Thursday, January 19, 2006
Seymour Lazar is a lawyer in Southern California indicted last year (along with another lawyer) for allegedly taking secret payments from prominent plaintiff class action firm Milberg Weiss to serve as the representative plaintiff in various securities fraud and consumer cases. A front-page article in the Wall Street Journal (here) includes an interview of Lazar in which he discusses his case, a step that is usually a risky proposition but one we've seen lately in white collar crime cases (see post here). Lazar disputes doing anything wrong, although he does not deny receiving the payments. He calls them "referral fees" and notes that lawyers pay them all the time in cases. Lazar asks, "Did I hurt anybody? Who did I cheat? Did anybody get screwed?"
The problem for Lazar is that the standard is not simply did he "cheat" or "screw" anybody. The representative plaintiff in a class action usually has to certify that he/she is not receiving anything more than other class members will receive, and class representatives have been disqualified for being affiliated with counsel for the class without any direct payment or other remuneration. To take a payment from the lead attorney is more than just the appearance of a conflict, it is a violation of the fiduciary obligation of the representative. The question for the fiduciary is not whether anyone was "screwed" but whether the representative plaintiff fulfilled the duties of being the named party in the action charged with the responsibility of acting to protect the interests of the class. Lazar's interview may be an effort to generate sympathy, and it succeeds by noting that at 78 years old, he recently had a triple bypass and is receiving treatment for cancer. And he certainly is a colorful character, having played a minor role in the Melvin Dummar/Howard Hughes will contest in the 1970s. Whether his standard for what is proper for a class representative will fly is another question. (ph)