Milberg law firm indicted in bribe case

Kickbacks alleged in class action cases

May 19, 2006|By NEW YORK TIMES NEWS SERVICE

The securities class action law firm of Milberg Weiss Bershad & Schulman was charged yesterday with several criminal counts, including obstructing justice, perjury, bribery and fraud.

The 20-count indictment, handed up by a federal grand jury in Los Angeles, represents the most prominent confrontation between the government and a law firm in years.

While federal regulators won multimillion-dollar settlements from big corporate law firms over their role in the savings and loan scandals, no major law firm has faced a criminal indictment in recent memory.

Milberg Weiss has been the dominant law firm in winning multimillion-dollar lawsuits against huge corporations on behalf of shareholders who claimed they were wronged. Its success was so great that Congress raised the legal hurdle for winning such lawsuits in the 1990s.

The firm was accused yesterday of secretly paying kickbacks, beginning in 1981 and continuing through 2005, to plaintiffs in class action lawsuits. While the indictment does not prevent the firm from practicing law, it is expected to have a huge impact on its business.

Talks in recent days to avert an indictment had stalled between prosecutors in Los Angeles and lawyers representing Milberg Weiss, lawyers involved in the negotiations said. The firm had been unwilling to sign a deferred prosecution agreement in which it would have waived attorney-client privileges, installed new monitoring systems and made a substantial payment.

Two of the firm's prominent partners, David J. Bershad and Steven G. Schulman, are named in the indictment. The two, who sat on the firm's executive committee, decided to take leaves of absence late last week in the hope their departures would stave off an indictment of the entire firm.

While the indictment caps a six-year investigation by the Justice Department into the firm's activities, prosecutors have been stymied in their efforts to bring charges against the two primary targets of the investigation, Melvyn I. Weiss and his former partner William S. Lerach.

Before a bitter split in 2004, when Lerach began his own firm, the two dominated the securities class action arena through their firm Milberg Weiss Bershad Hynes & Lerach.

Weiss ran the East Coast operations of the firm, called "Milberg East," and Lerach headed the San Diego operations, known as "Milberg West."

Both men were told in February that they would not be indicted at this time, although people involved in the talks believe they still remain targets of prosecutors.

The indictment against the firm and Bershad and Schulman was included in a revised indictment that was originally handed up last summer against Seymour M. Lazar, a retired California lawyer and former Milberg client.

Beginning in 1981 and continuing through about 2004, Lazar or members of his family served as plaintiffs in approximately 70 lawsuits for Milberg Weiss and received about $2.4 million in "secret and illegal kickback payments," the new indictment says.

While Lazar has long stated his intention to fight the charges, another Milberg Weiss client, Howard J. Vogel, signed a plea deal with prosecutors last month and agreed to provide information against the firm.

Vogel, a retired mortgage broker, admitted that he or members of his family served as plaintiffs in some 40 lawsuits from 1991 until 2005 and received about $2.5 million in "secret and illegal kickback payments," according to the new indictment.

A third figure named in the indictment, a Beverly Hills ophthalmologist, Dr. Steven G. Cooperman, or members of his family, allegedly acted as plaintiffs in nearly 70 lawsuits, receiving approximately $6.5 million in payments.

Testimony by Cooperman prompted the original investigation six years ago. He is a highly controversial figure, however, as he offered to provide evidence to prosecutors in hopes of receiving a reduced sentence on his conviction of art fraud charges.

Under New York law, it is illegal for a lawyer to promise or give anything of value to induce a person to bring a lawsuit or to reward a person for having done so, the indictment says.

It also said the kickbacks created a conflict, because the paid plaintiffs had a "greater interest in maximizing the amount of attorneys' fees awarded to Milberg Weiss than in maximizing the net recovery" to others in the class.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.