Industry Eye: Harley nemesis jailed

Bill Lerach also ordered to pay $7.5m in damages

BILL LERACH, one of America’s most feared corporate lawyers who initiated a class action against Harley-Davidson for allegedly duping its shareholders in 2005, has received a stern dose of his own medicine.

On 11 February, Lerach was sentenced to two years in prison, fined $250,000 and barred forever from practising law for operating a kick-back scheme that bribed shareholders to act as lead plaintiffs in class-action lawsuits he initiated. He has also had to pay $7.75m in damages.

Lerach’s modus operandi was characterised by the Harley-Davidson case. He accused the company’s senior management of repeatedly stuffing their US dealer network with excessive inventory to inflate the brand’s financial results and send the share price up into the stratosphere - so that they could sell large tranches of directors’ share options for top dollar.

The SEC, the US stock market regulatory authority, investigated the allegations and decided that there wasn’t much substance. Harley also stood its ground, refusing to be spoofed into the sort of out-of-court settlement Lerach had screwed a lot of other companies with, and eventually the whole thing fell on its face.

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