Pitt alum predicts more corporate scandals to come

Attorney William Lerach warned audiences about huge, impending corporate scandals the last… Attorney William Lerach warned audiences about huge, impending corporate scandals the last time he was in Pittsburgh. That was three years ago – before the Enron fiasco.

When he spoke Downtown again last week, the Pitt law school graduate predicted corporate America will soon “erupt into an even greater corporate scandal than we have today.”

Lerach has devoted his career to helping prevent such scandal. Lerach’s brother introduced him as “the nation’s leading security class action lawyer,” and said Lerach has collected over $30 billion in recoveries.

Lerach, also the keynote speaker at Pitt law school’s graduation ceremony on Saturday, addressed a group comprised mainly of Pittsburgh lawyers on Friday. The audience enthusiastically applauded Lerach’s former corporate law professor at Pitt, after Lerach pointed him out in the audience.Lerach is currently working in California on cases against Enron and AOL Time Warner.

According to Lerach, prosecuting corporate crime and using litigation to recover losses are the most important ways to prevent further corporate corruption and restore investors’ trust.

“I think what will change things is a couple of these guys going to jail for 10 to 15 years. Maybe that will create some fear,” Lerach said.

He added that many stockholders are forming class actions suits against corporations they believe exploited them.

Lerach does not hope for much useful legislative reform any time soon because “corporate interests are too strong.” He dismissed the recent legislative efforts to curb corruption as being too weak.

In fact, Lerach believes the legislative efforts of the 1990s largely enabled the corporate scandals. Lerach attributed the Republican-supported 1995 Securities Act to a “tsunami of corporate lobbying.”

According to Lerach, the goal of the 1995 Securities Act was to reverse many of the corporate restrictions passed after the stock market crash of 1929 that spawned the Great Depression.

After the crash, Congress exposed many false accounting practices and passed the Securities Act of 1933, intended to prevent further corruption. It required truthful reporting and prohibited insider trading.

Lerach said that, because the reforms following the 1929 crash restored trust, the “investing money came back out from under the mattress.”

Many of the laws passed under the 1995 Securities Act, however, relaxed corporate liability toward investors. For example, corporations were no longer responsible for false projections that might unjustifiably encourage investors.

Lerach testified before Congress in 1995, giving warning about the bill. It was, nevertheless, passed after former President Bill Clinton’s veto was overridden by a margin of one vote.

The 1995 Act led directly to the recent scandals, according to Lerach. He cited, as an example, the inside trading that led Enron insiders to sell $1.2 billion of stock shortly before the company collapsed.

“Most of the reported earnings of the last five years were nothing more than illusions,” he said.

“When crime pays, you get crime,” he added.

Lerach received a standing ovation after his lecture, and fellow lawyer Denis Unkovic described the speech as “breathtaking.”

Unkovic, whose mother lost money in her pension plan because of corporate fraud, described Lerach as “one of the true visionaries … who sees society for what it ought to be.”