Remembrance of controversies past

When we (and Paul Krugman and Ben Stein) were young(er), many were called to high dudgeon over the trials of the Trial Lawyers;

Bush S.E.C. Pick Is Seen as Friend to Corporations

....Mr. [Chistopher] Cox - a devoted student of Ayn Rand, the high priestess of unfettered capitalism - has a long record in the House of promoting the agenda of business interests that are a cornerstone of the Republican Party's political and financial support.

A major recipient of contributions from business groups, the accounting profession and Silicon Valley, he has fought against accounting rules that would give less favorable treatment to corporate mergers and executive stock options. He opposes taxes on dividends and capital gains.

And he helped to steer through the House a bill making investor lawsuits more difficult.

The above is from Stephen Labaton's NY Times 2005 piece, which also quoted (as a presumably objective source) attorney Bill Lerach;

William Lerach, a prominent shareholder lawyer in San Diego who a decade ago found himself on the losing end of the political battle over investor lawsuits, agreed that the Republicans on the commission will now be more unified. But as a result, he argued, the policies it sets could be devastating for investors.

"I would expect that Cox will use his authority for an across-the-board assault on investor protection," Mr. Lerach said. "In my experience with him, I found him to be virulently anti-investor and unrestrained in his desire to gut the securities laws. It's hard to think of a worse choice for the S.E.C. This is a world-class payback to the corporate world."

Which bill was the bi-partisan (passed by a Republican congress, vetoed by Bill Clinton--as a sop to his campaign contributing lawyers--but overridden largely thanks to Chris Dodd and Joe Lieberman) Private Securities Litigation Reform Act (PSLRA) of 1995. Even the strangest of bedfellows weighed in on the side of the trial lawyers;

Once upon a time, the threat of lawsuits hung over companies and auditors that engaged in sharp accounting practices. But in 1995 Congress, overriding a veto by Bill Clinton, passed the Private Securities Litigation Reform Act, which made such suits far more difficult. Soon accounting firms, the companies they audited and the investment banks that sold their stock got very cozy indeed.

That's Paul Krugman. His usually rabid crtitic, Ben Stein, tossed this into the mix;

In the late 1980s and early 1990s, as a result of a mass of securities frauds in Silicon Valley and in the Drexel Milken world and in the S&L’s, there were hundreds of securities law private class action suits against managers, directors, lawyers, and accountants. The recoveries in these cases were in the tens of billions. The accountants were called to account and hated it. Their insurers on their malpractice policies hated the suits. So did Silicon Valley.

The defendants did a smart cost-benefit analysis. They figured out that they would be better off if they got new laws to hinder lawsuits against them than if they actually went to the immense trouble of doing their work properly. It was far cheaper to pay campaign contributions to Congress than to forgo their freewheeling ways. So money was paid, promises were made, and the law was changed in 1995.

So, the crony capitalists got their nefarious way? Not exactly, as we--under an earlier blogging guise--pointed out back in 2005;

For the five years preceding the Private Securities Litigation Reform Act of 1995 (PSLRA) Bill Lerach and other securities litigation experts filed an average of 190 such class action lawsuits, with the high being 231 in 1994. For the five years following passage, the average was 187, with a high of 241 in 1998.

Then the fun began. The numbers being: 493 in 2001, 272 in '02, 219 in '03, and 237 in '04.

In addition the dollar settlements to these cases have tripled.

So were the facts (as compiled by Stanford University). What's the more recent history under the Barack Obama regime (and with Republican Chris Cox nowhere to be seen)? Let's turn to Insurance Journal;

Bringing a securities class action became less lucrative last year.

According to a new Cornerstone Research report, total settlements in such cases hit their lowest point in 16 years.

And, show me the money;

The aggregate amount of settlements dropped 78 percent to $1.07 billion in 2014 from $4.85 billion in 2013. Last year’s figure is 84 percent below the average for the prior nine years, primarily because of a dearth of large cases, the legal consulting firm found.

.... The average settlement amount, $17 million, was the lowest since 2000. In 2013, the average settlement size was $73.5 million.

The number of settlements remained relatively constant last year at 63.

Oh, Stephen Labaton's source, Bill Lerach? He went on to become a convicted felon;

William S. Lerach, once one of the nation's most successful attorneys, was sentenced to two years in prison Monday for his part in a kickback scheme involving class-action lawsuits against some of corporate America's biggest names.

.... U.S. District Judge John Walter said the kickback scheme had corrupted the law firm where Lerach practiced for 28 years "in the most evil way."