Preying on the Misery of Others – Part II


Bernie Madoff may be the biggest purveyor of the Ponzi scheme, but he isn’t the only one — Sir Allen Stanford makes the “dean’s list” with a whopping $7 Billion of his client’s money. And Madoff and Stanford may be among the worst of those preying on the innocent, but they aren’t alone — there is a whole flock of lawyers out picking the bones of what is left.

An August 14 Associated Press report notes that attorney Ralph Janvey has submitted bills for $27 Million to the United States District Court in Texas. Janvey has been appointed by the court to find as much of Stanford’s missing $7 Billion as possible. Janvey’s first bill was for $20 Million through April 12 and another $7.6 Million for the seven weeks ending May 30 — a million dollars per week — nice work if you can get it. And God knows how much more he has stacked up for the months of June and July.

Thus far, Janvey has recovered $81.1 Million and you have to assume that it represents the “low hanging fruit” — the amounts easily discovered such as bank accounts, real estate, and balances in the funds Stanford managed — you know, the kind of funds that any first-year accounting student could find. The $81.1 Million represents slightly more than one percent of the amount lost by investors. In other words, if you had invested $10,000 with Stanford, Janvey’s efforts would have recovered $116. But after Janvey takes his cut, you would be left with $77.50 — and that’s only until Janvey submits his next bill.

Now let’s put that into perspective. Janvey has hired a team of silk stocking law firms around the country and is billing their time out at as much as $500 per hour. A work year (eight hours per day, 5 days per week, 50 weeks per years) is 2000 hours. While many lawyers work and bill between 2300 and 2500 hours per year, for these purposes we will stick to the 2000 hours — the same number of hours that most people work. At $500 per hour these firms are billing out $1 Million per year per lawyer. ONE MILLION DOLLARS PER YEAR PER LAWYER. (Actually that figure is probably much larger since most firms bill out their associates fees at roughly three times what they actually pay them and pocket the rest as profit.) They also charge $250 per hour for copying records. That’s $250 per hour to the law firms who in turn pay some file clerk less than $25 per hour to do the actual copying. At that rate, the file clerk will make three times more each day than a $10,000 investor has recovered to date.

I have been a lawyer for forty years although I am no longer actively engaged in the practice. I am still enormously proud of being a lawyer and have a great deal of admiration for most lawyers — particularly lawyers in small towns across the nation. My father was a lawyer as are my brother and my sister. When I attended law school it was impressed upon me that lawyers are there to serve the public. Their function, primarily, is to act as a guide through the maze of laws and procedures that govern our lives and to find solutions for conflict. For most lawyers that is still the ethos that drives their practice.

But there are groups of lawyers today whose conduct and billing practices embarrass me and for whom I can find no justification economically, ethically or morally. The first such group is that cluster of bottom feeders known as the class action tort lawyers. In August of 2005 in my column in the Medford MailTribune, I wrote:

“In this world there are four kinds of lowbrows. There are burglars who take your property when no one is looking, robbers who take your property by force when you are looking, embezzlers who take your property by manipulation”¦and there are class action tort lawyers who take your property with the court’s permission. For those of you who want a real lesson in sleaze, I invite you to read John Grisham’s “King of Torts,” an all too accurate revelation of today’s class action tort industry and the lawyers who inhabit its lucrative slag heap.

* * *

“As usual, it is the little guys that get hurt the worst. In this case, these people are your neighbors, the coaches for your Little League teams, the volunteers at charity events, and the guy next to you at the local grocery store. They spent years installing, repairing and upgrading your phones. But one kick in the shins is never enough.

“America’s trial lawyers are never ones to let a little greed get in the way of making a tragedy even worse. And this is the second bitter pill. The minute the market value of Qwest stock began to slide into the abyss, the class action tort lawyers sprang into action and filed a series of lawsuits allegedly on behalf of the former US West stockholders. The class action tort lawyers know that they are never going to have to try the case, never be put to the proof of their allegations. They know that this is a game where they commence discovery, ask a ton of questions, force the productions of hundreds of thousands of documents, and in the process make the defense lawyers very wealthy — they’re being paid by the hour. At a point in time settlement is inevitably reached. And the settlement is always the same. The members of the class get virtually nothing and the class action tort lawyers get rich.

