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Attorney in Milberg Case Draws Two-Month Prison Term Amanda Bronstad LOS ANGELES - A federal judge has sentenced Richard Purtich, a Los Angeles lawyer who pleaded guilty in the government's criminal kickback case against Milberg, to two months in prison, despite requests from his lawyer and federal prosecutors to give him probation. On Monday, U.S. District Judge John Walter of the Central District of California sentenced Purtich to prison time, plus an additional year of supervised release, and ordered him to pay a $50,000 fine. Purtich pleaded guilty two years ago to a tax charge, admitting that he failed to report to the Internal Revenue Service about $900,000 he received from Milberg and passed on to Steve Cooperman, a lead plaintiff in several of the firm's cases. In the case, prosecutors claimed that Cooperman, who pleaded guilty to a federal conspiracy charge last year, received payments from William Lerach--a former partner at Milberg, formerly known as Milberg Weiss--who pleaded guilty last year to a federal conspiracy charge and is serving a sentence of two years in prison. In a sentencing memorandum, prosecutors had recommended that Purtich receive one year probation, with no home confinement, given his extensive cooperation in the case. They also noted that Purtich lost his license to practice law about two years ago. They recommended a $50,000 fine. Thom Mrozek, a spokesman for the U.S. Attorney's Office, for the Central District of California, declined to comment. Purtich's lawyer, William Genego, a partner at Santa Monica, Calif.-based Nasatir Hirsch Podberesky and Genego, did not return a call for comment. In a sentencing memorandum, Genego had recommended that Purtich receive probation. Under the advisory Federal Sentencing Guidelines, Purtich could have faced 21 to 27 months in prison. The probation office had recommended a $200,000 fine. Lawyer in
Kickback Scheme Has Prosecutors By Amanda Bronstad Federal prosecutors in the criminal kickback case against securities firm Milberg are recommending that Richard Purtich, a Los Angeles lawyer who was one of the first to plead guilty in the case, be sentenced to one year of probation, according to a sentencing memorandum filed by the government last week. In court papers, prosecutors cited his "substantial assistance to law enforcement in the investigation and prosecution of another person who committed an offense." Purtich, an insurance lawyer, is scheduled to be sentenced on Aug. 11. In April 2006, he agreed to plead guilty to a tax charge, admitting that he failed to report to the IRS about $900,000 in payments he accepted from Milberg that he passed on to Steve Cooperman, a lead plaintiff in several of the firm's cases. The next month, federal prosecutors indicted the firm, then called Milberg Weiss, and two of its partners, David Bershad and Steve Schulman, alleging they obtained more than $200 million in attorney fees by paying kickbacks to lead plaintiffs in their cases. Prosecutors claimed that Cooperman, who pleaded guilty to a federal conspiracy charge last year, frequently received payments from William Lerach, a former partner at Milberg who left in 2004 to start his own firm, now called Coughlin Stoia Geller Rudman & Robbins. Lerach pleaded guilty last year to a federal conspiracy charge and is serving a prison sentence of two years. According to last week's sentencing memorandum, Purtich faced 21 to 27 months under the advisory sentencing guidelines. Federal prosecutors recommended probation, without a prison sentence or home confinement, because Purtich cooperated in the case while his career as a successful lawyer floundered. "Purtich was in the prime years of his career as a lawyer when, as a result of his offense conduct, he largely destroyed the professional success he had achieved," prosecutors said in the memorandum. During his career, for example, Purtich, a "devoted husband and father," earned up to $700,000 per year. But in 2002, after the government's investigation became public, Purtich lost his job. In December 2006, after he pleaded guilty, the State Bar of California suspended his license to practice law. He now works as an "independent contractor paralegal," prosecutors said in the memo. Prosecutors also noted that the kickbacks occurred several years ago. Cooperman, or his relatives, served as lead plaintiffs for Milberg from 1988 to 1999. Purtich began working with him in 1992. "Of course, Purtich's role as intermediary in the Milberg Weiss kickback scheme was also quite serious. However, as the Probation Office properly recognized, Purtich's conduct 'pales in comparison to the Milberg Weiss expansive scheme that involved a repeated fraud upon the Court system,'" prosecutors summarized. "With regard to the defendants sentenced to date, Melvyn Weiss, William Lerach, and Seymour Lazar, none of them cooperated with the government's investigation or prosecution. Each are clearly deserving of much harsher sentences than Purtich because of their central roles in the kickback scheme, including their obstruction of the courts." Weiss, co-founding partner of Milberg, pleaded guilty to a federal racketeering charge and is scheduled to begin serving a 30-month prison sentence next month. Lazar, a lead plaintiff in several Milberg cases, pleaded guilty to three counts, including obstruction of justice, and, given his ailing health, was sentenced to two years of probation, including six months of home detention. For Purtich, federal prosecutors also recommended a $50,000 fine. The probation office had recommended a $200,000 fine. Purtich's lawyer, William Genego, a partner at Santa Monica, Calif.-based Nasatir Hirsch Podberesky and Genego, did not return a call for comment. NY Firm
Defends Pay Deal With Partners New York Lawyer Securities class action law firm Milberg yesterday defended at a court hearing a pay deal with co-founder Melvyn I. Weiss, who was sentenced last month to 30 months in prison for orchestrating a scheme to pay kickbacks to individual plaintiffs in shareholder suits. The October 2007 agreement to pay Mr. Weiss 15 percent of fees on matters being handled by the firm was sharply criticized in a Wall Street Journal editorial Monday as a sweetheart deal that would pay the convicted felon far more than the roughly $10 million he disgorged or was fined. But following a brief hearing on the agreement yesterday, Milberg partner Matthew Gluck took issue with the editorial, saying the deal had proceeded with the government's full knowledge and contained no litigation release that might forestall a potential effort by Milberg to collect from Mr. Weiss some of the $75 million the firm itself agreed to pay last month in exchange for dropping criminal charges against it. The deal was struck shortly after Mr. Weiss was indicted last fall and marked his stepping down as managing partner of the firm. As an active senior partner, Mr. Weiss would likely have received closer to 25 percent of fees, said Mr. Gluck. Represented by Leslie D. Corwin of Greenberg Traurig, Mr. Weiss had moved for approval of the agreement before Manhattan Supreme Court Justice Herman Cahn, who oversaw yesterday's hearing. Though Mr. Weiss' application was unopposed, the judge reserved ruling, saying he wanted an explanation about a letter he received from Brooklyn lawyer Theodore A. Bechtold concerning the matter. Mr. Bechtold maintains a Web site in which he rails against those he regards as "racketeer lawyers," including but not limited to Mr. Weiss and other former Milberg partners. A lawyer for Steven G. Schulman, another convicted former partner, was also present in the courtroom yesterday, suggesting similar agreements were struck with the other figures in the kickback case. Along with Mr. Weiss and Mr. Schulman, federal prosecutors in Los Angeles also extracted guilty pleas from former name partners William S. Lerach and David J. Bershad. The last major figure in the case, Paul T. Selzer, a lawyer who helped facilitate the kickback payments, pleaded guilty Monday. Attorney,
