Pay-to-Play TortsThere is more to Hood's relationship with Bernstein Litowitz (BLB&G) than reported in the Wall Street Journal. It is certainly not improper for a statewide elected official to speak to an organization's forum in New York City or in Dublin, Ireland. But it does illustrate a closer relationship than campaign contributions or contingency fee contracts.It seems Hood's relationship with Bernstein Litowitz includes foreign travel. BLB&G Partner Sean Coffey and Jim Hood were guest speakers at the 8th Annual UK & Irish Pension and Investing Summit Conference in Dublin, Ireland last year (Nov 11-12, 2008).
Pension middlemen get investigated; lawyers get a pass
Pay-to-play schemes involving public officials and the pension funds they oversee are finally getting the hard look they deserve. Some 36 states are investigating how financial brokers and other middlemen have used kickbacks and campaign contributions to gain access to retirement funds. Now if only plaintiffs law firms would get the same scrutiny.
Like investment funds, class-action law firms hire intermediaries to help win state business. But the more common practice is for plaintiffs lawyers to make campaign contributions to public officials with the goal of being selected by those same officials to represent the pension fund in securities litigation.
The law firms typically agree to take the cases on a contingency basis that means no fees up front but a huge share (30% or more) of any settlement or jury verdict. However, attorneys suing on the government's behalf are supposed to be neutral actors whose goal is justice, not lining their own pockets. When for-profit lawyers are involved with a contingency fee at the end of the lawsuit rainbow, the incentives shift toward settling to get a big payday.
In Mississippi, the state attorney general determines when the public employees retirement fund should bring a securities class action and which outside firms will represent the fund. Would you be shocked to learn that AG Jim Hood has frequently chosen law firms that have donated to his campaigns?Mr. Hood is also partial to Bernstein Litowitz. On February 21, 2006, he chose the firm to represent the Mississippi Public Employees Retirement Fund in a securities class action against Delphi Corporation—just days after receiving $25,000 in donations from Bernstein Litowitz attorneys. The suit was eventually settled, and the lawyers on the case received $40.5 million in fees. Mr. Hood's campaign would appear to deserve a raise.
Coffey interviewed Attorney General Hood for an in-depth discussion on how he has helped the citizens of Mississippi push back against the destructive forces of corporate fraud.Hood has also appeared at BLB&G's "Institutional Investor Forum" at the "New York Yacht Club, in the heart of Midtown Manhattan." BLBG features Hood's speech in a number of their publications.Speaking to this law firm's educational forums does not suggest anything improper, but it does illustrate a closer relationship to the firm than simply signing them on as legal contract workers for the State of Mississippi.