Circle of Greed

by Patrick Dillon

  Such thoughts would haunt him in the coming months as pressure began to mount internally and his law firm felt like a rubber band stretching to the breaking point. As he waited for it to snap, he also felt a tension inside his own gut: specifically, he wondered with trepidation what new developments were unfolding beyond his control regarding his onetime client—and now convicted felon—Dr. Steven G. Cooperman. For now his best move, his only move, was to continue to grow the firm, or at least his West Coast division of the firm, and keep it moving toward independence from New York. At the close of 1999, he managed two strategic personnel acquisitions for the San Diego office of Milberg, Weiss, Bershad, Hynes & Lerach.

  The first was Paul Howes, a U.S. Marine Corps veteran who had served in Vietnam, later enrolling at the University of New Mexico, where he graduated Phi Beta Kappa. While in school, he also played tympani for the New Mexico Symphony Orchestra. He then attended the University of Virginia Law School in Charlottesville, where he simultaneously earned a master’s in public administration. He signed on as a special assistant to William Webster, then director of the FBI, and later clerked for a federal appeals judge in the District of Columbia. Suddenly—precipitously, his friends said—he jumped into television broadcasting, working as a correspondent for ABC News’ Washington bureau. Then, just as abruptly, Howes returned to the law and law enforcement as an assistant U.S. attorney for the District of Columbia—“for dirty bathrooms, the lure of cops, junkies, whores and homicides,” he quipped.

  Perhaps owing to his time in front of a camera, Howes developed a strong reputation for his clear, coherent delivery before judges and juries. He remained in Washington for eleven years, prosecuting felonies ranging from drug rings to high-profile homicides. Eventually he became restless again. When a colleague mentioned an opening for an experienced trial attorney at an aggressive plaintiffs’ law firm in San Diego, a city he’d enjoyed while stationed there as a Marine, he interviewed for it. The firm was Milberg Weiss; the partner conducting the interview was Bill Lerach. Suitably impressed, Lerach quickly settled on Howes as his prized new hire. In short order, Howes would be headed for federal court in Houston to help lead the case of a generation.

  The other key acquisition, Byron Georgiou, had an equally eclectic résumé. A 1970 Stanford honors graduate with a degree in social thought and institutions, he seemed headed for a think tank, or perhaps field social work in some bucolic hamlet in rural California. For a while he combined both of those instincts. Georgiou had attended Stanford on an academic scholarship, and in an effort to extend a hand to those who grew up in circumstances even more modest than his own, he co-founded Mariposa School, an alternative elementary and middle school in remote Mendocino County, where he also taught seventh and eighth graders, many of them sons and daughters of farmworkers. After a year he enrolled at Harvard Law School, graduating with honors in 1974.

  After clerking for a federal judge in San Francisco, Georgiou served four years for the California Agricultural Labor Relations Board, prosecuting unfair labor practices and enforcing the collective bargaining rights of farmworkers. Later, he went to work on the staff of Governor Edmund G. “Jerry” Brown, Jr., as legal affairs secretary. Georgiou was responsible for advising Brown on issues relating to the state’s public employee unions. It was this experience that piqued Bill Lerach’s interest. Lerach was not only beefing up his stable of litigators, he was in need of a lawyer with credibility who could act as liaison with what he saw as the future of his law firm—institutional investors, particularly public pension plans and labor unions.

  Together these two attorneys would play major roles in the biggest, most prestigious, complex, and richest securities lawsuit ever litigated. Charles Keating and Lincoln Savings, with all its codefendants, had presented a formidable onion to peel. By comparison, Enron would be an eight-hundred-pound bulb.

  TWO WEEKS AFTER HIS CALL, Russell Gioiella delivered Steven Cooperman to the U.S. attorney’s offices on the eleventh floor of the federal courthouse in Los Angeles. The interaction between the taciturn prosecutor, Richard Robinson, and the flamboyant defendant who had come to cut a deal was, as could be expected, chilly and awkward. Cooperman opened by letting Robinson know how difficult the trip had been because of his heart condition and all the pressure he was feeling. Robinson, who was disinclined to believe much of what Cooperman said, was less unsympathetic than wary that Cooperman was dissembling even about his health.