Last Defendant in Law Firm New York Lawyer LOS ANGELES — Paul Selzer, the last remaining defendant in the federal government's kickback case against Milberg, has pleaded guilty to filing false documents with the Internal Revenue Service (IRS). The plea agreement ends an investigation spanning nearly a decade in which federal prosecutors alleged that Milberg and seven of its partners generated $251 million in attorney fees by paying kickbacks to lead plaintiffs. Last month, Milberg agreed to pay $75 million as part of a nonprosecution agreement with federal prosecutors. Several former partners, including co-founder Melvyn Weiss and William Lerach, have pleaded guilty in the case. Lerach is serving a sentence of 24 months; Weiss was sentenced in June to 30 months in prison. Selzer, who was scheduled to go to trial next month, has agreed to pay a $250,000 fine and serve an unspecified period of probation in home detention. He pleaded guilty on July 14. Sentencing is set for Nov. 3. His lawyer, David Wiechert, a solo practitioner in San Clemente, Calif., declined to comment. Bonnie Vuong, chief assistant to U.S. Attorney Thomas P. O'Brien of the Central District of California, declined comment. Selzer is a former lawyer for Seymour Lazar, a lead plaintiff in several of Milberg's cases who pleaded guilty last year to one count of filing false tax returns and one count of obstruction of justice. He also admitted that he made false statements in court. Earlier this year, Lazar was sentenced to two years of probation, including six months of home detention. According to Selzer's plea agreement, the law firm in Palm Springs, Calif., where Selzer worked received about $991,000 from Milberg between 1984 and June 1995. A firm he later co-founded received another $190,000 from July 1995 to 2001. The payments were all earmarked for Lazar, who did not report the income to the IRS. In the plea agreement, Selzer admits that in 2000 his firm reported to the IRS as its own income nearly $50,000 of payments from Milberg. Those payments should have been reported as income to Lazar. Judge
Approves NY Firm's $75 Million By Amanda Bronstad In an investigation spanning nearly a decade, the government had alleged that the firm and seven of its former partners made $251 million in attorney fees by paying secret and illegal kickbacks to lead plaintiffs. Milberg, which had been preparing for an August trial, avoided a plea deal under a non-prosecution agreement with federal prosecutors. Several former partners have pleaded guilty in the case, including co-founding partner Melvyn Weiss and William Lerach. Lerach is serving a prison sentence of 24 months. Weiss is scheduled to begin a sentence of 30 months next month. Milberg
Agrees to Pay $75 Million to Settle By Anthony Lin Federal prosecutors today reached a settlement with class-action law firm Milberg, four of whose former name partners have pleaded guilty in the past year to criminal charges relating to the payment of kickbacks to individual plaintiffs in shareholder cases. The deal calls for the New York-based firm to pay $75 million in fines in exchange for the dropping of criminal charges. That amount is to be paid in installments through 2012, but the schedule will be accelerated if Milberg's revenues exceed $40 million in a single quarter or $120 million over four quarters. According to the agreement filed in Los Angeles federal court, Milberg "acknowledges and accepts responsibility" for the actions of the former partners - Melvyn I. Weiss, William S. Lerach, David J. Bershad and Steven G. Schulman, who have pleaded guilty to participating in the kickback scheme. But federal prosecutors also stated their "belief that no attorney currently a partner or associate with Milberg LLP is culpable with respect to the Investigated Conduct." Sanford Dumain, a Milberg management committee member, said yesterday the firm had retained counsel to explore recouping some of the $75 million through litigation against its former partners. He declined to provide further details on those efforts. Lawyers for the four ex-partners have either declined comment or did not return calls. The firm has already placed the first installments of the fine, totalling over $22 million, in escrow, he said. Mr. Dumain said the important thing was that the firm would now be able to move forward. "It's very important to us to get this behind us and have the recognition that none of the current partners and associates had anything to do with the misconduct," he said. As part of the settlement, the firm will also be required to maintain for an additional two years a "best practices" monitoring program it instituted several months prior to its 2006 indictment. The program overseen by former federal prosecutor Bart M. Schwartz is intended to ensure that the firm engages in no further misconduct in its handling of client matters. That misconduct, which spanned over 25 years, helped make Milberg the dominant firm when it came to securities fraud class actions At its height before a 2004 bi-coastal split, the firm then known as Milberg Weiss Bershad Hynes & Lerach was behind more than half of all securities class actions. The firm became Milberg Weiss Bershad & Schulman after Mr. Lerach left to found the San Diego-based firm now known as Coughlin Stoia Geller Rudman & Robbins. Shareholder suits often settle for millions and even billions of dollars, reaping large contingent fees for those plaintiffs' firms designated as lead counsel. As a result, there is intense competition among firms to be so named. Milberg's kickback scheme, which paid named plaintiffs 10 percent of legal fees in a case, allowed it to maintain a stable of such plaintiffs in order to swiftly bring claims on behalf of shareholders. Prior to the enactment of the Private Securities Litigation Reform Act of 1995, the first law firm to file such an action could count on winning lead counsel status. Such agreements are illegal because named plaintiffs in class action suits are not permitted to have interests above those of other class members, to whom they owe a fiduciary duty. The named plaintiffs also falsely certified to courts that they were not receiving any payment for their services. In the statement of facts accompanying the settlement agreement, Milberg today admitted earning around $239 million in legal fees on cases where plaintiffs were paid. The firm also admitted it concealed the fact that it illegally paid frequent class action expert witness John Torkelsen on a contingent-fee basis. The firm further admitted kickbacks were paid to a number of New York-area stockbrokers who referred clients to act as named plaintiffs in Milberg cases. One of these, a lawyer-turned-stockbroker named Paul L. Tullman, received almost $9 million in payments from the firm between 1981 and 2005. When Mr. Tullman received his last payment, the investigation of the firm's activities was already several years old. Prosecutors brought their first indictment in June 2005 against Seymour Lazar, one of the plaintiffs who received kickbacks, and Paul T. Selzer, a lawyer who allegedly facilitated the payments. Mr. Lazar and two other kickback recipients ultimately pleaded guilty in the case. With Milberg's settlement, Mr. Selzer will remain the only defendant. Lead Figures Plead Guilty It initially appeared the firm's two leading figures, Mr. Weiss and Mr. Lerach, who split off from Milberg to form his own California firm in 2004, had escaped prosecution when, in May 2006, only the firm and Messrs. Bershad and Schulman were indicted. But after Mr. Bershad agreed to plead guilty last July, Mr. Lerach announced he too would be pleading guilty. Mr. Weiss was indicted in October 2007 and pleaded guilty in March. He was sentenced earlier this month to 30 months in prison. Mr. Lerach is already serving the two-year sentence he received in February. Milberg saw a significant number of its lawyer depart the firm in the wake of its indictment, and the ongoing prosecution raised the possibility that the law firm might disintegrate in a manner similar to accounting firm Arthur Andersen, which fell apart after its indictment for obstruction of justice in the Enron scandal. But Mr. Dumain said yesterday that Milberg, which has around 60 lawyers, remains one of the largest law firms in the securities class action bar. "I think it's remarkable how many people have stayed here and gotten good results," he said. He also said the firm continued to have resources, like its own team of investigators, that other plaintiff's firms lacked. Following its indictment, the firm was also fired by some client pension funds and removed from lead counsel roles by some courts. Mr. Dumain acknowledged these setbacks but said far more frequent had been instances in which Milberg had carried on with its work on matters while under indictment. Barbara Hart, the head of securities litigation for competing firm Lowey, Dannenberg, Cohen & Hart, said Milberg had many young, talented lawyers and said she expected they would "put their best efforts forward to win new business." But she said the firm's recent past will probably continue to be a factor with clients, as well as with courts. "I don't imagine it will make things easier for them," she said. For many in the legal community it will also be difficult to imagine the new Milberg carrying forward without Mr. Weiss at the helm. But Mr. Dumain said the firm had been planning for the 72-year-old Mr. Weiss' eventual retirement even before his indictment. Milberg was represented by: William W. Taylor of Zuckerman Spaeder; Bryan Daly of Mayer Brown and former U.S. assistant attorney general Viet Dinh. NY Firm Founder Gets 30 Months in Prison By Amanda Bronstad LOS ANGELES - A federal
judge in Los Angeles yesterday sentenced Melvyn Weiss, the
co-founding partner of Milberg, to 30 months in prison.
