Firms profited from Garrett Bradley’s ties
Thomas J. O’Brien is an unlikely magnet for campaign contributions from high-powered attorneys in Manhattan and downtown Boston. The Plymouth County treasurer works in a sleepy branch of government that has little impact outside his county.
Yet, since 2007, lawyers from the Thornton Law Firm in Boston and Labaton Sucharow of New York City have given $100,000 to O’Brien’s political campaigns, accounting for almost half of all the donations he’s received over the decade.
O’Brien’s popularity with the firms can be traced directly to the small retirement fund that, as county treasurer, he oversees. Fourteen times in the past decade, the Plymouth County retirement system has filed lawsuits on the advice of the lawyers from Labaton and Thornton, charging one corporation after another with misconduct that reduced the value of the retirement system’s investments.
The lawyers, including O’Brien’s old legislative colleague Garrett Bradley of Thornton, say they admire O’Brien because he stands up to corporate mismanagement. But Plymouth’s serial lawsuits have benefited the lawyers vastly more than retirees and employees in Plymouth County. Court records show that the retirement fund has collected a grand total of $40,035 from all the lawsuits combined while the lawyers have received 1,000 times that amount: $41.4 million.
It can be hard to persuade pension fund managers to lead class action lawsuits when, in the end, they’ll often receive just a token payment — the lawyers may take 25 percent or more of any settlement while the pension fund that leads the suit must split the remaining money with thousands of other investors.
But in Massachusetts, no one is better at persuading investors to join class action lawsuits than O’Brien’s friend Bradley, the managing partner of Thornton Law Firm and, until his sudden departure a few months ago, assistant majority leader in the state House of Representatives.
Drawing on his political connections, Bradley essentially works as a salesman for Labaton, a nationally known securities litigation firm. His job is to line up public and union pension funds willing to serve as plaintiffs in lawsuits that the Labaton lawyers come up with by analyzing the stock market.
Bradley “drums up business, he gets the work,” explained Brian Kelly, a former federal prosecutor hired by Thornton Law Firm to answer Globe questions. “He and (Michael) Thornton are the two rainmakers.”
Since Bradley began generating business for Labaton in 2004, the firm has filed more than 100 cases on behalf of Massachusetts pension systems such as those in Plymouth and Norfolk counties, the City of Boston, and the biggest one of all, the state pension fund known as PRIM. Along the way, Bradley asked Boston Mayor Martin J. Walsh — when he was a legislator and union leader — to introduce him to union pension leaders, according to a person with firsthand knowledge. Bradley hired another legislative colleague to help build ties to Cambridge pension officials, state records show.
And Bradley has freely used campaign donations to reward pension fund allies, such as O’Brien, whose former legislative district is just a few miles from Bradley’s home in Hingham. The two men still talk frequently on the phone, a Thornton spokesman acknowledged.
O’Brien said his county’s decision to join so many Labaton lawsuits has nothing to do with political favors. He said he sees it as his duty to help expose corporate wrongdoing — even if the lawsuits don’t bring significant payments to Plymouth.
“We believe that we have an obligation to protect the interest of our members and retirees against illegal corporate behavior,” O’Brien said in an e-mailed response to Globe questions.
Officials at Thornton and Labaton say they, too, have done nothing wrong in supporting public officials they agree with.
“Labaton Sucharow’s work with the Thornton Law Firm has complied fully with all ethical and legal standards,” said a Labaton Sucharow spokeswoman, Diana Pisciotta, in a written statement. She said the firm supports candidates nationwide who “support investor rights, integrity, and transparency in the markets.”
Fund-raisers for Cahill
Former state treasurer Tim Cahill in court in 2012, durign his corruption trial.
Greg Derr/The Patriot Ledger/Pool/File
Former state treasurer Tim Cahill in court in 2012, durin his corruption trial.
But Bradley’s willingness to use his political connections to promote Labaton has led him to ethically murky territory.
Bradley cultivated close political and personal ties to then-Treasurer Tim Cahill at a time when Cahill was overseeing the state pension fund, PRIM, and Labaton was trying to get its business. Cahill also employed two of Bradley’s relatives at the Treasury.
As a state legislator, Bradley was barred from doing paid work for a state agency and he denied playing any role in recruiting PRIM to become a Labaton client. However, calendar records show that Bradley and an attorney from Labaton held a fund-raiser for Cahill in March 2005 while PRIM was looking for law firms to monitor its stock portfolio and possibly sue if they found corporate wrongdoing.
Combined with a second Cahill fund-raiser Bradley hosted a few months earlier, he helped raise more than $30,000 from Labaton and Thornton lawyers and their families.
Bradley acknowledged hosting the fund-raisers but said he didn’t discuss the securities work with Cahill. If he had, it would have violated state rules barring applicants for state contracts from contacting state officials during the bidding.
Three months after the second fund-raiser, Labaton got the job and went on to make roughly $60 million from two successful lawsuits, sharing around $9 million with Thornton Law Firm, according to public records. For its part, PRIM collected $681,763.
