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October 25, 2004
Sinclair Broadcasting: Meet Trial Lawyers, Inc.
Last month, I wrote a column in Investor's Business Daily examining the politics underlying state pension funds and their decisions to push shareholder class action lawsuits. As I noted, the 1995 Private Securities Litigation Reform Act has been largely ineffective, in no small part because the litigation process has been substantially captured by "the largest shareholders in our economy[,] . . . state employee pension funds, such as CalPERS (the California Public Employees’ Retirement System) and the New York State Common Retirement Fund . . . [S]uch state funds are politically directed and thus subject to the unseemly political influence game that trial lawyers have long mastered."
It turns out that the much-publicized decision of Sinclair Broadcasting not to air "Stolen Honor" last Friday was forced upon it ($) by just such an unholy alliance. Sinclair was threatened by a class action lawsuit by none other than William Lerach, the securities plaintiffs' lawyer and Democratic funder who once famously quipped, "I have the greatest practice in the world. I have no clients." His partner-in-crime? New York State Comptroller Alan Hevesi, a Democrat, who oversees the Empire State's employee pension fund, a large Sinclair shareholder.
As I noted in my column, Hevesi has received substantial campaign contributions from securities plainitffs' lawyers and used his position to advance their agenda through his control of the New York pension funds. He led the New York funds to be the lead plaintiffs in the suit on behalf of Worldcom shareholders against Citigroup, one of New York's largest employers, in which the New York pension funds held $1 billion in stock. The plaintiffs' lawyers in that case stood to gain $144.5 million; directly and indirectly, those same lawyers had donated $121,800 to Hevesi's political campaigns. Hevesi also raised at least $137,000 in contributions from Milberg Weiss, Lerach's former firm, which controlled over fifty percent of all securities litigation until Lerach split off his west coast office earlier this year. In addition to working with Lerach on the Sinclair matter, Hevesi earlier selected Milberg as class counsel for the state fund’s suit against pharmaceutical giant Bayer.
For more discussion of the Sinclair situation, see Tom Smith at The Right Coast and Point Of Law contributor Stephen Bainbridge.
UPDATE: See also Larry Ribstein's thoughts here and here.
Posted by James R. Copland at 03:51 PM
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