Cornyn pushes for securities class action reforms

Chris Rizo Jun. 23, 2008, 5:17am

WASHINGTON (Legal Newsline)-U.S. Sen. John Cornyn this week will speak to the Federalist Society about legislation he has introduced aimed at preventing plaintiffs' attorneys from giving their clients kickbacks for filing lawsuits.

The Texas Republican will address the Federalist Society on Wednesday in Washington.

Cornyn introduced the Securities Litigation Attorney Accountability and Transparency Act on May 19, the same day disgraced attorney William Lerach, formerly of the law firm of Milberg LLP, began his two year prison sentence for his role in a $250 million illegal kickback scheme.

He said the bill will help "ensure that the lawyer for shareholder plaintiffs in securities class action lawsuits truly and faithfully represents the interests of the entire class, and not just their own interests and those of the large investors who are the lead plaintiffs."

The legislation, outlined in Senate Bill 3033, would require the disclosure of payments between attorneys and clients, the competitive bidding as a factor for the selection of lead counsel, and a congressional study to determine appropriate attorneys fees.

Prosecutors say Lerach's firm raked in $251 million in fees from cases in which the firm's lawyers illegally paid kickbacks clients to file lawsuits claiming they suffered a loss because corporate executives misled them about a company's financial condition.

Among corporations targeted were AT&T Inc., Lucent, WorldCom, Microsoft Corp. and Prudential Insurance.

"As recent events have shown, current securities litigation laws have been subject to abuse, and there is reason to believe this criminal activity may not be limited to just a few bad actors," Cornyn said in a statement when introducing his proposal.

"It is important that corporations be held accountable through securities fraud litigation when they cheat ordinary shareholders out of their hard-earned money," he added.

"But it is equally important that attorneys be held accountable when they do the same thing. The recent securities litigation kickback scandals ought to spur Congress to action."

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