Greg Sullivan, a former state inspector general now at the Pioneer Institute think tank, said Bradley’s work as a salesman for Labaton while he was a legislator was improper from the start.
“To me, there’s something very wrong about a powerful legislator approaching the institutional creatures of the Legislature that they regulate and trying to convince them to give him business,” said Sullivan.
Bradley declined to discuss his work for Labaton, but he took a drastic step when the Globe began asking questions about his work with PRIM last June: He abruptly resigned from the Legislature, stunning his colleagues. He said he was getting a promotion at Thornton that required his full attention, but he stepped down so fast that the Democrats had no time to recruit someone else to run for the seat and his name appeared on the ballot.
A few months later, in November, Bradley also resigned his formal position at the New York firm and his name was removed from the firm’s website. However, a Thornton spokesman said Bradley is still soliciting clients for Labaton.
The Thornton spokesman, Peter Mancusi, said that Bradley’s resignations were strictly related to his blossoming legal career because he realized “his new role required his full-time attention.” The unpaid Labaton position, the spokesman said, required Bradley to spend significant time in New York.
Thornton officials note that, as a precaution, Bradley doesn’t accept payment for lawsuits Labaton pursues with PRIM. However, law firm records obtained by the Globe show that Bradley gets more than his usual percentage of fees from securities cases involving Massachusetts pension funds other than PRIM. A Thornton spokesman said the extra money was not to make up for the loss of PRIM income but for generating business in Massachusetts and 10 other states.
Thornton officials also pointed out that former attorney general Scott Harshbarger, hired in 2006 to provide ethical guidance for Bradley, concluded at the time that Bradley had “consistently done, and continues to do, the ‘right thing’ ” in balancing his legal and political work. “He has generally abstained from even marginal conduct on his own accord.”
Bradley and his Thornton colleagues are now facing a federal criminal investigation into their firm’s massive political donations program. The US attorney wants to know whether the law firm illegally reimbursed the firm’s attorneys for donations, including those to politicians who oversee pension funds. Revelations about the alleged multimillion dollar “straw donor” scheme, disclosed by the Globe Spotlight team in October, prompted Hillary Clinton, Elizabeth Warren, and many other top Democrats to return money from Thornton.
Plymouth County Treasurer O’Brien, however, did not return the money he received from Thornton.
“It is my current understanding that the donations I have received are completely legal,” he said, adding, “Of course, if after a thorough review any governmental agency determines that a contribution was made illegally, I will return it immediately.”
Class action lawyers win big
Shareholder litigation has its detractors, even within the legal profession: Rather than waiting for injured parties to come to them, the lawyers typically gin up potential lawsuits based on the movement of financial markets and then try to find stockholders who can sue as “victims.” Depending on your perspective, they’re either crusaders against fraud or corporate ambulance chasers.
Sometimes, shareholder lawsuits shine a light on corporate wrongdoing or hold companies accountable for serious misconduct. For instance, PRIM agreed to be Labaton’s lead plaintiff in a lawsuit against Massey Energy after one of its mines collapsed and killed 29 miners. The lawyers argued the West Virginia coal mining company, in which PRIM held tens of thousands of shares, had lied when it claimed before the disaster to be one of the safest mining companies in the country, misleading investors.
But critics say many class action securities lawsuits attempt to capitalize on the normal fluctuations of the stock market and aim less to prove wrongdoing than to prompt a settlement.
“Most of the class actions brought in state and federal court are wholly concocted and contrived by law firms,” said Darren McKinney, spokesman for the American Tort Reform Association, which advocates greater restrictions on lawyers’ ability to file class action suits.
And, because the plaintiffs typically receive so little from the lawsuits compared to the lawyers, it encourages a “pay to play” environment in which lawyers try to curry favor with elected pension fund overseers, according to Columbia Law School professor Jack Coffee. He noted that securities litigation is so lucrative that plaintiff law firms often compete to represent the same alleged victims using campaign contributions.
“Very few law firms get chosen as plaintiffs’ counsel where other firms have made political contributions and they have not,” said Coffee. He noted that an American Bar Association rule prohibits lawyers from making political donations to obtain government work, but it is rarely enforced.
For Thornton Law, a personal injury firm that specializes in representing victims of asbestos-related diseases, securities litigation opened a world of opportunity. The firm’s longtime bread and butter — lawsuits on behalf of victims of a rare form of lung cancer called mesothelioma — appeared to be declining, and firm founder Michael Thornton went looking for new sources of revenue. Around 2004, he teamed up with Manhattan-based Labaton, whose lawyers had worked with him on tobacco cases.
Bradley, who worked with Labaton from the start of the relationship, was instrumental in persuading more than 15 public pension funds and a host of union pension funds to sign up with Labaton. Bradley’s pitch included offering the potential plaintiffs free “monitoring” of the stock market for potential signs of corporate misconduct that could have affected their portfolios.
