Circle of Greed

by Patrick Dillon

  Love of money is not a new sin—it’s identified in the Bible as a root cause of evil—but what happened to Bill Lerach and Mel Weiss was nearly existential. “He who does battle with monsters needs to watch out,” Friedrich Nietzsche warned in Beyond Good and Evil, “lest he become a monster himself.”

  Bill Lerach was no monster, but he had indeed gone after fraud by using fraud. And he had seen the corrupting power of wealth, somehow not imagining that the love of money could corrupt him as well.

  ON SATURDAY, JULY 5, Shannon Lerach entered the visitor center of the medium-security U.S. penitentiary at Lompoc, California, and signed the form declaring her intent to see prisoner number 46683–112, her father, Bill Lerach. She never made it past the metal detector. A week earlier, following a minor dustup with authorities, Lerach had been transferred from the minimum-security penitentiary he’d entered on May 19 into the more secure facility across the street. Both Shannon and Michelle, his wife, had looked in on him in the visitors’ room of his new surroundings and listened to his complaints: slow mail, no-show on his medical prescriptions, confiscated newspapers, an edgier, less hospitable atmosphere, but tolerable.

  On this day, however, Shannon was turned away altogether and forced to return to San Diego, a drive of more than four hours’ duration, without explanation. Eventually the story would seep out. Bill Lerach had engaged a guard in conversation about San Diego and their mutual interest in the San Diego Chargers NFL team. Lerach, intimating that white-collar crime does pay, allowed that he had been a longtime season ticket holder of very good seats. This got the guard’s attention and perhaps ignited his envy.

  The conversation went something like this. “Too bad I can’t use my tickets,” Lerach had said. The guard agreed, bummer, especially since the 2008 Chargers expected a mighty year. “Well,” Lerach apparently told his newfound friend, “if you ever want to see a game, let me know.”

  Little time passed before Lerach was summoned to a supervisor’s station and charged with “making a material offer to an officer of the United States Bureau of Prisons.” He was then moved to administrative confinement for a period, he was told, of thirty days. There would be no visitors, no exchange of mail, no newspapers, no outdoor exercise except for one hour a week. He would be confined to a small cell with a thick metal door and one tiny window. There he was flanked by opposing, riot-prone Latino gang members, who hurled insults and threats at each other nonstop. He was given a towel matching the size of a washcloth and no washcloth at all. His first change of underwear came at nearly the two-week mark, “when I smelled like a farm animal,” he would finally report in a letter, many days after his solitary confinement was long past due. His only consolation, he wrote: “I don’t have CNBC so I can’t watch my investments go to shit.”

  His “thirty-day” segregation lasted two months, until September 5, when he was loaded onto a bus and transferred to the low-security prison camp, a complex of short buildings surrounded by three rows of razor wire, crouched beneath desert mountains at Safford, Arizona, eighty-five miles northeast of Tucson. There he would contemplate and discuss America’s economic crisis, receive visitors, get several newspapers a day, give lawyerly advice, and pick up new acquaintances, ranging from white-collar criminals to drug smugglers, to a young man who had hacked Wal-Mart’s internal computers and was able to change the codes (reducing a $33.95 price to $3.30, for example) for online shopping. Among the more colorful inmates was a huge man covered head to toe with tattoos who passed his time crocheting blankets for other inmates and a Russian sea captain who said he believed he’d been transporting “coconuts” from Colombia to North America. The captain borrowed Lerach’s Wall Street Journal regularly to check the prices of foreign currency. “Some of those ‘coconuts’ must have gotten through,” Lerach mused. Another favorite was “Mr. Clark,” a highly respected octogenarian and formal postal worker who had gone on a murderous rampage, helping to give rise to the term “going postal.” In the macabre and utilitarian world behind bars, he was of course assigned to work in the prison post office, Lerach reported in letters to friends.

  In his new environment Lerach discovered a like-minded crew who shared his enmity for Wall Street bankers, at whom they would jeer when they appeared on CNBC defending their obscene pay packages. Likewise, he shared with most of the rest of the prison population satisfaction at the November election of Barack Obama, for whom, had he not been barred from voting, would have cast a vote.

