Tuesday, February 12, 2008

"Gimme the sports section, cellmate"

According to a front-page story in today's Wall Street Journal, William Lerach is hoping that newspaper subscriptions will put him in a good bargaining position in prison.

Yesterday, Lerach, formerly a prominent class-action plaintiffs' attorney, who has pleaded guilty to rent-a-plaintiff accusations, received his sentence. He'll do two years in federal prison, pay $8 million, and accept disbarment.

Fortunately, he has been in the habit of reading up to six newspapers a day. He figures that'll help him get along. "A sports section is supposed to win you a lot of favors." Good luck with that.

It is amusing to me that the government stumbled into the case against Lerach and his former colleagues at Milberg Weiss in the course of pursuing a bit of insurance fraud involving two extremely valuable paintings -- a Monet and a Picasso, no less.

The works were: Monet's "The Customs Officer's Cabin at Pourville," from 1882, and Picasso's "Nude Before a Mirror," painted in 1932. They were both purchased by a fellow named Stephen Cooperman, then insured in 1991 for a total of $12.5 million. The following year he reported them stolen and made his insurance claim. This was suspicious from the get-go. The Cooperman home had a burglar alarm, which had not been set off by the alleged thief. There was no sign of break-in at all, other than the reportedly missing paintings. But the insurance company, after contesting the matter initially, settled in time. (I don't know off hand whether the amount of the settlement has ever been made public.)

Anyway, the paintings were found undamaged in a storage locker in a Cleveland suburb on Feb. 2, 1997. For the story of how that recovery came about, go here. The short version ... a Clevelander apparently had stored the paintings in the locker as a favor to his buddy, Cooperman. The insurance company took title to the paintings when they were found, and Cooperman now faced fraud charges.

Cooperman cut a deal for a lighter sentence by telling authorities that he had some (unrelated) dirt on Milberg Weiss. He had been a lead plaintiff of theirs in class-actions against corporations. They'd have him buy stock in a company that might be vulnerable to such a lawsuit. This is where the business sections of six daily newspapers might be helpful. Then, if the the stock price fell dramatically, Cooperman would serve as the lead plaintiff, allowing Milberg Weiss to win a "race to the courthouse" against other attorneys and their clients, and allowing it to be first in line for as lead counsel for the class. Cooperman would receive payment for his part in this, and that payment would in turn be very hush-hush, because the courts are rather vigilant about intra-class conflicts of interest.

So that's the want-of-a-horseshoe-nail type story that led to the fall of King Lerach.

Seek edification elsewhere.

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