Bill Lerach, a partner in Milberg Weiss Bershad Hynes & Lerach, is among the nation’s most successful plaintiff’s lawyers. For more than a decade, he has been suing and settling with scores of publicly traded companies his clients accused of fraud. His recent high-profile cases include Enron, Qwest and WorldCom.

While CEO signings of quarterly statements earn daily mentions on CNBC, Lerach, who works from the firm’s San Diego office, sees little of use coming from the Sarbanes-Oxley law.

Question: How has Sarbanes-Oxley changed your practice?

Answer: Actually, there was very little in the Sarbanes-Oxley bill to help the shareholders I represent. The only provision with any direct impact on shareholders who have been cheated is the lengthening of the statute of limitations by a year or two, which has some very minor impact. Other than that, Sarbanes-Oxley is really about enhanced SEC enforcement, enhanced criminal penalties and an accounting oversight board. However important all that might be, it is of no help to shareholders who have been cheated.

Q: OK, what should Congress have done?

A: They should have revised the 1995 (Securities Litigation Reform) act that led to this upsurge in fraud, they should have restored aiding and abetting liability, they should have restored joint and several liability (liability among business partners of the defendant), they should have eliminated the legal immunity for false “forward looking statements” which exists under the so-called Safe Harbor, and they should have ameliorated the overly harsh pleading standard that allegedly defrauded shareholders have to meet to even have their case heard in court. That’s what they should have done.

Q: A recent National Review Online op-ed by Rep. Christopher Cox, R-Newport Beach, one of the sponsors of the 1995 Act, attacks the “joint and several liability” as a search for a deep pocket among innocent bystanders. On the other hand, if you try to sue someone in bankruptcy, they’ve got empty pockets.

A: The problem is the very worst frauds — the Enrons, and the WorldComs, the Sunbeams, where the shareholders take a complete wipeout — are made so much harder to remedy in the absence of joint and several liability. Joint and several liability has existed for 60 years under the securities laws, so that the professionals who facilitate large frauds will be held responsible and entirely responsible if the company goes bankrupt. Unfortunately, the way Chris Cox and others of his ilk changed the law in 1995, lawyers, investment bankers and accountants are shielded from their fair share of the liability, are able to point at the bankrupt entity as the primary perpetrator and the shareholders are denied a full recovery.

Q: How do you respond to the criticism that trial lawyers unfairly share in the proceeds of large settlements?

A: It’s not true; it’s propaganda that guys like Cox have been putting out for years. Look, Cox is nothing but the mouthpiece of the tort reform movement. The fees in securities class actions are supervised by federal district court judges, most of whom are Republicans, most of whom are conservative. Otherwise, the fees are negotiated by sophisticated institutional investors. I’m aware of virtually no situation in which lawyers get more than 20 percent to 25 percent of the recovery, a recovery they obtained by risking their own capital and their own time to bring about the result. The charge of excessive fees is totally false.

Q: Corporate counsel we’ve talked to are quite concerned about the impact of the certifications of earnings and revenue called for by Sarbanes. But it seems as though you are downplaying the effectiveness of this hammer.

A: Well, it may be a subtle distinction, but let me make it. One of the things Sarbanes did is to intrude into what has traditionally been a state law area, namely corporate governance. Sarbanes does a lot with respect to corporate governance, the independence of board members, and audit committees and the saving of corporate records and I could go on and on. But none of that directly helps defrauded investors get their money back. Does it make corporate lawyers crazy? Yes. Will it make the lives of some corporate managers more difficult inside the corporation? Yes. Does it make it easier for defrauded shareholders to recover their losses? No.

Q: So the remedy lies with the 1995 reform law that wasn’t affected by Sarbanes?

A: We’re still stuck with the 1995 law that tilted the playing field way, way, way too far in favor of Wall Street, the big accounting firms and the corporations. And, as night follows the day, six years later, you’re engulfed in a massive upsurge of accounting and financial fraud.

Q: We hear complaints that CEOs will spend too much time verifying the probity of their records and not enough time tending to competitive business.

A: There may be some truth to that, but why is it? It’s because of guys like Ebbers, Lay, Skilling and Chainsaw Al Dunlap. The reason corporate managers are being reined in and subject to increasing government regulation is that so many of them inflicted so much damage on so many Americans. That’s the way it goes in this country. If you misbehave, you violate the law, you rape and pillage, Congress passes a law to rein you in.

Q: How would you compare Ebbers and Co. with the so-called robber barons of the late 19th, early 20th century?

A: I’d say they rank right up there, although the robber barons escaped largely unscathed. Unfortunately, for the Ebberes and Skillings, they’re going to get scathed.

— Richard Acello