Big-Name Fund-Raising Event Prompts Questions : Politics: Supporters say swanky party helped a worthy cause. Critics fault it as big-money lobbying.

The wealthy trial lawyers who paid $1,000 each to attend a swanky San Diego fund-raiser Sept. 21 were understandably awed by the impressive lineup of top politicians assembled there: Senate Majority Leader George J. Mitchell (D-Me.), four other Democratic senators and five leading Senate candidates from California.

The host of this unusually high-powered gathering was William S. Lerach, an energetic San Diego plaintiffs’ attorney and Democratic fund-raiser who personally contributed $74,000 to congressional candidates in 1989-1990--exceeding the legal limit of $25,000 in 1990. At his September event, $190,000 was raised for the Democratic Senatorial Campaign Committee.

By all accounts, Lerach is also the leading proponent--and perhaps a principal beneficiary--of legislation introduced just two months earlier by Sens. Richard H. Bryan (D-Nev.) and Alan Cranston (D-Calif.), who were among the honored guests at the San Diego party. The bill would lengthen the current statute of limitations on class-action stockholders’ suits alleging securities fraud by corporate officers.

Was it just a coincidence that brought Lerach, Bryan and Cranston together that night--as they all contend--or was Lerach’s lucrative fund-raiser a reward to the Senate Democrats for their authorship of his pet legislation?

In an Aug. 28 letter inviting potential contributors, Lerach made it clear that the party was an opportunity for San Diego trial lawyers to discuss “the threats that confront us” with the senators. And he specifically mentioned the statute-of-limitations issue.

“You don’t often get a chance to spend an evening with seven members of the United States Senate. . . .” Lerach wrote in his invitation. “Most importantly, this event will give us an opportunity to support and express our views to some of the most influential members of the Senate who are in a position to protect the rights that we fight for on a daily basis and must preserve.”

While it is probably not unusual for big political fund-raisers such as Lerach to set such an agenda privately, political professionals say that few of them ever put it so bluntly in writing.

Nevertheless, Bryan, Cranston and Lerach all insist that there was no direct connection between the bill and the $190,000 in contributions raised that night. Lerach says that the party was scheduled long before the Democrats ever introduced the bill. Bryan insists that Lerach played no role in persuading him to offer the legislation. And Cranston says that, while he was persuaded by Lerach to support the bill, he did it entirely for altruistic reasons.

Furthermore, Lerach’s admirers argue that even if the fund-raiser was intended to repay Democrats in Congress for backing the Bryan bill, their effort was completely above reproach because the measure would benefit disenfranchised small investors, not big-money interests.

Michael Waldman, executive director of Congress Watch, a Ralph Nader group that supports campaign finance reform as well as the Bryan bill, notes that the legislation sought by Lerach is opposed by a well-financed coalition of lobbyists representing securities lawyers, accountants, banks and insurance companies.

“I think that the campaign finance system and the role of big money needs to be changed, but I don’t see this as an example of where an indefensible piece of legislation is moving along because of money.” Waldman said.

But other critics of the current campaign finance system see the story of Lerach’s fund raising for Democrats as another vivid example of how the political system is being corrupted by big-money contributors whose primary objective is to win legislation that is in their own economic interests.

“When money drives a decision, no matter how worthy the cause, it ultimately disenfranchises those who don’t have money,” said Ellen Miller, executive director of the Center for Responsive Politics, a bipartisan think tank that is usually allied with Congress Watch on campaign finance matters. “If it is based on money instead of merit, it is unfair. Every money interest would say that their bill is defensible.”

No matter who is right, there is little doubt that Lerach, a leading litigator of class-action stockholders’ suits, is deeply enmeshed in what is fast becoming one of the most high-stakes lobbying battles in Washington.

Not only would the Bryan bill affect current and future lawsuits worth billions of dollars, but business lobbyists view it as the first skirmish in an escalating legislative war over corporate governance issues, such as whether the compensation being paid to top corporate executives is excessive.

Bush Administration officials themselves are deeply divided on the issue. While President Bush has taken no position on the Bryan bill, Securities and Exchange Commission Chairman Richard C. Breeden testified in favor of it before Congress. And Vice President Dan Quayle, an outspoken critic of trial lawyers, is working behind the scenes against it, though aides say that he will not publicly take a position until the President announces his views.

The statute-of-limitations issue arose as a result of the Supreme Court’s 5-4 ruling on June 20 that plaintiffs must sue for securities fraud within three years of the date that the fraud occurred and within one year of the date it was discovered. The 1934 Securities and Exchange Act, under which these suits are normally filed, contains no such limits.

The ruling is expected to affect not only all future suits but perhaps some suits that were pending at the time the high court ruled.

A month after the court ruled, Bryan offered his bill, which would allow plaintiffs to sue within five years of the date the fraud occurred and one year of the date it was discovered.

Since then, Bryan’s bill has been incorporated into a banking reform measure approved by the Senate Banking, Housing and Urban Affairs Committee, and Rep. Edward J. Markey (D-Mass.) has offered similar legislation in the House. Markey’s bill would allow victims of securities fraud to file claims within three years after discovery and five years after the fraud occurred.

Leading opponents of the bill include the Securities Industry Assn. and many big investment and accounting firms.

Lerach himself downplays his lobbying role on behalf of the Bryan bill. In early September, he told The Times in an interview that he had no particular interest in any legislation. More recently, he acknowledged his personal interest in the bill but said that he had no recollection of ever speaking to Bryan about it.

For his part, Bryan says that he offered the legislation at the behest of a constituent, Richard Griest, who wrote numerous letters to complain about the Supreme Court decision. While Bryan acknowledges that he had met Lerach a year earlier at another fund-raising event in California, aides insist that the two men never discussed the bill before it was introduced.

