The morning our editorial of January 25, 2007, "New York Versus Apple," appeared, questioning the wisdom of a shareholder lawsuit against Apple Computer led by the New York City pension fund, our phone rang and it was the city comptroller, William Thompson Jr. He was upset that we had, in his view, questioned his integrity. The editorial, in fact, had not questioned Mr. Thompson's integrity. The editorial stated specifically that what this paper was questioning was his judgment in accepting campaign contributions from trial lawyers whom he was hiring to represent the city's pension fund in these sorts of shareholder litigations.
The editorial also promised that we would be happy to share with our readers news of the answers to queries we'd lodged with the city at the time that it was unable immediately to answer. The firm representing the New York City Employees' Retirement System in the federal lawsuit against Apple and its directors is Grant & Eisenhofer; the editorial noted that a Grant & Eisenhofer partner, Keith Fleischman, gave a $1,000 campaign contribution to Mr. Thompson in 2003 when Mr. Fleischman was a lawyer at Milberg Weiss, a firm that has, in an unrelated case, been indicted on federal charges.
Since then the city has replied to more of our queries. The Law Department's deputy pensions chief, Carolyn Wolpert, supplied the Sun with the names of the nine law firms in the "securities litigation pool" that the city uses to file these shareholder suits. As the graphic nearby shows, several of them or lawyers associated with them have made campaign contributions to the comptroller that make the $1,000 from Mr. Fleischman look like pocket change. In particular, two firms that, according to Ms. Wolpert, evaluated the Apple litigation before the NYCERS board decided to go ahead with it — Kirby McInerney & Squire, LLP and Pomerantz Haudek Block Grossman Gross LLP — have put a total of more than $54,000 into the campaign coffers of Mr. Thompson, who faced only token opposition when he was reelected in 2005 with more than 90% of the vote.
|Campaign contributions raised by the New York City comptroller, William Thompson Jr., from law firms in the city's securities litigation pool and lawyers affiliated with them.|
In the case at hand, the chief of the pensions division of the city Law Department, Inga Van Eysden, acknowledged to us that "Grant & Eisenhofer brought the idea of NYCERS filing a lead plaintiff application in Apple to the Law Department's attention." What we take this to mean is that New York didn't realize it had been injured and then set out to find a lawyer. Instead, a lawyer chased down a perfectly healthy client and brought the client the idea of a lawsuit, even though the Apple stock the city owned was up 600% over the past two years.
The context in which all this is unfolding is one of new public scrutiny of such lawsuits. On February 20, the Wall Street Journal ran a lead editorial about state attorneys general, remarking, "You have to smile at their nerve. These are the same AGs who deplore the mere appearance of a ‘conflict of interest' in business, and who justify their lawsuits as protecting state consumers. Yet they don't seem to think it is a conflict if their offices sign contracts with law firms that return a cut of their profits back to the AGs as campaign contributions." One could say the same thing, albeit on a more modest scale, about Mr. Thompson.
Yesterday, the New York Times ran a lead editorial urging the New York State comptroller, Thomas DiNapoli, to "declare that he will not take campaign contributions from anyone who does business with his office. Not a penny. The appearance of complete impartiality is essential for an official charged with safeguarding state workers' pension funds." One could say the same thing about Mr. Thompson, being an official charged with safeguarding city workers' pension funds.
We're not entirely unsympathetic to Mr. Thompson's situation. Unlike Michael Bloomberg, he's not wealthy enough to finance his own mayoral campaign. Municipal bond houses that comptrollers used to rely on for contributions have stopped giving, in an agreement to stop the appearance of "pay to play." Trial lawyers, whatever their faults, are Americans with the same First Amendment right to get involved in politics by giving money that is enjoyed by citizens who are not members of the trial bar.
It's one thing, however, to take campaign money from trial lawyers. It's another thing entirely to turn around and allow those lawyers to use the good name of the city pension fund to pursue litigation with no redeeming value other than racking up huge fees for those same trial lawyers. The price Mr. Thompson pays for the more than $100,000 in campaign contributions he has taken from the class-action security lawyers who represent the city is inevitability that the newspapers — and, someday, perhaps, voters — are going to question his judgment in pursuing this sort of litigation.