsuits in 1998 and 1999. Almost all of those civil lawsuits were dismissed by the various courts that heard them.
"They were all thrown out of court by the judges that heard them," Lerach said. "Such attitudes by the judges led to the recent upsurge in fraud."
Lerach said that beginning in the mid-1990s, a corporate-friendly Congress and judicial system began stripping away regulatory protections that dated back to the end of the Depression. A 1995 law in Congress was prompted by Lerach and attorneys like him, whom corporate CEOs accused of filing frivolous class-action lawsuits on behalf of shareholders.
"Say what you will about corporate executives. They're both smart and ruthless," he said. "The late 1990s encouraged securities fraud because it made it so hard for investors to hold corporations accountable."