Then and Now: What Lerach Told Us

Plaintiffs' attorney William Lerach, long the scourge of Corporate America, was sentenced today to two years in prison for paying off witnesses. Years ago, here's what he told CFO magazine about his view of corruption in corporate finance.

What do you say to the critics who charge that you are going after the banks and these other parties only because they have deep pockets?

It’s true. My job as a lawyer is to recover money for my clients who were defrauded, and to do that by pursuing all the responsible parties. I wish Enron was still around and had money and could pay, but that’s not the way it is.

What reforms would you like to see in a post-Enron world?

If I gave you my wish list, it would be pretty long. I’d like to see the ’95 act modified, of course. But I also think that there ought to be a federal corporation law, and that corporate governance ought not to be left to individual states. Look at the Delaware situation. It doesn’t make sense for a domestic Liechtenstein, in effect, to provide a haven for these multinational and national corporations. [A federal law] would get rid of the liability raincoat that protects Delaware directors from their negligence and dereliction of duty. I mean, who should pay back Bernie Ebbers’s $408 million loan? How about the directors who authorized that ridiculous loan in the first place?

What advice do you have for CFOs?

CFOs really have to go back to basics. You’ve got to trust that America’s investors will reward you if you are honest, even if you are conservative. If you expense your options, if you give them better transparency, if you create a culture of trust about your company, you’ll get rewarded for that. That’s what was wrong with the old system: you were rewarded for just the opposite kind of behavior–phony growth, pro forma, EBITDA.

A recent study found that CFOs are being named more and more in securities suits–74 percent of the time this year, compared with 67 percent last year. Is this a trend?

It is.

So CFOs should be on notice?

On guard.


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