“In the case of the US West employees and shareholders the proposed settlement is 15 cents per share — shares that were worth $60 per share. But the class action tort lawyers are going to get 30 percent of the total settlement — 30 percent of $50 million. And that $15 million dollars is going to come out of the pockets of the employees and shareholders. Their 15 cents per share will be reduced to about 10 cents per share. FIFTEEN MILLION DOLLARS for the lawyers, and 10 cents for the employees and shareholders.”

The second such group are the silk stocking law firms that throw armies of bodies at exorbitant rates at problems that, from the client’s perspective, can be more economically settled through negotiation and compromise — the process by which they are ultimately settled after these law firms have exhausted their respective clients’ funds and patience. At the commencement of litigation these law firms talk bullishly of the opportunity for success and a rosy picture of the ultimate outcome. This will change gradually as the process progresses.

These firms engage in what is referred to as “motion practice.” They file reams of standardized interrogatories — each time billed as if originally created. When receiving the same type of standardized interrogatories from the other side, they object, parse, obfuscate or bury material in truckloads of documents. In each instance, such conduct results in endless rounds of motions, briefs, arguments, orders and requests for reconsideration — all of which are billed out at the extraordinary rates charged by these firms.

Understand that very little of this “motion practice” relates to the substance of the litigation. Rather it is principally designed to increase the number of hours that can be billed. In most of these law firms there are associates who do the work and then partners who review the work. There are computer files full of discovery requests (interrogatories, requests for documents, and depositions) that are developed for each type of litigation. Though these forms of discovery requests are utilized repeatedly, they are billed as if they newly created for each succeeding contest.

There are repeated motions for judgment on the pleadings (almost never granted) and subsequent motions for summary judgment (rarely granted because there are always facts at issue). And when the deadline for trial looms the attorneys begin to urge their respective clients to consider settlement; warning each of the vagaries of trial and the catastrophic consequences of a loss. The clients, having already spent extraordinary sums to pay their respective lawyers, now face the prospect of additional amounts if they should lose — or the now cautionary prospects of winning (severely diminished since the onset of the litigation). In the end a compromise is reached — more than likely the same compromise that could have been reached at the outset if the lawyers focused on resolution rather than the riches that come from encouraging litigation.

This type of conduct is the exception to the rule. But the practice of law for those who engage in such conduct has become much like the excesses of government officials and corporate executives who spend other people’s money without reservation or conscience.

There ought to be a law.

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  • Rupert in Springfield

    >There ought to be a law.

    There simply ought to be better professional policing.

    Look, if I hire a plumber, sure, there is concern that he might replace an extra pipe or two to pad the bill. However there really isn’t a lot of concern that on a regular basis any plumber who is called in to replace a faucet is suddenly going to start dismantling the entire piping system to jack up the bill.

    Why?

    Because plumbers have professional standards. A plumber who did such a thing with any regularity would lose his license. Other plumbers would gladly disown him from the profession and seek revocation of his license.

    Sure with Auto Mechanics, plumbers, electricians etc. we all hear of the occasional excesses. However they are the rarity, not the norm. The reverse is true, at least in the publics perception, of lawyers. The reason why is because the trades are held to higher standards than the bar apparently holds lawyers.

    You show me a plumber who has urged the rescinding of a rip off plumbers license and Ill show you an average plumber. You show me a lawyer who has urged rescinding of a predatory slip and fall work guys license and I will show you an exceptional lawyer.

    Lawyers who do this sort of thing are no different than the errant plumber or auto mechanic I described. However their professional association, the bar, and other lawyers do not appear to look upon such transgressions as seriously as the trade organizations do. Perhaps it is time for the bar to take its role a little more seriously.

  • v person

    Larry, if he submitted bills for 27 million and recovered 81 million, that suggests there was not much low hanging fruit, and that they had to do a lot of moving around of an orchard ladder. Court appointed lawyers can’t simply pad their hours, at least not legally. Also you say “thus far has recovered.” For all we know they may have identified a lot of additional assets that will take more time to recover. My point is, don’t rush to judgment.

