The Real National Legal Scandal Buried in the Scruggs Saga Publicity

Once again Sam Friedman has written an excellent post to his blog on his observations about the insurance industry “trifecta” of losing their arch nemeses Elliot Spitzer, Dickie Scruggs and Melvyn Weiss in the space of a week. Though Cowboy won’t like this I’ve used one of his old labels for this post, “Crooks in Gucci Suits” because the shoe fits.

While Dickie Scruggs gained fame as the public face of the affiliated law group that took down big tobacco it was actually Ron Motley in South Carolina that was the heavy lifter in the group. It is easy to confuse being the public face for top dog but the associated PR from being the front man also put a big target on Mr. Scruggs, from lawyers here in Mississippi who envied his success to the business community who view trial lawyers in general as Satan incarnate. When I think about those at the pinnacle of their professions I am sometimes reminded of the famous John Lord Acton quote, “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” Of course my life experience differs from painting “great” men with such a broad stroke as few of us are truly bad, even fewer absolutely good. Most are a mix of good and bad, even Dickie Scruggs and Joey Langston. In Melvyn Weiss’s case being in the background meant the publicity with his guilty plea would not be as great.  However, his transgressions far exceed “corruptly influencing” a small time country judge from BF North Mississippi as we’ll soon see.

First we stop at the National Underwriter for their report by Dan Hayes on the real scandal which has corrupted the judicial system of this entire nation for 25 years:

Melvyn I. Weiss, the high-profile attorney who with his firm led giant class-actions against insurers and other corporations, has agreed to a $10 million fine and a sentence of up to 33 months for illegal activity in connection with hundreds of those class lawsuits.

U.S. Attorney Thomas P. O’Brien in Los Angeles noted that Mr. Weiss would become the fourth current or former partner of the law firm he co-founded 40 years ago to admit criminal conduct.

He said Mr. Weiss agreed to plead guilty to a federal racketeering charge, and acknowledge that he and others concealed secret payment arrangements that Milberg Weiss had with named plaintiffs in class-action lawsuits.

Former Milberg Weiss partners William S. Lerach, David J. Bershad and Steven G. Schulman have already pleaded guilty and admitted to a role in a scheme that Mr. O’Brien said paid “millions of dollars in secret kickbacks to several individuals in exchange for them serving as named plaintiffs in more than 225 class-action and shareholder derivative-action lawsuits that were filed across the United States.”

“This kickback scheme lasted for more than 25 years and had a severely detrimental effect on the administration of justice across the nation as lies were routinely made to judges,” Mr. O’Brien said. “The scheme was based in greed, and it affected the integrity of the courts and the interests of an untold number of absent class members.”

Milberg Weiss was just not any law firm either, it was one of this country’s largest class action-plaintiff law firms.  According to Wikipedia Milberg Weiss was “a leader in its field, responsible, at least in part, for over 50 percent of all securities class action cases settled in 2002.” For those with short memories 2002 was a banner year for such litigation in the aftermath of the stock market crash in 2000.

The smoke signals of wrongdoing from Milberg Weiss have been reported in the Wall Street Journal for years. The firm itself, now known as Milberg LLP, also remains under indictment for the same charges though it now claims to be run by lawyers with no connection to the current criminal charges.

This brings me back to Mr. Friedman’s blog entry on the subject and a point he makes most worthy of further discussion:

What gets me, however, is the deafening silence out of Washington.

When insurers step out of line–such as when bid-rigging and contingency fee abuse was exposed, or when thousands of policyholders were left bare after questionable Hurricane Katrina claims-handling–Congress rushed to probe the business, vowed to pass sweeping reforms and threatened to revoke the industry’s cherished federal antitrust exemption.

However, I don’t see Congress rushing to investigate the plaintiffs bar, despite the outrageous criminal behavior of two of the profession’s highest-profile litigators. As far as I understand the system, lawyers are state-licensed. Perhaps the Feds should take over! (Or shall we have an optional federal license for attorneys?)

I guess Congress is averting its gaze because just about all of our legislators are members of the bar themselves. Let he who is without sin cast the first stone, right?

I agree with Mr. Friedman that Congress needs to look at these problems but not just the plaintiffs bar. Tort reform and it’s impact on shutting out the least among us from the legal system also should be looked into, as does the use of the court system by monied interests to skirt their contractual obligations through the use of delay and disingenuous legal filings designed to flush out all but other monied interest from obtaining justice and their day in court. Ca$h is the root of all these problems, from a felon like Melvyn Weiss buying lead plaintiffs for his class action suits down to the widow lady in Picayune who lost her house because an insurer has decided to play hard ball on her husband’s life insurance policy simply because they could and had corporate lawyers on retainer more than happy to assist with institutionalized bad faith.

For those interested and with a subscription here is the link to yesterday’s Wall Street Journal report on the Weiss guilty plea.


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