NY Law Firm's Scheme Hurt Shareholders, Study Claims The American Enterprise Institute Legal Center is releasing today an article by Professor Michael Perino of St. John's University School of Law that takes on the argument that the Milberg Weiss (now known as Milberg) kickbacks constituted a victimless crime because the payments came out of legal fees awarded to the firm and named plaintiffs had incentive to maximize class recoveries. Examining a database of 730 Milberg Weiss class action settlements and legal fee awards, Mr. Perino compared those that were cited in the indictments against the firm and its partners and those that were not. He found the indictment cases on average actually settled for slightly less than the non-indictment cases, suggesting the kickback incentives did not improve recoveries. On the other hand, Mr. Perino found that the legal fees requested and awarded in the indictment cases were significantly higher than those in the non-indictment cases, and also higher than those in cases handled by firms other than Milberg Weiss. According to the report, the findings support the notion that class members were hurt by the kickbacks, as they "appear to have received a lower proportion of the settlement proceeds than class members in otherwise substantially similar non-indictment cases." Federal prosecutors have requested a 33-month sentence for Mr. Weiss, who pleaded guilty in March. He is in turn arguing for 18 months. His sentencing is scheduled for June 2. Ex-NY BigLaw Partner Charged in Second Fraud Scheme By Anthony Lin Brooklyn federal prosecutors have further charged a former Baker & McKenzie partner, indicted last fall on securities fraud charges, with stealing from a client escrow account. Martin E. Weisberg, 57, then a corporate partner in Chicago-based Baker & McKenzie's New York office, was charged in October by the Eastern District U.S. Attorney's Office with participating in an illegal short-selling scheme that netted two Israeli investors $55 million. The counts in the indictment include securities fraud, conspiracy and money laundering. Federal prosecutors said today they had since uncovered Mr. Weisberg's involvement in a separate fraud scheme. He is now facing additional counts of wire fraud and money laundering. According to the indictment announced today, Mr. Weisberg told three clients they would not receive interest on $30 million they deposited with him in an escrow account. Mr. Weisberg then allegedy deposited the money in an interest-bearing account which generated $1.6 million in interest between August 2006 and October 2007. Prosecutors claim Mr. Weisberg stole $1.3 million of it. He faces a maximum of 20 years in prison on each wire fraud count and 10 years in prison on each money laundering count. He had already faced similar maximum sentences on his earlier securities fraud charges, as well as millions of dollars in fines. One of the clients that placed escrow funds with Mr. Weisberg, Bahamas-based SIAM Capital Management, recently sued Baker & McKenzie over the firm's turning over of the company's documents to prosecutors in alleged violation of attorney-client privilege. But William J. Linklater, a partner who acts as spokesman for the firm, said recently the case had been resolved with the firm returning SIAM's documents. Mr. Linklater could not immediately be reached for comment on the new indictment. Mr. Weisberg's lawyer, Elkan Abramowitz of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, also could not immediately be reached for comment. According to the October indictment, Mr. Weisberg helped Israeli investors Zev Saltsman and Menachem Eitan gain access to hundreds of millions of discounted but restricted shares in two companies he represented. The alleged scheme involved a series of so-called PIPE (private investment in public equity) transactions. In such transactions, large investors are allotted blocks of discounted shares, the sale of which are restricted until after a registration statement becomes effective. From 2001 to 2004, Messrs. Saltsman and Eitan allegedly used a variety of vehicles to invest almost $90 million in PIPE transactions, acquiring 123 million shares of Xybernaut and 101 million shares of Ramp. The government charges that, prior to the effective date of the registration statements, the two would take short positions in the two companies' stock. A technique utilized by investors betting a stock price will drop, short-selling typically involves borrowing stock to be repaid at a later date when the investor hopes it will be cheaper. Messrs. Saltsman and Eitan would set this date after the effective date of the registration statement, permitting them to use their discounted PIPE shares to repay the borrowed stock. Messrs. Saltsman and Eitan were also charged in the October indictment, as were Edward G. Newman, Steven A. Newman and Andrew Brown, the top executives at the two companies whose shares were used in the scheme, New York health care software company Ramp Corp. and Virginia-based Xybernaut Corp., a maker of wearable computers. The Securities and Exchange Commission also filed a civil suit against the six men. According to prosecutors, Mr. Weisberg and the executives at Xybernaut and Ramp were aware of what Messrs. Saltsman and Eitan were doing and accepted money to give them continued access to the company's PIPE deals. Mr. Weisberg allegedly received $3.1 million from the Israeli investors, keeping $1.7 million for himself and transferring $1.4 million to Steven A. Newman. Edward Newman and Andrew Brown allegedly received payments of $100,000 and $50,000 respectively. During most of the time the alleged PIPE scheme was ongoing, Mr. Weisberg, was a partner at New York's Jenkens & Gilchrist Parker Chapin, then an arm of now-defunct Dallas law firm Jenkens & Gilchrist. Most of the lawyers in the office, including Mr. Weisberg, left to open a New York office for Atlanta's Troutman Sanders in April 2005. Mr. Weisberg left Troutman Sanders soon after and became a partner in the New York office of Baker & McKenzie in August 2005. In a strange twist, Mr. Weisberg had also previously faced fraud and money laundering in a 1991 case brought by federal prosecutors in Texas. Mr. Weisberg had been a partner in the New York office of Philadelphia's Morgan, Lewis & Bockius when he was retained in 1989 by William W. Gray of Horseshoe Bay, Texas, to launch a corporation specializing in "arbitrage" of the Mexican peso. In a January 1991 indictment, the government charged the arbitrage was in fact a Ponzi scheme in which investors were promised returns of up to 600 percent a year based on the supposed currency trades. Investors allegedly lost $27 million in the scheme. Mr. Weisberg left Morgan Lewis, where he had been a partner since 1987, in February 1991, shortly before he was added to the indictment. Mr. Gray was found guilty on all counts and sentenced in October 1991 to 18 years in prison, from which he was released in 1998. Most of the other participants reached plea agreements. But Mr. Weisberg was acquitted after a trial at which Dick Clark of American Bandstand, a longtime client, testified as a character witness. NY Firm Moves to Reduce Criminal Forfeiture in Scandal By Amanda Bronstad Prosecutors allege that Milberg Weiss, now known as Milberg, along with seven of its partners, obtained $251 million in attorney fees through illegal payments to name plaintiffs. In March, founding partner Melvyn Weiss agreed to plead guilty to a federal racketeering conspiracy charge and pay nearly $10 million. Three other former partners, William S. Lerach, David Bershad and Steven Schulman, have pleaded guilty in the case. Lerach reported to federal prison this week to serve his two-year sentence. In recent months, Milberg has been in settlement talks with