Bradley, a rising star on Beacon Hill, called on friends and political allies to help him build his business. Former House Ways and Means chairman Charles Murphy, for example, introduced Bradley to leaders of the Cambridge retirement system, a Thornton Law spokesman acknowledged.
For his efforts, Murphy received $11,476.85 as “co-counsel” on several Cambridge retirement system cases.
Thanks in large measure to Bradley’s work, Labaton has dominated the market for pension fund lawsuits in Massachusetts. Though other law firms have agreements with some of the state’s 105 pension systems, state records kept since 2013 show that Labaton and Thornton have made by far the most from litigation brought on behalf of those systems.
Records show that Labaton earned more than $75 million from settling about 50 cases on behalf of Massachusetts pension systems in the last three years, and in turn it paid Thornton Law about $12 million.
For Bradley, who left a low-paying assistant district attorney’s job to join Thornton in the late 1990s, the work for Labaton has helped make him a wealthy man. In 2012, the year the first securities cases began to settle, Bradley’s income doubled — from $387,369 to $767,892 — according to firm payroll records. In 2016, he earned millions, a spokesman acknowledged, in part because of the $18 million the firm received from the settlement of a Labaton-led case against State Street Bank and Trust. The State Street suit was brought on behalf of bank customers and was not a shareholder case like the others.
The case against CVS
Bradley’s work for Labaton often involves sending flurries of e-mails to various pension officials, including to the Plymouth County treasurer’s personal account, alerting them to drops in stock prices that could lead to potential lawsuits.
In a 2010 lawsuit against CVS Caremark, for example, Plymouth County and Norfolk County officials did not come to the lawyers complaining that they had been deceived. Instead, Bradley notified them that CVS’s stock price fell steeply in late 2009 and suggested the drop was caused by mismanagement of CVS’s prescription drug program.
“CVS belatedly disclosed that the Federal Trade Commission had begun a nonpublic investigation,’” wrote Bradley in a Jan. 14, 2010, e-mail to the pension fund leaders that he signed simply “Garrett.” As a result of the company’s belatedly disclosed mistakes, he added, “the price of CVS stock fell 20 percent . . . its biggest drop in 8 years.”
Lawyers for CVS urged a judge to disqualify the Plymouth County and Norfolk County retirement systems from the resulting lawsuit because attorneys at Labaton and Thornton had donated so much to O’Brien and Norfolk Treasurer Joseph Connolly, who received $61,500 from the Labaton and Thornton lawyers from 2005 to 2012. CVS lawyers noted that 11 donations were made to O’Brien just days after the CVS stock drop.
“Why would a lawyer from Garden City, New Jersey, for example, donate to a Plymouth County treasurer who is years away from his next election, less than two weeks after the stock drop at issue in this case?” the defense lawyers wrote.
The political donations create “both an appearance of impropriety and a conflict of interest,” the lawyers wrote. Ultimately, the case settled — CVS agreed to pay $48 million, $14.4 million of which went to lawyers, not counting expenses — without the judge ruling on the propriety of the donations.
‘Grotesque legal proceeding’
CVS attorneys weren’t the only ones to complain. CVS stockholder Arthur Miller — who was in line to receive about $16 from the settlement fund, if all shareholders applied for payment — wrote to the judge to “object to each and every aspect of this grotesque legal proceeding.”
Miller said the settlement Labaton negotiated would “pay off all the legal people involved and give crumbs to the eligible shareholders.”
The judge noted Miller’s objections but approved the settlement and legal fees anyway.
Of all the potential clients in Massachusetts, no pension fund is more highly sought after than PRIM. With $63 billion in assets, PRIM has faced relentless requests from Labaton and other law firms to file lawsuits against companies that may have engaged in wrongdoing.
Michael Travaglini, who ran PRIM from 2004 to 2010, said he resisted pressure to sign on to most shareholder lawsuits because they benefited the lawyers far more than the pension fund. “Upon reflection, it seemed that the financial value was almost exclusively left to the law firms,” he said.
To better manage all the jostling among attorneys, the attorney general, acting on behalf of PRIM, issued a formal request for law firms to monitor the stock market for possible lawsuits in 2005 while Cahill was treasurer. That’s when Bradley hosted the Cahill fund-raisers, raising questions of whether he was currying favor in hopes of getting PRIM’s legal business, a charge Bradley denies.
Former US attorney Michael Sullivan, who hired Bradley as a prosecutor when he was the Plymouth County district attorney in the 1990s, recalled his former employee as hardworking and highly ethical, someone who could appropriately juggle his public and private roles.
“I found he could manage a private law practice and his work as a state legislator. I always saw him separating the two and never taking advantage of one for the other,” he said.
But Greg Sullivan, the former state inspector general, said Bradley should not have been representing government agencies while he was a legislative leader in the first place.
“If a public official is working as a rainmaker with agencies he oversees, it’s hard to distinguish what he’s being paid for,” said Sullivan.