Jean Neal, a Bryan aide, says that only after the measure was introduced did the Nevada senator begin contacting trial lawyers--including Lerach--asking them to provide support for the bill and witnesses for a Senate hearing. She identified Lerach as a key member of the coalition supporting the legislation.

Murray Flander, Cranston’s spokesman, acknowledged that the California senator was persuaded by Lerach to back the Bryan bill. He indicated that Cranston was swayed at least in part by the argument that the bill would help plaintiffs in a class-action suit filed by Lerach against Charles H. Keating Jr. The suit was filed on n behalf of more than 22,000 investors who bought worthless junk bonds from Lincoln Savings & Loan Assn.

Ironically, a suit filed on behalf of the bondholders alleges that Cranston and four other senators were partly responsible for the Lincoln Savings debacle. Cranston is under investigation by the Senate Ethics Committee on charges that he improperly intervened with federal regulators in exchange for nearly $1 million in donations from Keating.

Cranston denies that he acted improperly in the Keating case or that he is to blame for the bondholders losing money.

While Lerach may have played only a minor role in persuading Democratic senators to sponsor the Bryan bill, he clearly viewed his fund-raiser as an opportunity to lobby them on the issue.

San Diego trial lawyers apparently were awed by the impressive lineup of political heavyweights that Lerach was able to bring to the party. In addition to Mitchell, Bryan and Cranston, the other big-name guests at the party were Democratic Sens. Lloyd Bentsen of Texas and Charles S. Robb of Virginia and five Democratic candidates running for the Senate from California--former San Francisco Mayor Diane Feinstein, Lt. Gov. Leo T. McCarthy, Rep. Barbara Boxer of Greenbrae, Rep. Mel Levine of Santa Monica and State Controller Gray Davis.

According to Federal Election Commission records, Lerach and his family members contributed at least $107,000 to congressional candidates before the 1990 election. His own gifts of $58,000 in 1990 far exceeded the legal limit of $25,000. At the same time, members of his law firm--Milberg, Weiss, Bershad, Specthrie & Lerach--contributed $218,000 to congressional candidates before the 1990 election.

Bryan has never personally received any campaign contributions from the firm, but the Democratic Senatorial Campaign Committee got $77,250 from the firm during the 1989-90 cycle, and Cranston received $27,000.

Opponents of the Bryan bill insist that Lerach and his law firm would be the biggest beneficiaries of the legislation.

Lerach acknowledges that some of his clients are affected by the Supreme Court decision, but he minimizes his own economic stake in the Bryan bill, arguing that it is designed primarily to help stockholders who have been defrauded.

Lerach’s firm was recently awarded fees of $9 million from an $18-million settlement of a suit against the officers of Northrop Corp. But Leonard B. Simon, a Lerach law partner, says that such a big settlement is unusual. In most such contingency fee cases, he said, plaintiffs receive about 70% to 80% of the award.

Furthermore, Simon charges that the opponents of the Bryan bill are trying to generate publicity and suggest that it is special interest legislation solely backed by trial attorneys. He notes that the bill also has the support of the SEC, the Federal Deposit Insurance Corporation, the American Assn. of Retired Persons, the Consumer Federation of America, the United Shareholders Assn., the North American Securities Administrators and Nader’s Public Citizen.

Simon says that the political clout of these groups is dwarfed by the lobbying clout on the other side. “It’s everybody with money versus everybody without,” he said.

But Miller, who advocates stricter enforcement of limits on campaign contributions, says that she suspects the issues of stockholder suits is fast becoming a “cash cow” for politicians on both sides.

Staff writer Mark Platte in San Diego contributed to this story.

High-Stakes Lobbying: A Case Study The 1989-1990 contributions by Milberg, Weiss attorneys to political candidates. Given to: Amount Sen. Alan Cranston (D-Calif.): $27,000 Sen. Joseph R. Biden Jr. (D-Del.): $13,750 Sen. Bill Bradley (D-N.J.): $13,650 John Innelli (D-Pa.): $11,000 Sen. John Kerry (D-Mass.): $10,000 Sen. Arlen Specter (R-Pa.): $10,000 Sen. Howell Heflin (D-Ala.): $7,250 Sen. John D. Rockefeller IV (D-W.V.): $6,000 Rep. John Conyers Jr. (D-Mich.): $5,000 Stephen Georgiou (D-San Diego): $3,500 Theodore Muenster (D-S.D.): $3,500 Harvey Gantt (D-N.C.): $2,200 Sen. Albert Gore Jr. (D-Tenn.): $2,000 Baron Hill (D-Ind.): $2,000 Harold Lonsdale (D-Ore.): $2,000 Rep. Nita M. Lowey (D-N.Y.): $2,000 Sen. Claiborne Pell (D-R.I.): $2,000 Sen. Lloyd Bentsen (D-Tex.): $1,500 Rep. William J. Hughes (D-N.J.): $1,500 Jim Bates (D-San Diego): $1,000 Sen. David L. Boren (D-Okla.): $1,000 Rep. Gerry Sikorski (D-Minn.): $1,000 Rep. Mike Synar (D-Okla.): $1,000 Rep. Edward F. Feighan (D-Ohio): $500 Democratic Senatorial Campaign Committee: $77,250 National Assn. of Securities and Commercial Law Attorneys PAC: $9,000 Democratic Congressional Campaign Committee: $1,250 Golden Eagle Club of San Diego: $650 Contribution totals include contributions made by attorneys working for the law firm Milberg, Weiss, Bershad, Specthrie, Lerach and, where identifiable, their spouses. Source: Los Angeles Times Computer Study of Federal Election Commission Records