  Then Cooperman gave him cause to be even more wary. “For more than ten years, I have been a paid class action plaintiff for the firm of Milberg Weiss Bershad Hynes and Lerach,” Cooperman blurted out. Robinson was unmoved. He only vaguely recognized the name of the firm. He did know that name plaintiffs were required to swear under oath that they were not receiving kickback payments nor expected to receive any. So was Cooperman admitting that he had committed perjury? That wouldn’t necessarily help his cause.

  Then Cooperman detailed the extent of his plaintiff-for-hire arrangement, hoping to impress Robinson with the amount of money he’d received (more than $6 million) and the number of cases in which he was a named plaintiff (more than seventy). By Cooperman’s estimates, Milberg Weiss had collected more than $250 million in fees from cases he’d participated in. The kickback scheme Cooperman identified involved lawyers who circumvented the law by acting as fronts by receiving so-called “referral fees” from the firm. One of Cooperman’s attorneys, Richard Purtich, who had represented him in his claims against the insurance companies in the art thefts, had received at least $3.5 million in three dozen checks over the years, he said. David Bershad, the Milberg Weiss managing partner in New York, signed the checks, he related. He’d been to Bershad’s office and seen where he kept the checks, in a locked credenza. He kept money there too, sometimes handing out cash. Another attorney received more than $2 million in referral fees that he then passed along, Cooperman continued. Robinson asked the name of the attorney. Cooperman hesitated and then said, “Jim Tierney.”

  Robinson was only half-surprised to hear the name of Cooperman’s art theft accomplice—the lawyer-turned-government-witness against his client. Was Cooperman now trying to drag his former partner in crime down with him? No, Cooperman assured Robinson, he was just trying to demonstrate how the conspiracy worked. Cooperman’s own brother-in-law, also an attorney, acted as a conduit. Milberg Weiss had paid him nearly $300,000 for consulting work, Cooperman explained, adding: “He never did any work for them.”

  Thinking ahead, the cautious Robinson contemplated the difficulty of making such allegations stick. Sitting at the table was a twisted, manipulative felon, not a good person to put in front of a jury. Besides, he’d have to demonstrate that the money paid to Cooperman rightfully belonged to other plaintiffs as part of their overall share in the class action. Then again, that was precisely the point. By siphoning off some of the share, Cooperman and his alleged co conspirators were committing fraud against the shareholders and the legal system.

  Sensing Robinson’s hesitation, Gioiella urged Cooperman to bolster his story. “I’m somewhat of a packrat,” he offered. He had kept every correspondence, bank record, invoice, canceled check, and memo of under-standing—and would make them available. One piece of correspondence, he said, detailed a direct payment from Mel Weiss. It involved an option to buy a painting. Weiss had given him a check for $175,000 for the option on that piece of art.

  His career as a paid plaintiff for Milberg Weiss had come to an end because of the art theft, Cooperman conceded. It had all begun with Bill Lerach, he explained, describing their first dinner at a West Los Angeles restaurant, and the terms of the deal they had struck. Lerach too had paid him directly, Cooperman asserted.* Robinson certainly knew that name. Bill Lerach was a big-fish plaintiffs’ lawyer, with a knack for publicity. Not wanting to transmit what he was thinking—that a case against William Lerach could be a very big one—Robinson struck the beginning of a bargain: Cooperman would have to surrender the evidence he cla
imed he possessed. He would also have to persuade others, including Tierney, to cooperate. He would have to make phone calls and let government investigators listen in and record the conversations. Finally, he would have to wear a wire and initiate face-to-face meetings with members of the law firm.

  Cooperman agreed, already knowing he was persona non grata at Milberg Weiss. In return, Robinson said, he would ask the judge to postpone Cooperman’s sentencing. If he did assist the government, and the prosecutors found his contributions credible and helpful, then there could be a discussion about reducing his sentence. But first Cooperman would have to demonstrate his worthiness. Cooperman turned to Gioiella, who appeared eager to close the deal. Then he reached out to shake the hand of Richard Robinson, the man who weeks before had presented enough evidence to put him in prison for the rest of his life.

