Wednesday, October 20, 2004

Wednesday, October 20, 2004
Sinclair Retreats on Kerry Film [PARA]By Elizabeth Jensen [PARA] The broadcaster plans a special with portions of 'Stolen Honor' after an outcry and stock losses.

Also - from today's Recorder -

Lerach Lashes Out at Conservative TV Chain

The Recorder
By Justin Scheck
October 20, 2004

William Lerach on Tuesday made his biggest political splash since following up a 1994 White House breakfast with a $45,000 campaign contribution to Bill Clinton. This time, all it took was a letter.

The lead partner of Lerach Coughlin Stoia Geller Rudman & Robbins rounded up the press corps with three mass e-mails and two conference calls to announce a possible shareholder claim against Sinclair Broadcast Group Inc. The suit would link the conservative broadcasting company's plan to run a movie critical of Democratic presidential candidate John Kerry with allegations of insider trading.

Lerach told reporters that while no litigation has been filed, he sent a letter Tuesday to the Sinclair board of directors asking them to sue two executives and one director for unloading $18.5 million in stock within the past year with foreknowledge of events that would trigger a stock collapse.

While Sinclair's stock has been in free fall for about a year, the latest in a string of stock-devaluing events, Lerach said, is the decision to air "Stolen Honor: Wounds That Never Heal," a documentary featuring veterans resentful of Kerry's opposition to the Vietnam War, on all 62 Sinclair TV stations.

The plan to show the movie resulted in "threatened boycotts from advertisers, and clearly had an adverse impact" on stock values, Lerach said. He said the executives knew months ago that they would air the movie, and that doing so would result in advertisers pulling out.

Sinclair's stock has fallen 15 percent since the news of its plans to air the documentary. The chain announced Tuesday that it did not intend to broadcast the entire film but only to show portions as part of a news show looking into Kerry's activities against the Vietnam War.

Lerach told reporters that it is normal procedure to send a letter to a company's board of directors prior to a shareholder derivative suit, in which stockholders can sue executives on behalf of a company, with any financial awards being returned to company coffers. "Of course, they will not do it. They'll reject the demand," Lerach said.

But other securities lawyers said it's rare for plaintiff attorneys to actually send such a letter before a derivative case, especially when the plaintiff attorney is certain the board will not sue.

"It's pretty unusual that someone would have a conference call to say that they're writing a letter. ... What Lerach could have done -- and what he usually does -- is sue, and argue that notifying the board would be futile," said Jordan Eth, a Morrison & Foerster partner who specializes in securities defense.

Other defense attorneys and a plaintiff attorney speaking on condition of anonymity said the pre-filing fanfare -- along with the fact that the only potential plaintiff Lerach has named is a New York union's pension fund -- raises questions as to whether the move was a political maneuver aimed at pressuring Sinclair.

Lerach has been a reliable donor to Democratic causes. According to the Center for Responsive Politics, he contributed $14,650 to Democratic candidates in 2004 federal elections through July of this year. Other Lerach Coughlin partners have given at least $112,000.

Lerach said on the first conference call that the suit is not tied to the election and that it is driven purely by claims brought by clients. "It is not politically motivated," he said. "We're equal opportunity suers."

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