prosecutors. The recent motion addresses the more than $251 million being sought as "proceeds" derived from the alleged conspiracy and money laundering charges against Milberg. The motion says that, under forfeiture provisions, the firm is entitled to deduct direct costs associated with providing a "lawful service." "Because Milberg was providing lawful services and is alleged to have done so in an illegal manner, any illegal 'proceeds' of its services must be calculated," the motion says. "Milberg is entitled to introduce evidence of its costs in litigating the class action lawsuits and to have those costs deducted from any amount found to be 'proceeds' of the offenses for which it is convicted." Also, the government should only be allowed to seek forfeiture for those alleged crimes that occurred before Aug. 23, 2000, when the Civil Asset Forfeiture Reform Act became effective, the motion says. The government's charges involve cases from 1984 to 2005. Milberg also opposes the government's request for a personal money judgment and seeks a jury's decision on the amount of the forfeiture for each crime. Milberg's lawyer, William Taylor, a partner at Zuckerman Spaeder in Washington, declined to comment. Thom Mrozek, a spokesman for the U.S. Attorney's Office for the Central District of California, declined to comment. Milberg
Weiss Founder Melvyn Weiss By Anthony Lin NY Firm
Bats .200 in Keeping New York Lawyer LOS ANGELES — A federal judge in Los Angeles has refused to grant four out of the five dismissal motions filed by Milberg Weiss in the federal government's kickback case. Prosecutors allege that Milberg Weiss and seven of its partners, including its founding partner, Melvyn Weiss, generated $250 million in attorney fees by paying illegal kickbacks to name plaintiffs. In January, Milberg Weiss filed motions to dismiss several of those claims, refuting charges that the firm committed mail fraud in failing to provide "honest services," obstructed justice by not turning over documents during a grand jury subpoena or violated New York's commercial bribery statutes. The firm also filed a motion challenging the government's depiction of a vast conspiracy, arguing that the indictment details separate schemes involving different plaintiffs. Weiss joined in those motions. U.S. District Judge John Walter for the Central District of California refused to grant the four motions earlier this week, according to Assistant U.S. Attorney Richard Robinson, a prosecutor in the case. Robinson declined to comment on the judge's decision. Walter did not rule on a fifth motion to dismiss a money laundering count, which he set for a hearing on March 31. Marina Ein, a spokeswoman for Milberg Weiss, declined to comment. Benjamin Brafman of Brafman & Associates in New York, who represents Weiss, did not return a call for comment. Former
Milberg Weiss Expert Witness By Amanda Bronstad Prosecutors in the Milberg Weiss case have been eyeing Torkelsen for years. His ex-wife, Pamela, has been cooperating with prosecutors in that case. Torkelsen, who ran Princeton Venture Research Inc. and Equity Valuation Advisors Inc., served as an expert witness in hundreds of shareholder derivative and class action lawsuits for several law firms from 1985 to 2003. In an announcement about the plea agreement on Thursday, prosecutors claim that Torkelsen was retained by several firms, including "one with a principal office in New York." According to prosecutors, the law firms told federal judges that Torkelsen was serving as an independent expert. But in secret, Torkelsen was being paid on a contingency fee basis. To maintain that secrecy, the firms would request reimbursement for fees that were never paid to Torkelsen. The firms also caused Torkelsen to lie, stating that he had been retained on a "non-contingency fee basis," and to write off his fees in unsuccessful cases and submit inflated fee requests. For instance, from 1993 to 1996, Torkelsen charged class action law firms more than $60 million in bills. More than $7 million of those fees were written off or adjusted in unsuccessful cases. As a result, the firm overbilled others by the same amount to make up those costs. In the case of the "New York law firm," Torkelsen inflated bills by more than $4 million, prosecutors allege. Torkelsen admits that he falsely told a federal judge in San Jose, Calif., that he was retained on a "non-contingent engagement by plaintiff's counsel" in a 1999 case. The plea agreement, which was filed in U.S. District Court for the Eastern District of Pennsylvania, also resolves related tax matters from 2003 to 2005 and was arranged by prosecutors in the U.S. District Court for the Central District of California who are handling the Milberg Weiss case. In the Milberg Weiss case, prosecutors allege that the firm and seven of its partners generated $250 million in attorney fees by paying illegal kickbacks to name plaintiffs. Some of those name plaintiffs have pleaded guilty in the past year. Torkelsen is serving a prison sentence in West Virginia after pleading guilty in 2006, in a separate case, to defrauding the Small Business Administration about his investment fund, Acorn Technology Fund. His lawyer in that case, Ralph Caccia, a partner in the Washington office of Atlanta-based Powell Goldstein, did not return calls. Contrite and Cowed, "Scariest Lawyer in the World" Gets 2 Years By Dan Levine But in the end, Los Angeles federal judge John Walter didn't blow up William Lerach's plea deal. Walter did, however, sentence the former securities class action king Monday to two years in jail — the highest penalty allowed under Lerach's agreement with the government. The conspiracy at Lerach's former firm, Milberg Weiss, to kick back fees to class action name plaintiffs — and the lies told in court to cover it up — deprived other law firms "who played by the rules" a fair shot at lead counsel in securities cases, Walter said. Indeed, the lies formed the very bedrock of Milberg Weiss's business model, allowing it to prosper and collect millions in fees over the years, the judge said, all based on falsely earned credibility. Such conduct stands in stark contrast to the generous and bright lawyer described in 159 letters submitted to the court on Lerach's behalf, the judge said. "With all of his intelligence, I cannot imagine how Mr. Lerach lost his moral compass to become a key member of the conspiracy," Walter said. Lerach, appearing in a black suit and a subdued blue tie that matched his tone, uttered just a few sentences to Walker, punctuated with pauses just long enough for the row of reporters to take down every word. "I pled guilty in this case because I was guilty. I knew what I was doing was wrong," he said, halting. "It was, as they say, felony stupid." Lerach apologized to his family, his former law firm, "and to the legal system I've abused." He added: "The conduct was completely unacceptable. I guess all I can hope is that you won't find it completely unforgivable." Lerach, 61, pleaded guilty in September to conspiracy in connection with kickbacks paid to Daniel Cooperman, a former Beverly Hills doctor who fingered Lerach in exchange for leniency in an unrelated art fraud prosecution. The government indicted Lerach's former firm, Milberg Weiss, in 2006, along with partners David Bershad and Steven Schulman. The indictments capped a seven-year investigation. Both Bershad and Schulman have pleaded guilty and agreed to cooperate. They await sentencing, which is scheduled for June. Melvyn Weiss, meanwhile, has pleaded not guilty and is currently scheduled for an August trial. Some defense lawyers involved in the case said before Lerach's sentencing that if Walter took a harsh posture toward Lerach, it might make Weiss, 72, more likely to take his chances with a jury, figuring that the prospect of