Sean Coffey Running for New York AG: A Wolf in Sheep’s Clothing to Guard the Hen House?

The only thing I know about Sean Coffey’s political ideology is that he’s a Capitalist.  That said, his upcoming campaign to be New York’s next Attorney General is unlikely to emphasize the fortune he’s amassed as a senior partner of the law firm Bernstein Litowitz Berger & Grossman.  For those who don’t know, Mr. Coffey earns a living by collecting hundreds of millions of dollars in attorney fees for his part in bringing (and usually settling) lawsuits against companies (like WorldCom, for instance) over violations of securities laws.

I may be jumping the gun a bit but I’d give 20 to 1 odds that the central theme of Coffey’s campaign will be something along the lines of:  ”A tough fighter (and former Navy Captain) who has spent his career fighting corporate greed and corruption on behalf of the little guy.”  It sounds pretty good and some of it’s actually true!  Unfortunately the rest is a crock of shit.

I don’t question the propriety of punishing corporate malfeasance, but Sean Coffey is no Robin Hood. Unlike most attorneys in private practice, Mr. Coffey finds a defendant to sue before he finds a plaintiff to represent. And who are these plaintiffs willing to surrender outrageous fees to subsidize Mr. Coffey’s lifestyle?

You, the taxpayers, of course.  In a nutshell, Mr. Coffey’s law practice works like this:

1. Identify the officials making decisions for major public pension funds.
2. Hire former insiders (like, e.g. Carl McCall) to lobby current officials for business.
3. Become a major donor, fundraiser, and bundler for such politicians/trustee(s).
4. Identify an SEC action alleging that a company’s conduct violated securities laws.
5. Locate a pension fund with a sizable equity investment in the defendant company.
6. Paraphrase the SEC’s complaint and file a private suit on behalf of that fund.
7. Settle the case for a billion dollars (or on a rare occasion, take it to trial).
8. Take home $200,000,000.00 for all your hard work
9. Run for Attorney General on the platform that you only took 20% of $1 billion.

I don’t begrudge the man his personal largess; only the way he earned it.  There are a lot of talented litigators in the world and Mr. Coffey didn’t make his fortune because he’s just that much better than the rest. He made his money by paying to play with influence peddlers in state governments who turn a blind eye to his outrageous fees.  The plaintiff’s bar would argue that such eight or nine figure fees are typical in these cases (which may well be true) and the judges sign off on them as the accepted current state of play in the securities class action industry.

Contingency fee arrangements agreed to in advance by individual clients and their attorneys are not the ethical equivalent of such fee arrangements between fund trustees on one side and law firms financing the fund trustees’ political careers on the other. Sean Coffey made his millions by ripping off pensioners and taxpayers and calling it “investor protection.”  I’m calling him out on it because he’s now decided he should be New York’s chief law enforcement officer.

If Mr. Coffey was really more interested in protecting investors than lining his own pockets with their money, why did he go to work for Bernstein instead of the SEC in the first place?  Or better, why not bring the same kinds of securities suits, but instead of getting “super” wealthy off cash-strapped state pension system clients, just extract enough from the settlements to be “kind of” wealthy?  I don’t know his answer but I’m sure it too would be rich.

Filed under: Law & Politics, Opinion, Bernstein, pay-to-play, pension funds