Trial in law firm overbilling case ends

July 12, 1995|By Marcia Myers | Marcia Myers,Sun Staff Writer

With its staid reputation and tens of millions of dollars at stake, the Baltimore law firm of Weinberg and Green played its final cards yesterday in a courtroom where the prestigious firm itself is on trial, accused of purposely padding legal bills and defrauding one of its biggest clients.

Their ace -- or so they hope -- was renowned litigator Brendan Sullivan, who spent the better part of three hours tearing at the credibility of Malcolm C. Berman, chief executive officer of Fairfax Savings -- the man behind most of the allegations against the law firm.

Daylong closing arguments ended a trial that began in April. The cross-fire has been punctuated with accusations of bribery, blackmail and fraud.

Weinberg and Green, a 77-year-old Charles Street firm, eighth-largest in the state, is accused of malpractice. Fairfax Savings of Baltimore claims the firm secretly marked up its bills by 15 percent over a three-year period in the mid-1980s.

With $440 million in assets, the bank once was among the firm's top clients.

For that reason -- as well as fear that public disclosure would follow if the problems were revealed -- Weinberg and Green concealed the problems from Fairfax, hiding documents and even fabricating some records, Benjamin Rosenberg, the bank's lawyer, said yesterday.

Law firm executives met at least 18 times on the matter between March and September 1987, before a partner was dispatched to Mr. Berman's home to inform him of the trouble, Mr. Rosenberg said.

Even then, he said, it was little more than a whitewash. Then-partner Stanford D. Hess, who admitted orchestrating the overbilling, disclosed only $20,000 in overcharges. The law firm ultimately repaid Fairfax $110,000 to try to resolve the matter. But the true damages at that point were in the neighborhood of $2.6 million, Mr. Rosenberg said.

"It's amazing how many lawyers knew about this and did not say a word," Mr. Rosenberg said. "It was Weinberg and Green condoning the fraud, allowing it to continue, permitting a client to be defrauded and never doing a thing about it."

The bank now estimates damages at about $18 million, and has asked the judge to award punitive damages that will make a total award of $30 million.

But Mr. Sullivan, perhaps best known for defending Oliver North in the Iran-Contra case, fought back by characterizing Mr. Berman as a shrewd businessman who ignored the advice of Weinberg and Green, instead scheming to benefit from the law firm's mistakes.

The law firm fully disclosed the scope of the problems to Mr. Berman, who later signed two documents agreeing to financial settlements, Mr. Sullivan said. In exchange, Mr. Berman promised to take no legal action against the firm. And he made no effort to hire outside counsel, as Weinberg and Green repeatedly advised him to do.

The firm had performed "virtually life saving legal services" for Mr. Berman, and was in large part responsible for the executive's net worth, estimated at up to $70 million, Mr. Sullivan said.

He described Mr. Berman as a sophisticated businessman, who was known to scrutinize business deals intently, line by line, word by word. But Mr. Berman testified during the trial that he has reading and writing difficulties, and said he had trusted his lawyers, accepting their advice with few questions.

"It's no secret -- we view his testimony as untruthful -- not in some parts, but in all parts," Mr. Sullivan said.

He urged the judge to rule that whatever mistakes Weinberg and Green made in the mid-1980s had been resolved by the written agreements and payments with Mr. Berman.

During the trial, several former and current law firm employees admitted to installing a computer program under the direction of Mr. Hess that automatically inflated the bills to Fairfax.

Montgomery County Circuit Judge Ann S. Harrington is expected to file a written decision later.

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