Rep. Chris Cox lashes out at lawyers

Paul Clinton

Don’t forget to blame the lawyers.

That’s the message from Rep. Chris Cox as elected federal

lawmakers grapple with remedies and blame in the country’s ongoing

attempts to emerge from the black tarp of corporate scandal.

Cox, in a Friday guest column in the conservative National Review

magazine, said attorneys circling bankrupt companies are looking for

bones to pick.

Attorneys seeking to go after the “deep pockets” of other

companies that have done business with Enron, WorldCom, Global

Crossing and Tyco because these companies can’t afford to pay damages

are guilty of “a legalized extortion racket,” said Cox, who

represents Newport Beach.

Some of the banks that arranged loans for WorldCom, including

Citicorp and J.P. Morgan, have been on the congressional hot seat and

could be open to lawsuits.

However, UC Irvine finance professor Philippe Jorian said they

aren’t the “bystanders” Cox hopes to protect, even if their blame

isn’t as clear cut.

“It’s not clear that what they did was outside of normal

accounting practices,” Jorian said. “It’s fuzzy.”

Cox, a high-ranking House Republican, also singled out lawyers who

charge clients exorbitant fees as they try civil-action lawsuits

filed on behalf of a group of disgruntled shareholders who watched

their investments vanish in the flaming embers of a falling stock

price.

“Even more brazenly, multimillionaire class-action lawyers are

using the corporate scandals as excuses to weaken the few modest

regulations that restrain their self-interest,” wrote Cox, a Harvard

Law graduate who served as a special counsel to the Reagan White

House in the 1980s.

On Thursday, Enron’s stock -- which has been delisted from the New

York Stock Exchange -- closed at 14 cents. WorldCom’s stock --

delisted from the Nasdaq -- closed at 24 cents.

In 1995, Cox co-wrote legislation known as the Private Securities

Litigation Reform Act, which ushered in changes in class-action

suits. Among them were regulations that encouraged large institutions

to assume the role of “lead plaintiff” in the suits to curb

astronomical attorney fees.

President Clinton vetoed the bill; however, Congress overrode him.

In the Enron case, the UC Regents took the lead and slashed

attorneys fees from 33% to 8% of any amount awarded by a jury.