As I was reading yesterday's expose and in depth reporting on the New York State pension fund "pay to play" scandal in the NY Times yesterday, I couldn't help but be struck by how incredibly pervasive the corrupt practice was and is.
If you haven't read it check out the story and learn about the nationwide web of "placement agents" who are really nothing more then politically connected strong arm boutiques that exploit their contacts in state agencies and government to extract "finder fees" from investment managers so that they can get huge chunks of business from state and local pension funds. NY Attorney Andrew Cuomo has done an excellent job of going after these arrangements which in many instances are nothing more then strong arm rebating and payola deals by ethically challenged state employees or "consultants" tied to the state agency.
Why did the investment managers, over 300 and counting, agree to go along with this tactic? Largely because it was the only way to get the business once some investment firm foolishly agreed to cave in to the request in the first place, thus establishing in the minds of the pension fund that it was OK to sqeeze vendors in order to give them business. Fortunately some of these guys will be in jail soon and out of the "pension consulting" business.
What struck me though was the disturbing similarities to the strong arm tactics being employed on the plaintiff side of the structured settlement business, where in structured settlement firms will agree to pay exorbitant sums of money to state or national trial lawyer organizations in order to be named their exclusive or preferred provider of services to their membership.
As I mentioned in my post a few weeks back on the growing trend of trial lawyers asking for out right kick backs of commissions on structured settlements that I'm hearing about, the mind set of Pay to Play has been initiated by the state and national organizations that make the settlement industry vulnerable to these tactics.
Lets face it, every state and local trial organization needs money and when they witness the national organizations extracting huge amounts of money from settlement firms and other vendors to get "preferred status or access" with their members, what is to stop them from following suit? It doesn't matter if the firm is any good at what they do or competent, although they will often go through some nominal vetting or back ground service. No, what matters is the size of the check at the end of the day and what they can do for the trial lawyers.
I won't rehash my long standing and demonstrable commitment to trial lawyers and their causes, I've beaten that to death and don't feel I need to reaffirm that. If anything, my 25+ years serving only plaintiff and trial lawyers makes this even more painful as i've witnessed this slowly creeping corruption get worse and worse. You would be hard pressed to find the few hold out state organizations that haven't implemented some form of "preferred provider" status that can be purchased, thats how wide spread it is, and the ethos that says "squeeze the settlement guy for cash" continues to spread because of the number of settlement brokers and firms that cave into the pressure.
What I find ironic is the very people and organizations that purport to be so firmly against rebating on the defense side are the one's that pay the largest amount of tribute to national, state and local trial lawyer groups in the form of pay to play endorsements and exclusivity. At the very time where rebating on the defense side has been largely wiped out and eliminated, we are witnessing an explosion of ethically questionable practices on the plaintiff side as the made scramble for cash and premium has led to a wave of "plaintiff experts", many of whom are just recycled defense guys, bringing their lousy business model over to the plaintiff side of the business.
As i've said before, these tactics and practices will not go unnoticed for much longer. There is a big difference between asking for advertising dollars or sponsoring a golf tournament and endorsing a firm largely based on the size of the check they write. It has led to the perception that the settlement industry can be bought and why are we suprised that certain trial lawyers would thus take advantage of that fact?
We reap what we sew and eventually NSSTA and SSP are going to have to get deadly serious about creating an ethics policy that drums members out of the business that engage in these corrupt and questionable practices.