leniency before Walter would not be great. Given Weiss' age, though, a conviction at trial could effectively mean a life sentence. Weiss' lawyer, Benjamin Brafman, declined to comment. Other name plaintiffs involved in the scheme, Howard Vogel and Seymour Lazar, have already been sentenced. On Monday, Judge Walter did not seem in a forgiving mood. Walter told the full, but not packed, courtroom that but for the plea agreement, he would have sentenced Lerach to a prison term "substantially in excess" of 24 months. The government had asked for 24 months, while Lerach sought six months in jail and six months home confinement. Before ultimately accepting the deal, Walter interrogated federal prosecutors about their reasons for entering into it. This created a window into the negotiations between the government and Lerach's lawyers, John Keker and Elliott Peters of Keker & Van Nest. Assistant U.S. Attorney Robert McGahan noted that Lerach came to the government to discuss a plea before Lerach had been notified he would be indicted. Jail time was on the table from the very start of negotiations, McGahan said. The prosecutor at one point described Lerach as a "volunteer" for entering into talks with the government. That set Walter off. "Mr. Lerach certainly was not a volunteer in terms of Mr. Lerach calling the government, knocking on their door and saying, 'Here I am,'" the judge said. Walter noted that Lerach had been under investigation for years, undermining any claim that he suddenly "saw the light." "That's just not factually true," Walter said. "Being a former federal prosecutor, I know that didn't happen." At that point McGahan expanded his answer, saying that although the government was confident in its analysis that the statute of limitations would not be an impediment to prosecuting Lerach, it was still a risk. On the defense side, Keker said he told the government in negotiations that Cooperman was a "defense lawyer's dream" because of all of his shady behavior, and so would not be a credible witness. But Keker also noted that taking the case to a jury would have carried a big risk for Lerach as well, given the huge jail sentence that could follow a conviction.Probing the Milberg Weiss Probe Federal prosecutors have it in for the ailing class action leviathan. Follow our complete coverage of the kickback investigation. Ultimately, Walter said he respected the prosecutors and defense lawyers on the case, and that they were "assisted by a well-respected member of the court" who was a former federal prosecutor. Walter did not identify the mediator, but a lawyer familiar with the case said he believed it was Central District Judge A. Howard Matz, who had already presided over discovery issues in the Milberg Weiss prosecution. "I have a great deal of respect for my colleague's judgment," Walter said. Moreover, "judges should not intrude on charging decisions of prosecutors," he added. Lerach will also be on supervised release for two years, pay a $250,000 fine, and disgorge nearly $8 million in fees. He also must complete 1,000 hours of community service. In 2004 Milberg Weiss Bershad Hynes & Lerach split into two firms: one then known as Lerach Coughlin Stoia Geller Rudman & Robbins in San Diego, and Milberg Weiss Bershad & Schulman in New York. Lawyer Sentenced in Kickback Scheme By the Associated Press LOS ANGELES (AP) -- William Lerach, a former partner at a prestigious New York law firm, was sentenced Monday to two years in federal prison for his role in a lucrative kickback scheme involving class-action lawsuits against some of the nation's biggest corporations. Lerach, 61, was also sentenced to two years probation, fined $250,000 and ordered to complete 1,000 hours of community service. "This whole conspiracy corrupted the law firm and it corrupted it in the most evil way," U.S. District Judge John Walter said during the hearing. Authorities said Lerach's former firm, now known as Milberg Weiss, made an estimated $250 million over two decades by filing legal actions on behalf of professional plaintiffs who received kickbacks. The firm paid $11.3 million in kickbacks to people who became plaintiffs in lawsuits targeting companies such as AT&T, Lucent, WorldCom, Microsoft and Prudential Insurance, prosecutors said. Seven people, including three former partners at the firm, have pleaded guilty in the case. Lerach, whose high-profile legal victories included a $7 billion judgment against now-defunct energy giant Enron Corp., pleaded guilty in October to one count of conspiracy to obstruct justice and make false statements. "I pleaded guilty in this case because I was guilty," Lerach said before sentencing. "It was, as they say, felony stupid." Prosecutors had recommended a two-year prison sentence along with two years probation and a $250,000 fine. Probation officials' proposed that he be imprisoned for 15 months. Retired
Lawyer Sentenced in Case Over By Thomas Watkins Federal prosecutors have said the 80-year-old Lazar was paid about $2.6 million to be a professional plaintiff and help the prestigious law firm now known as Milberg Weiss in its pursuit of the lawsuits. Authorities said the firm made an estimated $250 million over two decades by filing such legal actions. Seven people, including three former partners at the firm, have pleaded guilty in the case. Lazar was the first to be sentenced. He also was fined $600,000. U.S. District Judge John F. Walter said he was outraged that a former attorney could "flatly lie" as part of legal proceedings. The lack of respect for the legal system amounted to the "absolute height of arrogance," the judge said, adding that he would not have hesitated to send Lazar to prison it not for his age and deteriorating health. Wearing a dark blue suit with a knitted sweater draped across his shoulders, presumably for extra warmth, the frail-sounding Lazar said he understood Walter's concerns but felt he had already been punished for his wrongdoing. "I have been under investigation for seven or eight years and it has been seven or eight years of hard time," Lazar said. "That's all I can say." With the judge's consent, Lazar remained seated throughout the hearing. Lazar pleaded guilty in October to obstruction of justice, subscribing to a false tax return and making a false declaration to the court. He could have faced up to 18 years in federal prison but prosecutors recommended home detention because of Lazar's declining health and his age. Walter said he spent the weekend thinking about a suitable sentence for Lazar, worrying that a noncustodial term would send a message that wealthy defendants can buy their way out of confinement. But ultimately, Walter said Lazar's infirmity made him unsuitable for prison. Lazar thanked the judge after the sentencing. "Good luck to you," the judge replied. Lazar then left the courtroom and was greeted by members of his family. Lazar has already repaid $1.5 million of the money prosecutors said he was paid as part of the scheme. The law firm, previously known as Milberg Weiss Bershad & Schulman, paid $11.3 million in kickbacks to people who became plaintiffs in class action lawsuits against companies such as AT&T, Lucent, WorldCom, Microsoft and Prudential Insurance, prosecutors said. The tactic allowed attorneys with the firm to be among the first to file litigation and secure the lucrative position as lead plaintiffs' counsel, according to court documents. The firm dominated the industry in securities class action lawsuits, which involve shareholders who claim they suffered losses because executives misled them about a company's financial condition. The three former partners who have pleaded guilty are William Lerach, Steven Schulman and David Bershad. Lerach's high-profile legal victories included a $7 billion judgment against now-defunct energy giant Enron