  Lerach took particular pleasure in Obama’s victory over the Clintons, whom he’d helped financially and who’d turned on him, and then over John McCain, the candidate Lerach had once brought to his knees. On a personal note, Lerach managed to lose twenty pounds and, due to a lack of a barber, began slicking back his always unruly mop of hair, transforming him into what one of his visitors described as “the second coming of Gordon Gekko,” the character based on Ivan Boesky played by Michael Douglas in the movie Wall Street.

  DEBRA W. YANG RESIGNED as U.S. attorney for the Central District of California on November 11, 2006, lured to Gibson, Dunn & Crutcher by a hefty salary and a $1.5 million signing bonus. Yang’s move came less than one month before seven other U.S. attorneys were dismissed—and in the wake of White House counsel Harriet Miers raising the possibility to one pliant Justice Department political appointee of replacing Yang. Suspicion arose that White House political aides wanted to quash the investigation of corruption allegations into the activities of Representative Jerry Lewis, the fifteen-term Republican congressman from Southern California, who was being represented by Gibson Dunn. According to a 392-page 2008 Justice Department report into the firings, Miers’s motivations were less sinister—and more petty: Yang had declined a White House invitation to apply for an appointment to the Ninth Circuit.

  Her successor, George Cardona, left the post in the spring of 2008 following the sentencing of Bill Lerach. He teaches at UCLA Law School. Douglas Axel was promoted to head the major frauds section of the U.S. attorney’s office. Michael Emmick divides his time teaching at Loyola Law School in Los Angeles and Pepperdine Law School in Malibu. Jeffrey Isaacs is the chief assistant city attorney for Los Angeles and head of the three-hundred-attorney criminal branch. A week after Lerach’s sentencing Robert McGahan resigned as a government prosecutor to join the Los Angeles office of Goodwin Procter, to specialize in white-collar crime and government investigations. Postal inspector Jim Harbin announced his retirement, while his colleague Catherine Budig continued her work. Through mid-2009 she was on special assignment in Washington, D.C. Richard Robinson, who prosecuted the Milberg Weiss case from beginning to end, continued to prosecute white-collar crimes for the government.

  Virginia Curry, the FBI agent who helped crack the Cooperman art theft, thus launching the case against the lawyers of Milberg Weiss and their pay-to-play plaintiffs, retired from the FBI and went back to college, where she is studying to earn a master’s degree in art history at Southern Methodist University in Dallas.

  Sean Coffey, the litigator anointed as the next Bill Lerach, resigned from Bernstein Litowitz on October 16, 2009, to run for attorney general of New York.

  J. J. Little, who led authorities to the stolen Picasso and Monet, is again practicing law in Los Angeles. Pamela Davis, his former girlfriend, shown smiling and holding an empty picture frame on the cover of the February 1998 Cleveland magazine, alongside the headline “Raider of the Lost Art”—detailing how she helped authorities recover the stolen art treasures and stood to receive the $250,000 reward—married a Cleveland tax attorney. In December 2007 she was sentenced to 180 days in jail for intimidating a witness in a trial, during which she was accused of stalking and harassing neighbors and causing havoc in the neighborhood near the Cleveland Yacht Club. James Tierney, the Los Angeles attorney who stole the art and implicated his former client Steven Cooperman is living in Ireland on disability compensation.

  As for the art itself, underwriters Lloyds and Axa Nordstern sued Steven Coop
erman and his wife, Nancy, in California for $22 million, seeking to regain not only the $17 million they paid Cooperman for his fraudulent claim but also punitive damages, just as he had done to them. The court ruled against the plaintiffs, finding that the Coopermans lacked the means to repay the underwriters. The two art treasures themselves, once the subject of a conversation about shredding, were sold in 2002 at private auction. The identity of their purchasers and exact terms of the sales remain confidential, although the authors learned that the two pieces fetched a combined $6 million. No reward for their recovery was ever posted.

  ONCE A WEEK IN PRISON Bill Lerach would open an envelope or package, postmarked Los Angeles, with the name and address of his Coughlin Stoia partner Al Meyerhoff on the outside. The actual origin of the intellectual CARE package was Cedars-Sinai Medical Center, where “Big Al” lay dying. In the fall of 2007 Meyerhoff learned he had a rare blood disorder. In the fall of 2008 it turned into leukemia. His condition was terminal and he knew it, yet he continued to write Lerach, challenging, cajoling, and recommending new writers or works or political arguments to his law partner. Lerach looked forward to Meyerhoff’s incoming mail, which he always answered, scrawling equally challenging messages on his yellow legal pad. The two had become codependent.

