But Prudential Securities was doing everything it could to make the large client base unwieldy. Already one of the firm's lawyers had told Moriarty that they planned to depose all 5,800 of the clients in the growth fund lawsuit. Moriarty understood the threat perfectly: Knowing that the plaintiffs' lawyers were on a contingency fee and were paying expenses out of pocket, Prudential Securities planned to spend the three Texas lawyers into bankruptcy. The brokerage firm seemed ready to make good on its threat, and started with investors in Florida. Haney was the first client who would be deposed.
When Bristow walked into the hotel room, Haney was already speaking with Steve Hackerman, Bristow's partner, and Bill Webb, who had been Haney's broker.
“Mr. Haney, I'm sorry to be meeting you in such unpleasant circumstances,” Bristow said, taking the elderly man's hand.
“Oh, no, that's fine,” Haney said gently. “We do what we have to do.”
Haney apologized for the fact that his wife could not make the meeting. “She's ill, and just can't make it.”
Bristow sat down next to Haney and explained what would happen in the deposition the next day. He described how a number of lawyers would be asking him questions. All he needed to do, Bristow said, was stay relaxed and answer to the best of his ability.
“Now, what I'd like you to do, Mr. Haney, is tell me a little bit about your background,” Bristow said.
Haney looked down at the coffee table in front of him as he started to speak. He didn't come to Prudential-Bache with a lot of knowledge about investing, he said. With only a grammar school education, Haney had worked his entire life in the steel mills of Pittsburgh. Being handy, he had rebuilt a small unit apartment and sold it for a profit when he retired from the mills. His wife had a job, too, which helped to make ends meet. Because of their hard work, Haney and his wife had a few hundred thousand dollars. It was enough money to let them move to Florida, where they hoped to spend the rest of their lives in comfort. Once they arrived, the couple decided that they couldn't manage their money on their own. They went to Bill Webb, whom they had been told was a serious and religious man who looked out for his clients. Webb sold them a number of partnerships. When the growth fund came out, with its advertised low risk and high returns, Haney invested in it.
“He told us they were buying these discounted loans that would produce a profit and that there was very little risk involved,” Haney said.
Haney paused for a moment, closing his eyes and swallowing. “After all those years of hard work and pinching pennies, I had hoped to be able to live a nice life down here,” he said. “My wife and I were going to travel a little bit and have the fun we were never able to have when we both were working so hard.”
Haney's eyes began to cloud. “Then we lost so much of the money. And then my wife got sick. Now we could never afford to do the things we wanted to do in life. It just doesn't seem right. But there's not a thing we can do about it. We just have to forget all of our dreams.”
Haney broke down in deep sobs. For everyone in the room, it was a defining moment. This was what the case was about, this was the reality of the pain Prudential-Bache caused through its lies. At that moment, the lawyers knew that no matter what, this was a case they were going to win.
Bristow reached out and put a hand on Haney's shoulder. “Mr. Haney, I don't think I can appreciate how bad you feel, but I know how bad it is,” he said. “And I'll tell you one thing. We're going to get your money back for you. You can count on it.”
The deposition of Darrell Haney began early the next day in a room at the Sheraton. When Bristow and Hackerman walked in with Haney, they could not believe what they saw. More than half a dozen lawyers for Prudential Securities and Graham were scurrying about. Video cameras were set up to record what Haney said. The defense lawyers had also brought hundreds of thousands of dollars of electronic equipmentâso much that they needed to keep it in an adjoining roomâwhich would allow them to have instant deposition transcripts. They were obviously preparing for an all-day deposition of the elderly man.
Bristow smiled. It was the most comical thing he had ever seen in a deposition. Prudential Securities was obviously trying to send a message. Even with small investors who had little direct evidence to offer, they would do everything possible to run up the man-hours. It seemed they wanted to make the cost of bringing the lawsuit so high that it would serve as a warning to other plaintiffs' lawyers.
There was no question in Bristow's mind that Prudential Securities and Graham fought dirty. From the beginning of the lawsuit, they threw up every barrier and made every accusation possible against the lawyers. Even though the brokerage firm's attempt to sue Boyd Page had had a disastrous outcome, crushing the lawyers was apparently still a central part of its strategy. Already Prudential Securities had tried unsuccessfully to have Bristow's firm removed from the case by filing motions accusing it of every ethical breach. The motions were tossed out. Then, when his firm won access to the client list, Prudential Securities and Graham sent a joint letter attacking the law firm and suggesting that investors should not sue. The letter, from John Graham and James Kelso, the new head of the Direct Investment Group, criticized Bristow's firm by implying that it was not working in the interests of investors.
The letter appeared to be another cynical attempt to use Prudential's good name to trick investors into making decisions that benefited the firm financially. After all, at the same time it was criticizing lawyers willing to fight, Prudential Securities was simultaneously herding tens of thousands of investors into the inadequate VMS settlements.
The Haney deposition dragged on the entire day. The defense lawyers asked questions about every investment decision Haney had ever made. When it seemed there was nothing left to ask, the lawyers came up with another line of questioning. Legal assistants hustled back and forth from the adjoining room, providing the lawyers with the instant transcripts to help them form their next questions.
Finally it was Bristow's turn. He decided to humiliate his opponents for their tactics.
“Well, Mr. Haney,” Bristow said, his arm sweeping around the room at the lawyers and equipment, “what do you think about all this?”
“It's amazing,” Haney said softly.
“You know, they've got all this electronic equipment over there, and they've already printed your every word,” Bristow said. “They can call it back in a flash and stick it right in front of your face. So is there anything you've said that you want to take back?”
“No sir.”
“Well, now, Mr. Haney, they've spent something like $300,000 to get all this equipment,” Bristow said. “We can all look at what you've said. It's available. So are you sure you don't want to change anything?”