Corp. He pleaded guilty as part of a deal to conspiracy to obstruct justice and make false statements. Schulman pleaded guilty to a racketeering conspiracy charge. He agreed to forfeit $1.85 million to the government and to pay a $250,000 fine. Bershad pleaded guilty to conspiracy and agreed to cooperate with the government. Firm co-founder Melvyn Weiss has pleaded not guilty to one count each of conspiracy, mail fraud, money laundering and obstruction of justice in a revised indictment. The Milberg Weiss firm itself has pleaded not guilty to two counts of conspiracy and one count each of obstruction of justice and making false statements. Judge Rips One NY Firm for Greed, Another for a Possible Conflict By Zusha Elinson The ruling came Friday in In Re Chiron Corporation Securities Litigation, in which plaintiffs accused the drug company of not disclosing facts about its failure to bring a flu vaccine to market in 2003 and 2004. A settlement agreement of $30 million plus interest was reached in March between the plaintiffs and the drug company, which is represented by Skadden, Arps, Slate, Meagher & Flom. Walker denied Milberg's motion for preliminary settlement approval in his ruling and has set a case management conference for Dec. 20. Milberg Weiss has been dogged by a criminal probe into allegations that the firm paid kickbacks to lead plaintiffs in major class actions. William Lerach and other former partners have pleaded guilty, though the Milberg Weiss firm and name partner Melvyn Weiss have pleaded not guilty and are fighting the charges. In 2004, Milberg Weiss Bershad Hynes & Lerach split into two firms, then known as Lerach Coughlin Stoia & Robbins in San Diego and Milberg Weiss Bershad & Schulman in New York. In the Chiron case, the plaintiffs lawyers sought $7.5 million -- a 25 percent cut of the settlement -- but Walker said it was too much. Walker wrote that when calculating the firm's hours using typical hourly fees, Milberg's request amounts to a multiplier of eight or even 10. The normal multiplier for class counsel, Walker wrote, is between one and four. "Class Counsel need to justify both the application of a multiplier and its level as much as they need to show that their hourly rates are in line with competitive norms," Walker wrote. The judge further questioned whether the lead plaintiff -- International Union of Operating Engineers Local No. 825 Pension Fund -- was an adequate class representative because, he wrote, by approving the big fee for the lawyers, it didn't appear to be trying to maximize recovery for the class. Finally, Walker raised the criminal probe as a factor in considering the settlement agreement. "It is against this tableau common to all class action settlement proposals that the criminal charges against lead counsel pose a concern here, because the kickback arrangements alleged criminally are that lead counsel gave the paid plaintiffs a greater interest in maximizing the amount of attorneys fees awarded to lead counsel than in maximizing the net recovery to absent class members," he wrote. Defense lawyers were not immune from Walker's pen, either. Walker wrote that because Skadden is representing Lerach Coughlin in connection with the criminal probes, "the court is troubled whether Skadden, Arps is able to probe the adequacy of lead plaintiff and/or lead counsel lest a rigorous challenge uncover problems that might be traced back to Lerach Coughlin." James Lyons, a Skadden lawyer on the case, would not comment on the ruling, but said that Skadden had worked for certain Lerach Coughlin lawyers but not the plaintiffs firm. "Skadden has represented some individuals at Lerach Coughlin, none of whom had any involvement in the [Chiron] case, and we did not represent the Lerach Coughlin firm," he said Tuesday. Patrick Coughlin, name partner at Coughlin Stoia Geller Rudman & Robbins -- the Lerach Coughlin firm's new name -- said that his firm, though an offshoot of Milberg Weiss, was not class counsel on the case. "Whatever he does to Milberg, I feel sorry for them, but it has nothing to do with us," Coughlin said. A Milberg Weiss attorney declined to comment on the ruling. Walker is known for his skepticism of securities class actions and has had disagreements with the firm before. Legal Giant Pleads Guilty in Kickback Scheme By Anthony Lin New York Law Journal New York Lawyer October 30, 2007 Former Milberg Weiss name partner William S. Lerach pleaded guilty yesterday to charges that he participated in a conspiracy to pay kickbacks to named plaintiffs in securities class actions. Mr. Lerach, 61, one of the nation's most well-known plaintiff's lawyers, had agreed to the plea last month. Under the agreement, he will forfeit $7.75 million to the government and pay a $250,000 fine. He will also serve a prison sentence ranging from one to two years. Two other former name partners of New York-based Milberg Weiss, David J. Bershad and Steven G. Schulman, also have pleaded guilty in the case brought by Los Angeles federal prosecutors, as have three of plaintiffs who allegedly received around $11 million in kickbacks. Milberg Weiss co-founder Melvyn I. Weiss and the firm itself continue to face charges, to which they have pleaded not guilty. Mr. Lerach split from Milberg Weiss in 2004, forming his own plaintiff's firm in California. As part of his plea agreement, prosecutors agreed not to bring charges against that firm, San Diego's Coughlin Stoia Geller Rudman & Robbins. Law Also Applies to Lawyers By a Times Editorial The United States is awash in lawyers, upward of a million of them, and they come in all stripes. Many are highly ethical professionals who act in the best interests of not only their clients but also the law. But far too many fit the negative stereotype and practice their craft for the purpose of personal enrichment irrespective of ethics. An example of this insuperable greed is offered up in an indictment that is shaking the foundation of one of the nation's most venerable law firms. Melvyn Weiss, a leading class action securities lawyer and co-founder of the firm Milberg Weiss, faces federal conspiracy, racketeering and other charges for an alleged kickback scheme.While Weiss denies any wrongdoing, the indictment charges him with participating in a decades-long strategy to pay individuals money if they would serve as named plaintiffs in large class action lawsuits. Named plaintiffs are needed before a class action suit can move forward. They are the representatives of a larger group of similarly aggrieved people, who may or may not be individually known. Having a willing plaintiff in its back pocket would allow a law firm to be first at the courthouse to file cases, giving it a jump on other law firms, and to position itself to collect a bigger share of attorney fees. According to the New York Times, prosecutors in Los Angeles have said that Milberg Weiss paid out $11-million in kickbacks to ready plaintiffs in more than 150 cases, which translated into some $250-million in fees. The kickbacks allegedly have been going on for the last 25 years. Things don't look good for Weiss. Some of his former partners have already pleaded guilty to charges, and at least one is cooperating with prosecutors. One of the men who served as a lead plaintiff in the class action lawsuits has pleaded guilty to charges related to the kickbacks. Ethics may be a required course in law school, but too many lawyers fail to take its lessons to heart. NY Name Partner Indicted, Could Face Up to 40 Years in Prison By Anthony Lin