  Returning to his office, Robinson began writing a memo to his boss, recounting the meeting. He’d need some backup before taking the case upstairs to George Cardona, chief of the criminal division, who might have to take it further, to John Gordon, the acting U.S. attorney, maybe all the way to Janet Reno, Clinton’s attorney general. A case such as this, if there were a widespread conspiracy, could put a considerable drain on the resources of the L.A. office. Also, Robinson had no inkling of which way the political winds might blow. He knew this much, however. He’d have to hit the databases searching for every Milberg Weiss class action lawsuit he could find, looking for serial plaintiffs. It would require a painstaking search, but if Cooperman was telling the truth, a pattern should reveal itself among the hundreds, maybe thousands, of plaintiffs. The government had the right man for the job. Robinson was known among his colleagues for being risk averse and methodical, sometimes to a fault.

  AT HIS FIVE-ACRE ESTATE at Oyster Bay, Long Island, Mel Weiss had no inkling what Cooperman was up to, but he had reasons to worry. Yes, the firm had earned a 30 percent profit increase over the three preceding years, immediately following the congressional passage of the bill meant to put him out of business. Yes, he still owned a vacation home in Boca Raton. Yes, he had earned more than $13 million the previous year—everyone in the world knew that now, because of the disclosures he had been forced to make in the Lexecon trial. Following the disclosures, the National Law Journal reported that Milberg Weiss had earned more then $650 million over the previous ten years. Yet Weiss felt that the seams at Milberg Weiss, the firm he had helped found, were fraying and widening. One of the secrets he and the others in the executive committee had kept so well—the payments to plaintiffs and reimbursement to themselves—was slowly revealing itself.

  There had been that scene during one of the executive retreats. When the customary business was settled—new partners named, profits split, big pending cases identified—it had come time to discuss the plaintiff payouts and partner reimbursement. He had politely excused Pat Hynes, Len Simon, and Alan Schulman, the newest member of the executive committee. But Schulman hadn’t gotten it. He demanded to be in on all decisions and hadn’t understood why this was an exception. Bill Lerach had had to take him out into the hall.

  “Listen, shit-for-brains,” Lerach said in words overheard by others. “You do not want to be part of this discussion.”

  Later, Schulman called Bershad to let him know what he suspected had transpired back in the room between Weiss, Bershad, Steve Schulman, and Lerach—and to register his displeasure. Bershad denied any impropriety and apologized, telling Schulman that leaving him out had been a mistake. Then he called Lerach, relating the distressing conversation. Lerach was vexed, telling Bershad he had mishandled the situation. Bershad had reported this to his boss, who saw the situation as another rift the firm did not need.

  There was also the matter of the plaintiffs themselves. For the most part Bershad had done a yeoman’s job keeping track, signing, and distributing the checks. But the Cooperman check-forging escapade had been a disaster, and it showed how vulnerable the firm was to being extorted. Not only that, Weiss himself had often had to help stock Bershad’s credenza with cash. To do so, he’d played to his strength, spending a weekend at Caesar’s in Atlantic City, purchasing $200,000 markers to use at the gaming tables—sometimes winning, sometimes losing—but always managing to skim enough off the top from himself so that he could launder $50,000 or $75,000 for the plaintiff funds.

  Still, things had gotten sloppy. A couple checks meant for Lazar had ended up in Cooperman’s account. Lazar, his first plaintiff, had pushed too hard at times. He had called Bershad, telling him his son Job needed $250,000 in emergency home repairs. Since Job’s stepbrother had been a plaintiff in a case against United Airlines, could they send him the money? Bershad had balked, saying that was not the routine. All money should go through Lazar’s intermediary attorney. It was all right, Lazar assured him; his son was also an attorney. Bershad sent the check, not knowing that Job Lazar was no longer practicing law.

