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Who Wins This Case? Lawyers

Firms that had once shunned criminal work now see white-collar defense as a potential growth business.

May 19, 2006|Molly Selvin | Times Staff Writer

Daniel M. Petrocelli and his Century City law firm probably won't be fully compensated for their work defending Jeffrey K. Skilling, as the former Enron Corp. chief executive appears to have exhausted his defense fund.

But the payoff down the road could be well worth it, even if Skilling is convicted.

The decision to defend Skilling is seen as a business move by Petrocelli and his firm, O'Melveny & Myers, to burnish their reputation and expertise in white-collar criminal defense.

White-shoe firms like O'Melveny that had once shunned criminal work as distasteful have come to see defending alleged corporate wrongdoers as a potential growth business. Enron's collapse, other corporate scandals and passage of the Sarbanes-Oxley law tightening corporate accounting rules have fueled much of this growth.

"Law firms are finding that criminal law practice is lucrative," said Charles Weisselberg of UC Berkeley's Boalt Hall School of Law.

Said Bryant Garth, dean of Southwestern Law School: "Firms are competing really aggressively to get the bet-the-company or bet-your-career cases."

White-collar defense is one element behind booming revenues at law firm giants. Revenues at the seven top-grossing U.S. law firms last year exceeded $1 billion, according to American Lawyer magazine. New York-based Skadden, Arps, Slate, Meagher & Flom headed the list with a record $1.6 billion. O'Melveny ranked 15th with gross revenue of $808 million.

To sustain that cash flow, top-drawer firms fiercely compete for Fortune 100 clients. That competitive pressure means the decision to take on a corporation or executive in trouble may mean weighing a near-term loss of fees against the possibility of future work from that client or other corporations, legal experts say.

After a 3 1/2 -month trial -- on top of years of preparation -- Skilling probably has blown through the $23 million he set aside for his defense before the government froze about $55 million of his assets. The former Enron executive, charged with 28 counts of conspiracy, fraud and insider trading tied to Enron's collapse, acknowledged in trial testimony that he owed quite a bit more -- millions, according to a source in his defense camp.

Even with full payment in doubt, O'Melveny has fielded a deep bench in Houston for Skilling's defense. Petrocelli is one of at least four firm attorneys who have been in the courtroom throughout the trial. They have been backed up by a team of attorneys, jury consultants, experts and support staff laboring on the 25th floor of Bank of America Center in downtown Houston.

Their rabbit warren of offices and cubicles is cluttered with carts stacked high with documents. Whiteboards on the walls are covered with notations, many apparently relating to the fall of Enron.

The criminal defense bar has long included stars such as Thomas A. Mesereau Jr. and the late Johnnie L. Cochran Jr., whose Perry Mason-like courtroom style have made them the first call for celebrities in distress. Mesereau successfully defended singer Michael Jackson in his latest child molestation case, and Cochran became an international celebrity for gaining the acquittal of former football star O.J. Simpson on murder charges.

Until he took on Skilling's defense, Petrocelli did not have much criminal case experience. But he is hardly a stranger to the legal spotlight. His take-no-prisoners courtroom style helped him win a $33.5-million verdict for the family of murder victim Ron Goldman in a wrongful-death suit against Simpson, and last year he prevailed in a decade-long legal battle on behalf of Walt Disney Co. over the merchandising rights to Winnie the Pooh.

Petrocelli, 52, declined to comment for this article, and representatives of O'Melveny declined to discuss the Skilling case.

However, Seth Aronson, managing partner of O'Melveny's Los Angeles office, boasted of the firm's strong roster of former prosecutors. He noted its successful defense of Wen Ho Lee, a Los Alamos National Laboratory scientist accused of stealing nuclear secrets for China in 1999, along with other corporate defendants.

O'Melveny began building its white-collar criminal expertise several years ago, Aronson said, because "clients are facing more shareholder-driven investigations and criminal investigations." That practice continues to "grow significantly year after year," he said.

Other corporate firms are going after this business as well. Brian McCarthy, a partner with Skadden Arps in Los Angeles, said many firms took notice when in 1984 Six Flags Inc. and two of its executives were charged with manslaughter after a fire at its New Jersey theme park. The company was later acquitted of the charges, and charges against the executives were dismissed.

"That case opened people's eyes that there was a need for that practice," McCarthy said.

Enron and other high-profile corporate scandals convinced law firms that such work was here to stay, he said.

According to UC Berkeley's Weisselberg, firms realize that "what begins as an in-house investigation by a corporation or a civil investigation by a regulatory agency might turn into a criminal investigation." Lawyers, particularly former prosecutors, can sometimes keep a small inquiry from mushrooming into an indictment, he said.

For an individual lawyer such as Petrocelli, however, fame is undoubtedly part of the appeal of these cases.

Skilling's trial is "a kind of historical event," observed William Henderson, an Indiana University law professor who studies large firms.

"If you've already made a living," he said, "why not be in the history books?"

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Times staff writer Thomas S. Mulligan in Houston contributed to this report.

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