Amidst the hubbub of the Lay-Skilling trial, it’s a bit 1980’s-esque to harken back to the days of the Savings & Loan debacle. Nevertheless, this interesting DOJ press release caught my eye earlier in the week because it deals with one of the more colorful characters of that bygone era, Edwin T. McBirney, III, the former chairman and CEO of Sunbelt Savings. Sunbelt bit the dust during the shakeout of the S&L’s during the late 1980’s and early 90’s, and the federal government pegged the cost of Sunbelt’s demise at about $1.2 billion.
At any rate, McBirney lived large during the go-go days of Sunbelt. Legend has it that, at one of McBirney’s numerous parties, hundreds of Sunbelt’s customers and friends feasted on lion, antelope and other exotic game while two obese disco singers “entertained” by serenading the guests with “Two Tons of Fun.” At another affair with an African safari theme, McBirney dressed up as the Great White Hunter while guests ate water buffalo ribs and watched a magician make a live elephant vanish.
However, by 1990, the fun had ceased as McBirney pleaded guilty to stealing $7.5 million from Sunbelt in the years before its liquidation and, as part of his 15-year plea deal, McBirney agreed to pay the money back to the federal government. After chirping like a prosecution canary against another savings and loan executive, McBirney’s sentence was eventually reduced to five years and, in 1996, he was released on five years’ probation.
Alas, it seems as if McBirney had a difficult time reconciling his taste for living with his $7.5 million restitution obligation. While in prison, McBirney set up a trust to mask his post-prison earnings, so — upon his release from prison — McBirney was able to get by on as little as $50,000 a year despite the fact that he continued to enjoy a chauffeur-driven limousine, a $600,000 home in North Dallas and expensive meals in trendy restaurants. In short, McBirney never met an expense that couldn’t be written off as a cost of doing trust business.
Well, unfortunately for McBirney, somebody with the federal government finally noticed and, this past Tuesday, the 53-year old McBirney was found guilty on 27 counts of fraud, money laundering and lying to federal authorities about his true income while on probation for his previous conviction. As a result, McBirney now faces another 20 years in the pokey and the forfeiture of $2 million in cash and assets from the trust.
I don’t know about you, but I’m going to miss that guy. ;^)

Although the market for earnings restatements is robust (over 1,200 last year alone), the NY Times Steve Labaton reports that the market for lawsuits based on those restatements is not:

For all of the handwringing in some corners of Washington and in corporate America about vexatious litigation, it turns out that you can count last year’s number of investor class-action lawsuits against accounting firms on one hand.
A mere five cases were filed, according to the tally produced each year by Prof. Joseph A. Grundfest of Stanford Law School, a former commissioner at the Securities and Exchange Commission. The report found a sharp decline in the overall number of securities fraud class actions, as well as a marked reduction in the investor losses claimed by the suits. And it found that the Ninth Circuit, which includes California, a traditional haven for lawsuits because of the large number of technology start-ups, has been “losing its prominence.”
What’s going on?
Professor Grundfest, who has often been critical of what he sees as baseless shareholder litigation, has two explanations. The lawsuits related to the bursting of the market bubble beginning in 2000 are now largely over.
“The pig may have moved through the python,” he said.

The article goes on to note other chilling effects on the class action business fraud lawsuit, such as increasingly pro-business jurists, SOX (not sure about that one), the PSLRA, and the Supreme Court’s Dura decision.