  In different times, these might have been construed as small mistakes. But Cooperman was now in the clutches of federal prosecutors, which meant that the firm was at the mercy of Cooperman’s resolve. The only solace that Bill Lerach and Mel Weiss could take was in Cooperman’s own disrepute: he was hardly a credible witness and would have to be corroborated by others. Maybe it had been smart to appease Lazar by sending his son the money. On the other hand, where could the firm draw the line? As 1999 turned into 2000, the most feared law firm in America was experiencing internal dread even as Milberg, Weiss, Bershad, Hynes & Lerach was marching toward its greatest victory. At the dawn of a new millennium, the firm’s fortunes were hurtling into the future as if on the train tracks of two parallel universes: one of them involved a spectacular civil litigation in Texas, a case that few firms in the United States could even have attempted to pull off—none as skillfully as Milberg Weiss. The other was unfolding in the gritty criminal division of the Los Angeles federal court system.

  FOLLOWING THEIR INITIAL MEETING at the Los Angeles U.S. attorney’s office, Russell Gioiella and Steven Cooperman paid eight more visits to Richard Robinson. Cooperman carried documents to add to the dozens of boxes of evidence he had forwarded. They contained bank statements, telephone records, copies of faxes, canceled checks, and names of other witnesses, including his neighbors Ronald Fischman and Mel Kinder, whom he had persuaded to also become plaintiffs. Cooperman produced a litany of some fifty cases he had participated in as a paid plaintiff and furnished another list of two hundred target companies that he said the Milberg Weiss lawyers had considered ripe for suing.

  By this time Robinson had asked for help. He received it in the person of Michael Emmick, a thirty-eight-year-old graduate of UCLA Law School. Emmick had run the office’s thirty-member Public Corruption and Governmental Fraud unit. His latest assignment had been in Washington, D.C., as the principal deputy to independent counsel Kenneth W. Starr in the probe that had started as an investigation into Hillary and Bill Clinton’s actions as investors in a belly-up Arkansas development known as Whitewater. However, it ended up as a detailed investigation into the president’s sex life, particularly as it pertained to a White House intern named Monica Lewinsky. Although Ken Starr’s reputation suffered when a consensus developed that impeachment was a bridge too far, Emmick had been the prosecutor who actually dealt with Lewinsky personally. Now, back in Los Angeles, Emmick helped Robinson pore over the information Cooperman fed them. This time Emmick had a stronger set of facts, and a better witness to work with than he had in Washington. Like Robinson, he sensed that Cooperman’s story had the ring of truth.

  By the end of July 2000, Robinson and Emmick had persuaded their superiors that they were building the foundation of a potentially large case. Another investigator was assigned to the investigation. Her name was Catherine Budig, a former mail carrier. She had attended UCLA Law School at nights and after earning her degree became a postal inspector. “I just loved working with the Postal Service,” she explained. Budig began combing the evidence Cooperman provided, look
ing for signs of wire fraud and illegal interstate transfers of funds. What she found encouraged her two colleagues.

  With some trepidation, they filed motions to delay Cooperman’s sentencing while preparing separate papers petitioning the court for a reduced sentence—provided Cooperman continued cooperating. Adding to their growing confidence were fifteen storage boxes, now filled with contents including code names, handwriting samples, and abbreviations that Cooperman had decoded for them, including initials he could identify. The investigators contacted Purtich, his attorney, who not only verified that he had helped Cooperman secure the huge payout from the insurance companies for the “stolen” art but also that he had acted as an intermediary attorney for referral money forwarded to him from Milberg Weiss. Tierney too was cooperating fully, wanting to ensure he was not indicted in the kickback scheme.

  The pieces were falling into place. Still, Emmick and Robinson needed more witnesses. Both attorneys continued the tedious checking and crosschecking of Milberg Weiss cases, and as they did names kept repeating themselves. But at this point there was no way to be certain whose plaintiffs belonged to which firms—or just how wide the circle of culpability might be.

  IN HIS ANALYST REPORT on January 22, 2001, top Enron executive Jeffrey K. Skilling led off by announcing, “We had a strong quarter … Enron had just an outstanding year.” Skilling then detailed nothing short of excellent numbers, hitting all the benchmarks predetermined during rehearsal meetings. His report yielded the equivalent of applause from the analysts. “Strong buy,” said Credit Suisse First Boston, which increased its forecast for earnings per share for the next year. “Long-term buy,” added Merrill Lynch; and “buy” from JPMorgan, which told investors it expected the company to “maintain its sweet spot” of growth, predicting 15 to 20 percent increases over the next year.