    Rupert: lawyers have pretty clear professional standards, and can be disbarred for malpractice. So how is this different than for plumbers, doctors, architects, etc? You say they “do not appear…..” but is there any evidence that more plumbers lose their licenses than do lawyers?

  • Rupert in Springfield

    >but is there any evidence that more plumbers lose their licenses than do lawyers?

    Nope, and I never argued they did. If you want to elucidate us with the relevance of your question, fine. Without such explanation there isn’t a lot of point in delving into it though.

    If you want to argue the absurd case, that tort lawyers drumming up nonsense class actions suits as described above is tolerated less in the profession than tradesmen who scam customers are in theirs you are on your own.

    • v person

      You made the comparison between plumbers and lawyers, I didn’t. I merely asked if you had any evidence that plumbers were any more or less ethical than lawyers based on losing their licenses.

      I don’t draw the same conclusions you and Larry draw from the flimsy evidence he presents. You assume there is a scam. I’m questioning you assumption based on what Larry presented. I’m not defending lawyers.

      But speaking from personal experience, I have been scammed by a tradesman, and as it turned out they were well shielded by the builders board. I have yet to be scammed by an attorney, knock on wood.

      • Rupert in Springfield

        >I merely asked if you had any evidence that plumbers were any more or less ethical than lawyers based on losing their licenses.

        Ok, so you are saying incidence of license rejection or not is some basis for establishing the ethical level of an industry. I never made that assertion so there isn’t much point in getting into it.

        >I have been scammed by a tradesman, and as it turned out they were well shielded by the builders board.

        Well, that’s a bunch of BS. The builders board, with which I was professionally familiar with in ten years of contracting in this state, has as its mission protection of the client, not the contractor. I sat on the committee that developed guidelines for the contractors education requirement when it was implemented in the 90’s. Once anyone starts talking about the builders board shielding a contractor, which the contractors board really doesn’t have any ability to do, I know they are talking hooey.

        > I have yet to be scammed by an attorney, knock on wood.

        No, you are probably just ignorant that you were scammed by an attorney.

        I doubt very highly that there are more than about ten people in America who have not been a member of a class in some zany lawsuit. Rent at Blockbuster? You were scammed. Have Quest as your telephone service? You were scammed. Process credit cards in your business? You were scammed. I get letters of class action notification at the very least monthly. If you think you haven’t been a member of a class action suit and you are over forty, you either are a hermit, or simply unaware.

        • v person

          “Well, that’s a bunch of BS.”

          No…that is direct experience. And 2 builder friends told me in advance the likelihood of getting anything out of the board was slim to none. They were right.

          “If you think you haven’t been a member of a class action suit and you are over forty, you either are a hermit, or simply unaware. ”

          As a matter of fact I am aware of one that I was recruited to, unbeknownst to me. But was I “scammed?” It did not cost me anything. The roofer who screwed up my house, ran a truck into my carport, and left debris all over the place for me to clean up on the other hand, did cost me.

          • Rupert in Springfield

            >No…that is direct experience. And 2 builder friends told me in advance the likelihood of getting anything out of the board was slim to none. They were right.

            Ok, so it sounds like two friends plus the contractors board both judged your claim as not having a lot of merit. Improperly installed roofing is about the easiest thing to document there is. Wait for rain, video the water pouring in and call it good. I don’t find it credible that the CCB would not issue a finding in such a case that would allow you to attach the roofers bond in about three seconds.

            Frankly to me the carport thing really raises some eyebrows. Why anyone would go to the contractors board for a vehicular incident is a little beyond me, I would have called his car insurance myself.

            In the end, any licensed contractor has a big old surety bond sitting out there, he is just about the easiest person to sue in small claims. The fact that you didn’t pursue that tells me something is not quite right here.

            >As a matter of fact I am aware of one that I was recruited to, unbeknownst to me. But was I “scammed?” It did not cost me anything.

            Ok, I think you are missing the point of Mr. Huss’s article. This is about lawyers running a scams. Whether or not it costs you anything personally is a little besides the point. Thanks for your time.

          • v person

            Rupert, its amazing, always amazing how confident you are about what you can’t possibly know.

