NewsNotables – Issue 59

Eliot Spitzer

New York Times, March 29, 2008

Eliot Spitzer took office as New York’s governor on the first day of 2007, with a record margin of victory and a profound sense of promise. He resigned on March 12, 2008, in a scandal over his involvement in a sex ring, bringing an abrupt close to a tenure marked by an almost unbroken string of stumbles and frustrations.

Mr. Spitzer’s difficulties were in stark contrast to his long and steady rise to New York’s attorney general and then governor. Over the previous eight years as New York’s attorney general, he had gained national recognition as the “Sheriff of Wall Street” for his pursuit of corporate corruption and his self-styled role as the defender of the American investor.

In July the new attorney general released a scathing report which said that the Spitzer administration had misused the State Police in an attempt to discredit Joseph Bruno, the Senate majority leader and the state’s top Republican.

Comment: The governor’s fall from Democratic party star — seen as presidential material — to disgraced former official, is one of the more spectacular collapses by a political figure in recent years. In fact, he was caught with the same tools he had used to catch others. Many of his earlier foes took delight in his fall, but to me, it’s a sad case where a very intelligent prior prosecutor was blinded by his own desires and committed the very crimes he’d publicly denounced only a few months before.

High-Profile Trial Lawyer Agrees to Guilty Plea

New York Times, March 21, 2008

Melvyn Weiss recently became the latest prominent — to some, notorious — trial lawyer to agree to plead guilty to federal criminal charges, acknowledging his role in a scheme to make hidden side payments to plaintiffs in class-action lawsuits filed by his firm, Milberg Weiss.

Some of the best known lawyers in the country are now headed for prison. In mid-March, Richard Scruggs, who squeezed hundreds of billions of dollars from tobacco companies, pleaded guilty to trying to bribe a state court judge in Mississippi. In February, a former Milberg Weiss partner, William Lerach, was sentenced to two years in prison after pleading guilty to a role in the same kickback scheme that ensnared Mr. Weiss.

These lawyers humbled entire industries and their names alone could stir fear and vitriol in corporate boardrooms. They have been the targets of criticism for years from business groups that have complained that their lawsuits were frivolous and costly.

“It’s a situation where it appears that there has been fraud in pursuit of fraud,” said Joseph Grundfest, a former commissioner of the SEC who is now a law professor at Stanford University. “And just like mom explained that two wrongs don’t make a right, it follows both that corporate executives shouldn’t lie and the lawyers suing them shouldn’t steal. What’s complicated about that?”

“Bill Lerach and Mel Weiss practically invented the securities class-action lawsuit and used it throughout their careers to cause major harm to our judicial system,” Lisa Richard, president of the Institute for Legal Reform at the United States Chamber of Commerce, said. “The lawsuits they brought resulted in overcompensating some investors and shortchanging others — all while collecting hundreds of millions of dollars in legal fees for themselves.”

Comment: It’s hard for me to not be biased since I have seen so many class-action lawsuits that, to me, appeared extremely frivolous. Many times the lawyers involved collected more fees than the total amount received by the thousands of “victims” they supposedly represented. It’s unfortunate, but not surprising, that many of the big-name lawyers involved in these lawsuits committed crimes themselves in order to win their frivolous cases.

Identity Thieves Target Tax Refunds

Wall Street Journal, March 12, 2008

Doing your taxes is painful enough, but it can be especially so when a scam artist files a phony tax return with your name, social security number and other personal information in an attempt to collect a refund. Identity theft has become a serious problem facing taxpayers. Problems that can arise are delays or denial of refunds and assessments of tax debts.

In a recent case, a former Girl Scout troop leader was sentenced to ten years in federal prison after pleading guilty to multiple counts of identity theft and filing false and fictitious claims for tax refunds. She created a bogus Girl Scout medical-release form to get sensitive information, including children’s social security numbers. She then used the information to prepare and file electronic federal income tax returns. She netted over $87,000 from the government. Victims usually discover their predicament after getting a startling notice from the IRS asking about unreported income.

Comment: You just can’t be too careful these days with your personal information. Especially beware of phony emails that appear to be from the IRS. The IRS does not send emails. Phishing scams can appear in many different forms and guises, but the basic purpose is to trick you into revealing personal and financial data, such as social security, bank account, or credit card numbers. In a typical case, the email says you are entitled to a refund, but first you have to click on a link in the email to get a special claim form, which asks you for personal information.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics