NEW YORK — As the corporate victims continue to pile up in Wall Street's great financial collapse, that flapping noise coming from the skies over Manhattan isn't the pigeons circling, it's the vultures.
With personal fortunes, retirement savings and institutional assets evaporating each day, swarms of attorneys from some of the nation's most prestigious firms are positioning themselves to cash in on the escalating misery.
A quick scan of prominent business law firm web sites, like Fried Frank, Bracewell & Giuliani, Susman Godfrey and Bernstein Litowitz Berger & Grossman, shows that in recent weeks, many have launched a "crisis group," "task force" or "practice group" aimed at the market distress.
The Akin Gump firm even has a "Financial Markets Crisis Resource Center" that features streaming news headlines about the crisis along with a roster of services available to clients.
But who can blame them for the sudden burst of corporate ambulance chasing?
"When you're a securities litigator, whether you're on the defense side or the plaintiffs side, bad markets are good for business. That's just a fact of the matter," said attorney Brett Sherman, who represents nearly a dozen former Bear Stearns employees who plan to sue the company over losses to their now-deflated stock options.
The current financial crisis has cost retirement portfolios some $2 trillion during the past 15 months and the collapse and restructuring of some of Wall Street's biggest firms will be a messy process to sort out.
So the legal paper is flying fast and furious here, with no guarantees that anything will be left for the winners to collect.
British bank Barclays has sued Bear Stearns, claiming the former investment bank lied about the financial health of one of its failed hedge funds.
After losing a combined $100 million, New York's state and city employee pensions funds sued Countrywide Financial, claiming the mortgage lender inflated reported income and misled investors about the risk of their mortgage-backed securities.
Germany's HSH Nordbank is suing Swiss bank UBS in state court here to recoup $275 million in losses from similar toxic mortgage securities.
And investors who paid $25 a share for Lehman Brothers preferred stock, which now is virtually worthless, have filed a class action suit in U.S. District Court in Manhattan.
From January 2007 to June 2008, 607 lawsuits stemming from the subprime mortgage mess were filed in federal courts. That surpasses the 559 filed in the aftermath of the savings-and-loan crisis of nearly two decades ago, according to research by Navigant Consulting.
At the current pace, the mortgage and credit crises will spawn 220 securities class-action lawsuits this year, according to the Stanford Law School Securities Class Action Clearinghouse.
More importantly, the average loss for defendant companies in these suits was $243 million in the first half of 2008. That's more than twice the historic average.
"Not since the period of heightened filing activity in 2000 to 2002 have we seen market capitalization losses of this size among defendant firms," said John Gould, vice president of Cornerstone Research, a commercial litigation consulting firm.
The filing frenzy is likely to continue as more bank failures are expected.
That means "new waves of litigation could still emerge," said Jeff Nielsen, who heads Navigant's financial services disputes and investigations section.
"One lesson of the S&L crisis is that while a bank can be seized and even reconstituted over a weekend, the resulting litigation can linger for years."
Sherman's clients, who were all senior managing directors at Bear Stearns with at least 15-plus years at the company, are in varying states of depression and shock over their fallen fortunes.
It's a roller coaster of emotions he's seen plenty of times before, having worked many years defending Wall Street firms from the very lawsuits he now files against them.
Sherman gave up corporate defense after burnout and a near-death experience in the 9/11 terrorist attacks changed his outlook on work and life.
"It wasn't always big corporations that were losing the money in these cases. Sometimes it was mom and pop losing their life savings and you start feeling crappy about yourself after you deprived or stopped them from getting any kind of compensation," he said.
He's confident his group of former Bear Stearns employees won't face a similar fate. His clients include some multi-millionaires, some laid-off employees and some who were coaxed into retirement in return for stock options that quickly became worthless.
"Some of them are people who may never work again. Some don't want to work again and are now pretty much broke when they thought they'd be set for the rest of their life. And it really is the result of pure greed, like to a degree that's almost hard to fathom. But that was Wall Street. But it's not what Wall Street is going to be in the future. I can assure you that."
MORE FROM MCCLATCHY