|
Suit: Lawyers cut deal on CA claims to grab fat
fees
BY
MARK HARRINGTON | mark.harrington@newsday.com
November 27, 2007
Four
class-action law firms that negotiated a 2003 settlement of civil
accounting-fraud charges against Computer Associates walked away from
potentially billions in shareholder claims by prematurely settling a 2002
action so they could reap exorbitant attorneys' fees, a suit filed Friday
claims.
The suit filed in State Supreme Court in Manhattan by Texas billionaire Sam
Wyly and related investors accuses the law firms, including Milberg Weiss
Llp, of legal malpractice, fraud, unjust enrichment and breach of fiduciary
duty.
In addition, the suit claims that one starting point for the 2003 settlement
was a previously undisclosed meeting between Computer Associates board
member Alfonse D'Amato and Melvyn Weiss, the principal of Milberg Weiss.
The suit charges that
D'Amato, a lawyer and former U.S. senator, and another director "said they
knew Mel Weiss and that he would be reasonable - so long as the company
understood his objectives and self-interest."
The meeting took place in the summer of 2003, according to the suit, and
afterward D'Amato allegedly reported to Computer Associates' board that
"Mel" indeed would be "reasonable."
The following fall, the law firms and Computer Associates, the software
company now known as CA Inc., agreed to a "global" settlement of all pending
actions against the company that included a clause protecting board members
and executives, past and present, from being sued in the future. In
exchange, the new lawsuit alleges, the company agreed to support the law
firms' request for attorneys' fees of up to $1,000 per hour.
In addition to Milberg Weiss, the suit names as defendants the securities
law firms of Stull, Stull & Brody; Schiffrin, Barroway Topaz & Kessler; and
Coughlin Stoia Geller Rudman & Robbins. Representatives of the firms did not
respond to calls seeking comment. A spokesman for CA declined to comment,
and a spokeswoman for D'Amato didn't return a phone call.
The suit claims that while the settlement with Computer Associates netted
shareholder victims "not even a penny on the dollar" of their accumulated
losses, the law firms received some $40 million. The suit seeks unspecified
damages, access to all legal papers previously withheld in the suits, and
return of the $40 million in fees.
The heart of Wyly's claim is the difference between two sets of shareholder
lawsuits filed against Computer Associates - one in 1998 following a sharp
drop in the company's share price, and another in 2002 after revelations of
federal probes of the company's accounting.
Wyly's attorney, William Brewer, called the law firms' decision to
effectively drop the claims in the 2002 suit "one of the most egregious
cases of malpractice I've seen in 23 years."
The suit takes exception to the law firms' claims that allegations in the
two suits were largely similar and therefore could be combined for the
purposes of a settlement. The suit claims that if allegations in the later
suit had been properly researched and argued, the settlement would have been
much larger.
The new suit also notes that while the settlement was being reached,
officials at Milberg Weiss were under federal investigation in connection
with an alleged scheme in which individuals supposedly were paid improper
fees to serve as "professional plaintiffs" in shareholder cases, including
the Computer Associates suits. The Milberg Weiss firm and Melvyn Weiss have
since been indicted on those charges, and pleaded not guilty.
Copyright © 2007,
Newsday Inc.
|