          • v person

            It occured to me that you not only tend to generalize from the particular, which is bad enough. In this case you have “particulalrized” from the general. In other words, your experience with the contractors board in general gives you all the confidence you need to express certainty over the particulars of my case.

          • Rupert in Springfield

            >In other words, your experience with the contractors board in general gives you all the confidence you need to express certainty over the particulars of my case.

            No, I just go by the evidence you present here. You are the one who started this out by making generalities about something you know nothing about, the CCB. You are the one who stated that they regularly provide cover for contractors, not I. Don’t get whiney with me because you did exactly what you accuse me of and then get huffy when I give reasons why I think your example sounds a little fishy.

            Frankly this sounds more like it was simply a BS case rather than the CCB covering up for contractors, something they have zero incentive to do by the way.

            1 – We know this roofer was highly paid as a while back I said I had never met a liberal who paid union scale when it came to working on their own house. You assured me you did.

            2 – You went to the CCB about the contractor running his truck into your car port, why you did this is anyone’s guess. One doesn’t generally go to the AMA when getting into a fender bender at the hospital. That arouses suspicion.

            3 – Contractors are required to be bonded. This makes them pretty easy to file a claim against. Why you didn’t do this in small claims court again makes one think there is a little more to this matter than meets the eye.

            4 – You say it cost you money. Well, I’m not really sure how this could be as you paid the contractor for the job. We know you did this because had you not it wouldn’t have cost you anything, you could have simply refused to pay until he picked up whatever debris was laying about and deducted the cost of repairs to the car port. We know there was enough money in the bill to correct this situation because a roofer being paid union scale to roof a house would have a pretty hefty tab. Surly enough to pay for carport repairs and to pick up some old shingles.

            5 – We know the contractors board denied the claim, so we have third party evidence it was a little fishy.

            6 – We have your own actions, you didn’t pursue a claim against the contractors insurance for the carport and house damage.

            Frankly the whole thing doesn’t make a lot of sense and you are blaming the CCB for lack of due diligence on your part.

            I have no idea in what way the roofer screwed up your house, but certainly you noticed the debris laying about and damage to the car port before making the final payment. Why anyone would make final payment on a job that was screwed up, and then go running to the contractors board is a little beyond me. Sounds to me like you are blaming the CCB for lack of due diligence on your part. Case closed.

          • Anonymous

            “Why anyone would make final payment on a job that was screwed up”

            Because he’s a dumbass and a pussy.

          • v person

            3 for 3. That is, someone has seen fit to remove 3 of my posts today. Hello Catalyst. Anyone home today? You have a hacker out there afraid of debate.

            I repeat Rupert, you are wrong on 1, 2 4, 5, and 6. Otherwise you are batting 1000.

            “I have no idea in what way the roofer screwed up your house…”

            This is obvious. So why do you keep on pretnding that you do know something, or anything about this?

          • Rupert in Springfield

            >So why do you keep on pretending that you do know something

            I never pretended to know in what way the roofer screwed up your house. What are you on about?

            >I repeat Rupert, you are wrong on 1, 2 4, 5, and 6.

            1 – Ok, so now you are saying you did not pay this roofer union scale or something real close? That’s really odd, because about a year ago I said I thought it was very unlikely you paid union scale to people who worked on your house, so why would you support Oregon’s Little Davis Bacon act? Uh oh, Dean, that’s not too good.

            2 – OK so you didn’t go to the CCB about the contractor running his truck into your carport, yet you blame them?

            4 – You mean to tell me you signed a contract that did not have a large enough final payment to cover cleaning up some debris and fixing whatever was wrong with your house? Good lord, that’s ridiculous.

            5 – You already said the CCB denied your claim, now you are saying they did not? Which is it?

            6 – LOL, ok, so now we have the CCB denying your claim as well as the contractors auto insurance company AND his contractor liability insurance company?

          • v person

            Let’s see….
            1: I paid the bid price. Residential roofers in Oregon are not union, so there is no scale. But you must know that.
            2: You are still wrong
            4: I told you no such thing. Wrong again.
            5: I said nothing about CCB denying my claim. Wrong again.
            6: 3 wrongs don’t make a right.

            Give it up Rupert.

          • Anonymous

            Your case is easy to figure out –

            You’re not very bright and you make poor decisions.

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