“No sir.”
“Would you like them to place some of your words in front of you?”
“No sir.”
“You ready to vouch for everything you said?”
“Yes sir.”
Bristow dragged on the questioning about the equipment, occasionally fencing with objections from his opponents. By the time he was done, he had made Prudential Securities and Graham Resources look like a bunch of bullies picking on a frightened old man.
After seven and a half hours, the Haney deposition came to an end. Prudential Securities never used the equipment in a deposition again.
A few weeks later, in the late summer of 1991, a letter from Louisiana arrived at Daryl Bristow's law office. The letter was just one of a number sitting in a pile of mail on his desk. Bristow opened it without a second thought. As he skimmed the letter, his face turned red with rage. He jumped up from his desk and ran down the hallway to Hackerman's office.
“Steve,” Bristow fumed, thrusting the letter at his partner as he walked in, “look at what these sorry sons of bitches are trying to do now.”
Hackerman took the letter and read it, his eyes widening.
The letter was from the securities commissioner in Louisiana, the home state of Graham Resources. It was a notification that the regulators had reason to believe that the Bristow, Hackerman law firm had been offering an investment opportunity without filing an appropriate prospectus. Essentially, it was accusing the law firm of running a securities scam.
But the amazing part was what the regulators said was the “security” that the law firm had been offering: the contract for retainer that Bristow, Hackerman had sent to prospective clients in the growth fund cases. In essence, Louisiana was now questioning whether a contingency fee contract, an everyday product of law firms across the country, was an investment that required registration with securities regulators. A copy of the letter had been forwarded to Texas state regulators and the SEC.
“That's the silliest damned thing I've ever seen,” Hackerman said as he finished the letter.
Bristow's mind was reeling. He had heard too many stories about back-scratching in Louisiana state government.
“Surely the Louisiana Securities Commission can't be fixed,” he said.
“That's not the problem,” Hackerman said. “Look, these guys fight dirty. We should have expected it. They sued Boyd Page, now they're coming after us. They're just a little more sophisticated this time.”
Bristow started cursing Prudential Securities and Graham. Never before had he been in a lawsuit where the opposing side spent so much time attacking the lawyers and so little time dealing with the facts of the case. All of the defendants' motions accusing Bristow of unethical conduct had been bad enough, but this one stepped over the line. Bristow wanted to strike back, and hard. He just didn't know how.
Over the next few days, Bristow hired a lawyer from Baton Rouge to represent the firm before the securities commission. A few days later, he and his lawyer traveled to New Orleans to meet with the regulators. The meeting was relatively friendly. The regulators said that they had been obliged to send the letter because some lawyers representing Graham Resources had filed a complaint. The commission seemed to think the complaint was ridiculous, but still suggested that Bristow, Hackerman file a response. Bristow returned to Houston, still seething at the dirty tactics.
That same week, the plaintiffs' lawyer in the growth fund case met in a conference room at Bristow, Hackerman to discuss the case. Bristow was still thundering about the complaint that had been filed in Louisiana.
“These folks have gall to spare,” Bristow exclaimed. “Here they're the ones who have committed this huge fraud, but they turn around and try to send a regulator after us!”
Jim Moriarty, the lawyer and computer expert who had been brought into the case a few months before, suddenly jumped up. “Well, goddamnit, they want the regulators involved in this, then let's do it,” he said. “Let's get the regulators involved.”
“What are you talking about?” Bristow asked.
“We represent five thousand people who were ripped off by these bastards,” Moriarty replied. “They're the ones who have the right to file a complaint. So let's find out where they should send their complaints and pass on the information to them.”
“Wait a minute, Jim,” Bristow said. “We don't have the time to go writing up complaints for five thousand people.”
“Daryl, that's the beauty of this,” Moriarty said. “We don't write it. All we do is give some information. If they want to write something, it's up to them.”
Bristow shook his head. The idea sounded risky. “I'm not going to let one of my clients just haul off and file something without my knowing what they filed.”
“Why not?” Moriarty asked, throwing up his hands. “It's their case. It's not ours. They're the ones who know what happened better than anybody. They ought to be able to tell their story their way, without a bunch of lawyers interfering.”
Other investors had already shown that it could work, Moriarty said. Just a few months before, in June, regulators in Kansas had filed a complaint against Prudential Securities, charging that it had defrauded customers in seven different partnerships. It was a small case, but it started because customers in Kansas complained.
Bristow still looked doubtful. Moriarty sat down next to him.
“Daryl, you're not seeing what we have here,” Moriarty said. “One or two people aren't going to mean spit to most regulators or prosecutors. We've got
five thousand
people. Our clients, together, have power. They can make their voices heard. They can make something happen. All we have to do is give them a little help.”
Bristow rubbed his chin for an instant in thought. Then he looked back at Moriarty. “All right,” he said. “How would it work?”
Finding the name and address of every securities regulator in the country was the hard part. The computer program was simplicity itself. Like junk mail, it simply substituted different names within a standard text. Investors who lived in Arkansas were told how to write their state regulator, the SEC, and the National Association of Securities Dealers. Florida investors received the same information, but with a different state regulator listed.
The letter, signed by Bristow, was an open invitation to file a complaint with government authorities.
“We have been asked what can be done, besides filing suit, to seek further relief from the deceptive practices of the Prudential companies and their business partners in various failed limited partnerships that our clients were misled about,” Bristow wrote. “One very effective measure is to bring these improper sales and management practices to the attention of the proper regulatory authorities.”
The letter described what had happened in Kansas. It then said that if clients wished to make similar complaints, they could do so. However, the letter told them not to provide any details of their own personal situation, other than which partnerships they owned.