WSJ Looks at Plaintiffs Firms Who 'Pay to Play'
By Brian
Baxter
Wall Street Journal
February 3, 2010
UPDATE
: Feb. 4, 10:25 a.m.
The Recorder's
Amanda Royal reports that the
number of shareholder suits over M&A deals is also on the rise.
The Wall Street Journal--some might say never a friend to the
plaintiffs bar--takes an exhaustive look today at
law firms that donate to
out-of-state political candidates and
then later appear as counsel to large institutional investors
from those states in shareholder suits.
The report by WSJ writers Mark Maremont, Tom McGinty, and
Nathan Koppel cites data collected by the
National Institute on Money in State
Politics as well as from state and
federal sources. About 72 percent of donations, most of which
were made by lawyers from plaintiffs firms and their family
members, went to Democratic candidates.
What did those lawyers get in return?
The WSJ reports that their firms were chosen by state and
local political candidates to represent pension funds in
shareholder class actions. If they're successful, the firms walk
away with large contingency fees--some
of which are in the high eight-figures--much
to the consternation of some business advocates, politicians,
and lawyers.
"Plaintiffs lawyers donate because they think it buys them
access to people who make decisions over how pension funds
select counsel,"
Wolf Haldenstein Adler Freeman & Herz
securities litigation partner Fred Isquith told The WSJ. "[It]
creates an appearance of complete impropriety [and] should be
outlawed."
The WSJ reports the firms that gave the most to out-of-state
candidates since 2000 are:
Bernstein Liebhard,
Coughlin Stoia Geller Rudman & Robbins,
Entwistle & Cappucci,
Bernstein Litowitz Berger & Grossmann,
Labaton Sucharow,
Barroway Topaz Kessler Meltzer & Check,
Kaplan Fox,
Barrack, Rodos & Bacine,
Berger & Montague,
and
Motley Rice.
One firm not on the list is
Cohen Milstein Sellers & Toll.
Name partner Steven Toll tells The WSJ that he's sure not being
among the largest contributors to out-of-state campaigns has
cost his firm business, but he'd rather be chosen for a
shareholder action based on the merits, not because of the size
of his checkbook.
The WSJ reports that Ohio politicians received the most in
donations from out-of-state plaintiffs firms, likely because the
state has been aggressive in filing securities suits against
companies whose stock price drops due to allegations of
corporate malfeasance.
Former Ohio AG Marc Dann--once christened the "Mortgage Cop"
by The WSJ
in this 2007 profile--was
the driver behind many of those suits.
Dann has since resigned
and works as a
solo practitioner in Cleveland,
but his
successor Richard Cordray
continues to be aggressive in filing shareholder actions on
behalf of the state's pension funds.
The WSJ notes that while plaintiffs firms haven't contributed
to Cordray directly, they have given $830,000 over two years to
a fund for candidates run by the Ohio Democratic Party, which in
turn contributed $2 million to Cordray's campaign.
Be sure to read the expansive WSJ story for more details.
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