Federal prosecutors' years-long investigation of securities class action firm Milberg Weiss' alleged payment of kickbacks to plaintiffs culminated yesterday in the indictment of firm co-founder Melvyn I. Weiss, which coincided with the guilty plea of a previously indicted partner at the firm. Melvyn I. Weiss Mr. Weiss, 72, was added as a defendant in a superseding indictment that excluded former Milberg Weiss partner Steven G. Schulman, who agreed to plead guilty yesterday and cooperate with the Los Angeles-based prosecution. Mr. Schulman also agreed to pay around $2 million in fines and forfeited funds. Mr. Schulman's plea is the third by a former Milberg Weiss partner and leaves Mr. Weiss the only individual lawyer from the firm facing charges in the case. Former partner William S. Lerach pleaded guilty to a conspiracy charge in the case two days ago and David J. Bershad, another former partner, pleaded guilty in July. Messrs. Bershad and Schulman were first indicted last May along with the New York-based firm itself, which continues to face charges. Prior to their current legal troubles, Messrs. Weiss and Lerach were the nation's most prominent securities plaintiff's lawyers and the Milberg Weiss firm they ran together until 2004 was by far the dominant one in the area of shareholder class actions. Their lawsuits settled for millions and, sometimes, billions of dollars, earning Milberg Weiss huge contingent legal fees and the undying enmity of many in the corporate world. The 72-page indictment put forward by Los Angeles federal prosecutors yesterday depicted Mr. Weiss as the architect of a conspiracy dating back to 1979 to pay fees to individuals to act as plaintiffs in shareholder suits. The alleged $11.3 million in payments allowed the firm to maintain a stable of plaintiffs so it could swiftly bring a claim on behalf of shareholders. Prior to the enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA), the first law firm to file such an action could count on winning coveted lead counsel status, reaping the largest share of legal fees in a case. The plaintiffs were generally paid 10 percent of the legal fees received in their cases. Such agreements are illegal because name plaintiffs in class action suits are not permitted to have interests above those of other class members, to whom they owe a fiduciary duty. According to the indictment, Mr. Weiss first told Mr. Bershad in 1979 that he had entered into such an agreement with a plaintiff named Seymour Lazar. Mr. Lazar and his lawyer Paul Selzer are also facing charges in the case. Mr. Weiss allegedly assured Mr. Bershad that, because the payments would be in cash, there would be no paper trail and the lawyers would not be caught. The indictment charges that Mr. Weiss personally transported thousands of dollars in cash from New York to Florida to make payments to plaintiffs in Milberg Weiss cases. By 1986, such payments had allegedly become so common that the firm wrote into its partnership agreement that the individual senior partners were entitled to compensate themselves for making such payments out of the firm's profits. The indictment also described two other unnamed Milberg Weiss lawyers, Partner E and Partner F, who also allegedly participated in the scheme. Messrs. Schulman and Bershad, have agreed to cooperate in his prosecution as part of their own plea deals. Two of the individual plaintiffs who received payments have also agreed to cooperate as part of plea agreements. Mr. Lerach's plea did not require him to cooperate with prosecutors. Mr. Weiss is facing up to 40 years in prison on counts including racketeering conspiracy, conspiracy and obstruction of justice. His lawyer, Benjamin Brafman of of New York's Brafman & Associates, said in a statement yesterday that Mr. Weiss intended to fight the charges and expected to be "fully exonerated" at trial. He also praised Mr. Weiss as a philanthropist who has contributed to causes that have "benefitted mankind throughout the world." Mr. Schulman's lawyer, Herbert Stern of Roseland, N.J.'s Stern & Kilcullen, did not return a call seeking comment. Building a Firm In anticipation of Mr. Weiss' indictment, Milberg Weiss announced Wednesday that Mr. Weiss would end his participation in the management of the firm to focus on his defense. In another statement issued yesterday, the firm said it would "persevere throughout this difficult period" and "continue to fight for our clients and class members and to achieve the record recoveries for which our firm has long been known." Mr. Weiss co-founded Milberg Weiss in 1965 with Lawrence Milberg, who died in 1989. The firm became a top securities class action firm in the 1980s, and continued its dominance even after the PSLRA ended the "race to the courthouse" by forging close relationships with the giant municipal and union pension funds which took over the lead plaintiff mantle in the biggest shareholder cases. The firm split along coastal lines in 2004, with the West Coast-based Mr. Lerach launching San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins and Mr. Weiss continuing to lead the remaining Milberg Weiss. As part of Mr. Lerach's plea deal, prosecutors agreed not to target his new firm, which changed its name after he retired last month to Coughlin Stoia Geller Rudman & Robbins. Since its indictment last May, Milberg Weiss has lost a number of partners to rival firms and has also been removed from some cases by judges who claimed the criminal charges would hamper the firm's work for clients. But the firm has continued with many cases as well. Mr. Weiss is scheduled to be arraigned in U.S. district court in Los Angeles, Calif., on Oct. 15. The trial for the original defendants is scheduled for January 2008. Prominent Lawyer to Be Indicted By Barry Meier Melvyn I. Weiss, a leading class-action securities lawyer, is expected to be indicted as early as today in connection with the kickback scheme that has ensnared his firm, Milberg Weiss, and several former lawyers there, the firm said yesterday in a statement. The indictment of Mr. Weiss, 72, a legal and political powerhouse in New York, would be the capstone of a seven-year investigation into the law firm, one that started with the art fraud prosecution of a wealthy ophthalmologist who later admitted serving as a plaintiff-for-hire in several securities lawsuits brought by Milberg Weiss. Last year, prosecutors in Los Angeles initially charged that Milberg Weiss paid $11 million in kickbacks to plaintiffs in more than 150 cases, a strategy that allowed it to beat other firms to the courthouse and earn more than $216 million in fees. The charges against Mr. Weiss are expected to be part of a new superseding indictment against Milberg Weiss that will be filed in Los Angeles, the firm said. Thom Mrozek, a spokesman for the United States attorney’s office there, declined to comment. In a statement, the firm said Mr. Weiss would fight the claims. "Mr. Weiss has decided to discontinue his participation in firm management in order to focus on the defense of the charges against him," Milberg Weiss said in a statement. "The firm remains proud of Mr. Weiss’s and the firm’s accomplishments over the years." His lawyer, Benjamin Brafman, said that he could not comment on any possible indictment because, to his knowledge, one had not been filed. But he added that if Mr. Weiss is indicted, he "intends to vigorously fight those charges, and will bring to the fight all of the talents and resources that have made him one of the most extraordinary lawyers of his generation." The latest report about Mr. Weiss comes on the heels of a plea agreement announced on Tuesday between prosecutors and William S. Lerach, another prominent class-action lawyer who once worked at the firm. Yet another former partner at the firm, Steven G. Schulman, is expected to soon enter an agreement to plead guilty to a conspiracy charge in connection with the kickback scheme, a person close to those talks said. Mr. Schulman is expected to cooperate with prosecutors in the case and, like Mr. Lerach, will face a prison term, the person said. A