Castel sits on the U.S. District Court for the Southern District of New York. He has a reputation as a no-nonsense judge and presided over the 2009 mob trial of John A. (Junior) Gotti.
In the Bank of America case, Castel awarded $152 million in fees, plus $8 million for expenses, to the three national law firms that took the lead. But Lieberman, he said, was a “hanger on-er” who never filed an appearance on the record, according to a 66-page court transcript of the April 5 hearing on attorney fees.
The former Montgomery County Democratic Party chairman should get zero money from the $2.4 billion settlement, the judge ruled.
The plaintiffs in the class action lawsuit alleged that Bank of America broke federal securities law by failing to disclose Merrill Lynch’s losses when the two financial giants announced their merger in the fall of 2008. By the time Merrill Lynch’s troubles were disclosed, shareholders lost $50 billion in value, the plaintiffs alleged.
Bank of America denied the allegations and said it was agreeing to the settlement to avoid the cost and uncertainty of protracted litigation.
‘I was helpful’
As the case was getting underway in 2009, Cordray picked Lieberman, a criminal defense attorney, to be the Ohio-based attorney on the case.
Three high-powered firms with extensive securities fraud experience were named as the lead counsel and Ohio’s two largest public pension systems won position as the lead plaintiffs in the international class action case. The firms logged 180,000 hours in the case and pored over five million pages of documents. The case settled in September 2012, with roughly $22 million of the $2.4 billion settlement expected to go to Ohio’s two largest public pension systems.
University of Michigan law professor Adam C. Pritchard, who has studied the nexus between campaign contributions and legal fees in securities cases, said Judge Castel “is properly skeptical of Lieberman’s role.
“My instinct is Lieberman had something to do with the attorney general picking the firms that were selected and the firms were trying to use this as a back door way of paying him for it,” he said.
Lieberman said he was in on early legal strategy meetings, reviewed depositions and wrote memorandum. “I’m not going to say I was instrumental, but I was helpful in negotiating the settlement of this case,” Lieberman told the judge, according to the transcript.
Castel was having none of it.
“Is this kind of like the way it works out there, that if you want to retain securities counsel to prosecute this case, you make sure you have the attorney general’s designated local lawyer in for a piece of the action?” the judge asked Lieberman in a blistering line of questioning.
Castel told Lieberman to seek payment from the attorney general’s office, since it was the state that hired him. He also ruled that the other firms on the case cannot share their fees with any other firms without court approval. The national firms had supported Lieberman’s request for fees from the settlement pot. Lieberman’s firm was the only one slapped down by the judge, according to the transcript.
Lieberman and his firm hired counsel and are appealing Castel’s decision.
In an interview, Lieberman said: “The judge said the state should pay for our representation, not the class. But the state represented the class and the work that we did benefited the class. There were 630,000 documents that we looked at.”
If Lieberman’s firm isn’t paid out of the settlement, it means $6 million more for the plaintiffs who are spread around the globe.
Lieberman, who is married to Montgomery County Commissioner Debbie Lieberman, is running for Clayton City Council on the November ballot. He received some national exposure a year ago when, during the heat of the presidential election, Republican Ohio Secretary of State Jon Husted removed Lieberman and another Democrat from the Montgomery County Board of Elections in a dispute over early voting hours.
Lieberman, who was the county Democratic party chairman from 1994 to 2007, had been on the elections board for a decade.
If Castel’s ruling is left to stand, Lieberman’s hope for payment rests with DeWine. A review of campaign finance reports shows that 11 attorneys employed by Lieberman’s firm — Flanagan, Hoffman, Lieberman and Swaim — have each contributed $1,000 to DeWine’s campaign committee since the judge’s April decision. For some, it was the first political contribution they had made to the attorney general.
“I wasn’t aware of that,” Lieberman said when asked whether his partners are contributing in advance of possibly asking DeWine to pay the bill. “And, no, there is no connection.”
Lisa Hackley, spokeswoman for DeWine, said the state has not received a payment request from Lieberman’s firm on this case.