The WSJ has an interesting report on the alleged connection between plaintiff attorney contributions to local politicians and lucrative representation of public pension funds in shareholder litigation.
A Wall Street Journal analysis documented the extent of campaign giving by plaintiffs’ law firms specializing in shareholder suits. It found that 25 leading firms, their lawyers and family members contributed a total of more than $21 million in the past decade to state-level candidates and party funds, as well as to national-party groups that work to elect state officials. Less than 40% went to candidates in the law firms’ home states.
Labaton Sucharow was among the donation leaders. The law firm, its lawyers and their family members made $612,000 in campaign contributions in 24 states outside its New York home base in the decade.
Some lawyers say widespread political giving by plaintiffs’ law firms, especially outside their home states and near the time when counsel are chosen, is evidence of a corrosive pay-to-play culture in the securities-litigation industry. . . .
The Journal looked at donations in all 50 states from Jan. 1, 2000, through mid-2009, compiled by the National Institute on Money in State Politics, as well as data from other state and federal sources. About 72% of contributions went to Democrats. The Journal also examined the 25 largest recent class-action settlements in which public pension funds served as lead plaintiff, as calculated by NERA Economic Consulting. In 15 of the cases, one or more law firms representing a lead pension fund had donated to a politician in the fund’s home state. . . .
Public pension funds increasingly are the lead plaintiffs in shareholder suits, partly because a federal law encourages judges to pick big institutional investors for this role. As a result, plaintiffs’ law firms focus their marketing efforts on wooing public pension funds and the state and local officials who influence them. Some firms enlist the help of lobbyists and attend pension-fund conferences.
Some lawyers say they aren’t sure whether contributing helps them get government business, but are afraid not to. Some track how much rivals donate so they don’t fall too far behind.
“There are certain places where, to be in the game, you have to donate,” said Steven Toll, a partner at Cohen Milstein Sellers & Toll PLLC in Washington. It has contributed only modestly—$62,000 to out-of-state candidates—and Mr. Toll says he is sure its low level of giving has cost the firm business. But “we want to be chosen on merit, not because we contributed money,” he said.
The story looks at several specific examples, and has an extensive discussion of alleged “pay-to-play” in Ohio involving, among others, disgraced former Attorney General Marc Dann.