  On December 21 Al Meyerhoff passed away at the age of sixty-one, leaving a daughter and his wife and prompting a large wake. The Times of both Los Angeles and New York eulogized him as a leading labor, civil rights, and environmental lawyer, citing his victories over garment retailers for their sweatshops in Saipan, for his challenge to a California law preventing illegal immigrant children from attending public school, and for his ongoing war against cancer-causing pesticides in the fields of America.

  A memorial was held in San Francisco on February 28, 2009, in the Town Hall of the Delancey Street Foundation the world-famous residential self-help organization for former substance abusers, ex-convicts, and homeless. Actor Mike Farrell emceed. Influential California congressman George Miller, Frances Beinecke, president of the Natural Resources Defense Council, and Carl Pope, executive director of the Sierra Club, all spoke. Bill Moyers offered a televised tribute. Bill Lerach wrote from prison to say, “It broke my heart that Al died when I was in jail—unable to be with him … We fought the good fight together trying to advance the progressive causes we both held dear. We traveled the world together—lots of Scotch and steaks—and endless hours of political talk—the very best of times. I loved him then. I love him now.”

  Perhaps the most moving tribute was provided by Patrick Coughlin, who spoke for all 190 of Meyerhoff’s law firm colleagues when he joked that often he, as managing partner, would be the last to know that Big Al had filed a costly case, almost always to right a social wrong, sometimes committing the firm to perform pro bono. In his short speech Coughlin focused this day on the high line of Meyerhoff’s accomplishments and the firm’s great cases—Lincoln, Enron, WorldCom, the Holocaust reparations, Big Tobacco—as well as those that were ongoing. The firm’s lawyers, Coughlin said at Meyerhoff’s memorial service, had dedicated themselves to fighting fraud, with, and now, without Bill Lerach, and remained very much in the fray.

  Left unsaid was a fascinating footnote. The partners missed Lerach; they also missed John Torkelsen. The firm had never quite found a suitable star witness to replace him, and such an expert was still needed. As a matter of practicality, they had found someone new, however. He was none other than Bill Lerach’s old nemesis, Daniel R. Fischel.

  On September 10, 2009, Bill Lerach was released from federal prison and began serving his remaining six-month sentence in a halfway house in a low-income, crime-ridden, predominantly Latino neighborhood in southeast San Diego known as Barrio Logan. Weekdays, he worked in a dry cleaning business, earning $10 an hour. Weekends, he was able to return to his La Jolla villa overlooking the ocean. Throughout the fall and winter, he watched America’s financial markets struggle to regain their lost value, continued to curse at unworldly compensation paid to banking executives while the nation’s unemployment rate headed to 10 percent, and entertained offers to teach at various universities. He also heard from commercial insurers eager for him to consult on their directors and owners coverage policies—to protect, in other words, the corporate moguls he once feasted upon.

  * The firm renamed itself Milberg LLP, its original title, after founder Lawrence Milberg, who passed away in 1989 at the age of seventy-six. Despite the stigma of the guilty plea and the enormous fine it paid the government, Milberg enjoyed an incongruous resurgence in early 2009, becoming the counsel of record for more former Bernie Mad-off clients than any other law firm.

  Notes

  PROLOGUE

  a ten-mile route: Details of Lerach’s travel from the Beverly Wilshire Hotel to the federal building and courthouse in Los Angeles are from PD’s personal observation, October 29, 2007.

  the knee-capper of corporate America: Peter Elkind and Doris Burke, “The King of Pain Is Hurting,” Fortune, September 4, 2000.

  the most aggressive legal strategist: See the Coughlin Stoia website, http://www.csgrr.com/.

  He often compared his firm: William S. Lerach, interviews by PD, October 15, 29, 2007; January 9–16, 2008.

  “bloodsucking scumbag”: Karen Donovan, “Bloodsucking Scumbag,” Wired, November 4, 1996.