spokesman for Mr. Schulman declined to comment. A fourth former partner, David J. Bershad, pleaded guilty to conspiracy in July and has also agreed to cooperate with prosecutors. An indictment of Mr. Weiss, a co-founder of the firm, coupled with the plea agreement by Mr. Lerach, would bring the fall of two lawyers who dominated the field of class-action securities litigation for more than a decade. Both men styled themselves as defenders of investors and consumers wronged by corporations; their critics, including defense lawyers and corporate leaders, viewed them as opportunists who turned class-action lawsuits into a big business. The close timing of the plea agreement by Mr. Lerach and the indictment of Mr. Weiss suggested that both men were facing imminent indictment; given their choices, Mr. Lerach opted to cut a deal while Mr. Weiss chose not to for now. The two men, who were allied for so long, split in 2004 after a bitter dispute. Along with the firm, several other individuals have been indicted. Milberg Weiss, the law firm, has maintained its innocence. The trial against the firm was expected to start in January, but with Mr. Weiss’s apparent addition to the case, that proceeding may be delayed. In many ways, the kickback scheme that prosecutors say that Milberg Weiss and its lawyers concocted was simple and effective. To file a class-action lawsuit, a lawyer needs a so-called named plaintiff, or an individual whose name will appear on the initial complaint as a representative of the class. The class could be a group of individuals, like shareholders of the same company. Milberg Weiss, prosecutors say, essentially put named plaintiffs like the ophthalmologist, Dr. Steven G. Cooperman, on retainer and would, through disguised means, pay them 10 percent of any legal fees the firm earned. Having a ready list of named plaintiffs available also meant Milberg Weiss, by getting its cases filed ahead of other firms, could gain control of a case and get a bigger share of the legal fees. Those payments, however, were hidden from judges overseeing the cases. Dr. Cooperman pleaded guilty in July to conspiracy to obstruct justice and make false statements. Milberg Weiss’s ranks have shrunk significantly since the firm came under investigation. In its statement, the firm said that prosecutors had not accused any of the firm’s other current partners of wrongdoing. "We do not anticipate any interruption in our work, and we look forward to putting this difficult period behind us," the firm said.
By Amanda Bronstad LOS ANGELES-- Securities
class action attorney William Lerach has agreed to plead guilty to a
federal conspiracy charge as part of a criminal investigation into
whether he paid kickbacks to named plaintiffs. NY Name
Partner Pleads Guilty By Anthony Lin David J. Bershad, a name partner at securities plaintiff's law firm Milberg Weiss & Bershad, has pleaded guilty to federal charges that he conspired in the payment of illegal kickbacks to individual class action plaintiffs. The guilty plea by Mr. Bershad, entered yesterday afternoon in federal court in Los Angeles, raises the stakes for his co-defendants, former fellow name partner Steven G. Schulman and the Milberg Weiss firm itself, as well as the other major Milberg Weiss figures, Melvyn I. Weiss and William S. Lerach, who have so far escaped indictment. As part of his plea agreement, Mr. Bershad, 67, admitted to obstructing justice by "corruptly influencing" the administration of justice and making false statements in court. He also agreed to forfeit $7.75 million, pay a $250,000 fine and cooperate in the government's ongoing investigation and prosecution of other figures in the conspiracy. He is scheduled to be sentenced in June 2008. See the plea agreement and the statement of facts in support of the plea agreement. The former managing partner of New York-based Milberg Weiss, Mr. Bershad was alleged in the May 2006 indictment to have kept the cash the firm used to pay plaintiffs in a credenza in his office. Prosecutors claim Milberg Weiss partners paid more than $11 million to three individuals who acted as name plaintiffs in scores of class action suits brought by the firm over the past 20 years. The plaintiffs were allegedly promised a share of the $200 million in legal fees the firm received in the cases. Such agreements are illegal because named plaintiffs in class action suits owe a fiduciary duty to other class members and are not permitted to have a separate interest in the outcome of a case. Two of the plaintiffs who allegedly received payments from Milberg Weiss, Steven G. Cooperman and Howard J. Vogel, have already agreed to cooperate with prosecutors. Mr. Cooperman was to formally enter his guilty plea, announced in February, this morning. Mr. Bershad was one of the first lawyers to join the fledgling law firm founded in 1965 by Mr. Weiss and the now-deceased Lawrence Milberg. According to the indictment, he was responsible for managing firm finances and held an 18 percent equity stake in the firm, a position that garnered him $160 million in profits over the past two decades. The firm issued a statement yesterday stating that Mr. Bershad's relationship with the firm had been terminated. He had taken a leave of absence shortly after being indicted in May 2006. Mr. Schulman, who took a leave of absence at the same time before formally resigning from the firm in January, is continuing to fight the charges, recently filing a motion to dismiss the case against him. The guilty plea and promise of cooperation by Mr. Bershad raises the possibility that prosecutors will move forward with indictments of Mr. Weiss and Mr. Lerach, long thought to be the original targets of the investigation. Lawyers for the two men did not return calls seeking comment yesterday. The Daily Journal, a California legal newspaper, recently reported that Messrs. Weiss and Lerach had rejected plea deals that would have required each of them to serve between three and four years in prison. Among the most well-known lawyers in America, Messrs. Weiss and Lerach together oversaw a firm that came to dominate the securities class action arena. Widely regarded as one of corporate America's greatest opponents, Milberg Weiss won billions in settlement of countless shareholder suits, extracting huge fees along the way. In 2004, Milberg Weiss split along bicoastal lines, with Mr. Weiss continuing at the head of Milberg Weiss and Mr. Lerach launching San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins. Both firms continue to have active practices, though the indictment has led some judges to drop the firms from cases and has also caused a considerable number of partners to depart the New York firm. Lerach Coughlin said last month that Mr. Lerach may retire by year's end, raising speculation that its top partners' continuing legal problems may be hampering the firm. The indictment of the Milberg Weiss firm, which also has reportedly discussed a settlement with prosecutors, has been subject to criticism similar to those raised about the indictment of accounting firm Arthur Andersen, which collapsed following its indictment on charges relating to its work for Enron Corp. Though a much smaller employer than Arthur Andersen, Milberg Weiss has said the indictment unfairly jeopardizes the jobs of many employees who were not involved in the cases at issue in the prosecution. In its statement yesterday, the firm said: "We remain confident that [Mr. Bershad's] actions will have no effect on the firm's commitment to its clients and its ongoing work to protect public shareholders and consumers." Troubled NY Firm Defeats Bid to Oust It From IPO Litigation By Beth Bar Embattled plaintiff's firm Milberg Weiss & Bershad, which has been indicted on criminal bribery and fraud charges in federal court in Los Angeles, |