  “Now we’re going after Dick Cheney”: The Archdiocese of Milwaukee Supporting Fund v. Halliburton Company et al., U.S. District Court, Northern District of Texas, April 4, 2006.

  a 16,000-square-foot Tuscan-style mansion: Details on Lerach homes are from PD, personal observations.

  “Goddamn loser CEOs”: William S. Lerach, “Loser CEOs Raking It In,” Washington Post, November 11, 2007.

  “We’d fire a shot”: William S. Lerach, interview by PD, February 23–29, 2008.

  he had called John Keker: John Keker, interview by PD, March 6, 2009.

  For all Keker’s bona fides: Karen Donovan, “The Man Who Will Prosecute Oliver North,” Washington Post, November 4, 1996.

  They wore jail jumpsuits: Details of appearance at arraignment come from PD, personal observation, October 29, 2007.

  greeted by four assistant U.S. attorneys: PD, personal observation, October 29, 2007.

  “Do you understand”: Arraignment and plea hearings of William S. Lerach, U.S. District Court, Central District of California, October 29, 2007, reporter’s transcript.

  “I can’t vote”: PD, personal observations, October 29, 2007.

  CHAPTER 1. DRAGON SLAYER

  reforming Illinois’s antiquated constitution: “Father of State Constitution Witwer Dies,” Chicago Daily Law Bulletin, September 14, 1998. 14 “He was the only man I ever saw”: William S. Lerach, interview by CMC, March 18, 2008.

  “We’re going to take down the Methodist Church!”: Samuel W. Witwer, Jr., interview by CMC, July 3, 2008.

  partners took an immediate liking: Colin Wied, interview by CMC, April 29, 2008.

  Melvyn I. Weiss: James Granby, interview by CMC, March 19, 2008.

  “Have you lost your mind?”: Bill Lerach, interview by CMC, March 19, 2008.

  the Californians were struck: James Granby, communication to CMC, June 9, 2008.

  “It’s a dynamite case”: Colin Wied, interview by CMC, April 29, 2008.

  an agreement on the terms: James Granby, interview by CMC, March 19, 2008.

  “The Annual Conference said the residents”: Phyllis Berman, “The Methodists and Mammon,” Forbes, December 25, 1978.

  “upright Christian socialist”: Christopher Caldwell, “Nixon Rising,” National Review, October 11, 1999.

  “The fat was really in the fire”: Quoted in Tim Tanton, “United Methodists Pacific Homes Saga Ends on an Up Note,” United Methodists News Service, September 10, 1999.

  “We started to have them”: Quoted in Berman, “Methodists and Mammon.”

  “is not the alter ego”: Quoted in Jack Jones, “Church Denies Liability in Pacific Hom
es’ Failure,” Los Angeles Times, August 15, 1980. 20

  “fiercely independent”: Ibid.

  “It would violate”: Betman, “Methodists and Mammon.”

  “Those 7.5 billion”: Ibid.

  he found the young lawyer: Tharp expressed these sentiments in chambers to CMC.

  “enormous” damages: Carl M. Cannon, “Church’s Council to Appeal,” San Diego Union-Tribune, April 3, 1978.

  “To hold otherwise”: Barr v. United Methodist Church, 90 Cal. App.3d 259, 153 Cal. Rptr. 322 (1979).

  “To default would threaten”: Morton Mintz, “Methodists Ask Court to Remove Them from Suit,” Washington Post, November 24, 1979. 25

  “would unconstitutionally abridge”: Ibid.

  “A trial is like putting on”: William S. Lerach, interview by CMC, March 19, 2008.

  “The money was misused”: Mitch Himaka, “Pacific Homes Retirement Case Outlined to Jury,” San Diego Union-Tribune, August 14, 1980.

  “I rise to speak”: Herbert Lockwood, “Pacific Homes’ Seniors Early as Suit Begins,” San Diego Daily Transcript, August 14, 1980.

  “After my husband died”: Lee Havins, “Pacific Homes Trial Is Slowed by Objections,” San Diego Evening Tribune, August 19, 1980.

  weary of the ill will: Ibid.

  “The only glue”: Quoted in Jones, “Church Denies Liability in Pacific Homes Failure.”

  “This gave us full protection”: Quoted in Lee Havins, “2nd Church Witness Linked Church to Pacific Homes,” San Diego Union-Tribune, August 21, 1980.