May 19, 2006

Milberg Weiss: At Long Last, Two Partners, and the Firm Itself, Are Indicted

It’s a story I’ve been following for almost a year.

Thursday, the government came down hard in what I believe will be seen, if the prosecution is victorious, as a very significant legal case:

Milberg Weiss, two partners charged with fraud
Thu May 18, 2006 9:51 PM ET

LOS ANGELES, May 18 (Reuters) – Milberg Weiss Bershad & Schulman LLP, the most prominent class-action securities law firm, was indicted on Thursday by a federal grand jury on fraud, conspiracy and other charges related to an alleged kickback scheme.

A Los Angeles grand jury handed up a 20-count indictment against the firm and partners David Bershad and Steven Schulman. Prosecutors accused them of illegally paying part of nearly $250 million in fees over a 20-year period to clients who agreed to act as plaintiffs.

The indictment against a firm that long prided itself as an uncompromising champion for shareholders likely will cripple its ability to remain as lead attorney in some cases as clients and attorneys defect, observers said.

The widening government probe also was expected to open the door for a score of rivals in the world of shareholder litigation, long dominated by Milberg Weiss and its scorched-earth tactics. By its own account, Milberg Weiss has won more than $45 billion in its suits against corporations.

Milberg Weiss and the two named partners described the indictment as “unjust,” and the firm said it would vigorously defend itself against the charges.

Milberg Weiss said it was “particularly incensed” that the government chose to indict the firm, which includes 125 attorneys among its 365 employees.

In a statement, Milberg Weiss said six months of settlement talks fell apart over the government’s demand that the firm waive its attorney-client privilege and falsely accuse its own partners of crimes to avoid indictment.

U.S. Attorney Debra Wong Yang said prosecutors tried to cut a deal with the firm, but were forced to seek the indictment after Milberg refused to take responsibility or curtail its illegal actions even after the probe became public in 2001.

“This indictment alleges a wholesale violation of this responsibility” to tell the truth and disclose relevant information to the court, Yang said at a news conference.


The charges include perjury, bribery and obstruction of justice in more than 150 lawsuits against a wide swath of corporations, including cases against Standard Oil, British Petroleum , Lockheed Martin Corp. , Denny’s Corp. and Genentech Inc. .

Prosecutors said Milberg Weiss maintained a stable of paid plaintiffs who agreed to be named in their lawsuits in exchange for a portion of the legal fees.

The perjury charges stem from court documents filed in each of the cases in which the Milberg clients swore they had not received any payment to serve as plaintiff.

Three Milberg clients named in the indictment allegedly received more than $11 million in illegal kickbacks from the firm.

….. Yang would not comment on whether the ongoing probe would next target Milberg’s lead attorneys, Melvyn Weiss and William Lerach, who has since left Milberg to form his own firm.

Attorneys for Weiss and Lerach earlier this year said their clients had been told by prosecutors that they were no longer targets of the investigation, but sources said the two men could still face charges.

“This is unprecedented for a law firm to be indicted,” said Les Corwin, an attorney in New York with Greenberg Traurig, who represents law and accounting firms.

“We are in uncharted waters,” he added.

The indictment would not have a chilling effect on shareholder litigation but could cripple the firm itself, said Richard Samp, chief counsel for the conservative public interest law firm Washington Legal Foundation, before the charges were announced.

“It will make it very difficult for the firm to continue. Many of the top attorneys will likely leave,” Samp said. “But I don’t think this will lead to a shortage of attorneys willing to take on plaintiffs’ cases.”

Weiss and Lerach have been cast as villains by the corporations they target, and as white knights by consumer groups.

….. But Yang said on Thursday that the case came to light in 1999 under the Clinton administration, after a Beverly Hills ophthalmologist, Steven Cooperman, facing unrelated fraud charges, alerted prosecutors about the kickbacks in hopes of receiving a plea agreement. (Additional reporting by Anna Driver and Herb Lash)

“White knights” — what a media-spun crock. “Prosecutors said Milberg Weiss maintained a stable of paid plaintiffs who agreed to be named in their lawsuits in exchange for a portion of the legal fees.” That is illegal, PERIOD. “White knights” don’t commit serial perjury. And yes, spokesmen for the firm did try to pass the indictments off as a Republican conspiracy. Zheesh.

And the bellyaching about the firm itself being indicted is precious. Let’s take a pre-indictment poll: How many partners at the firm objected to the indictment of CPA firm Arthur Andersen in the Enron collapse?

(sound of crickets chirping)

Andersen’s conviction was tossed by a unanimous decision of the Supreme Court, but of course by that time the firm was finished.

If the prosecution can show that the firm and its partners did what was alleged, the firm deserves to disintegrate into teeny tiny pieces, and the partners involved deserve hard time for what they have illegally done to hold back the economy and destroy shareholder wealth.

I’ll never understand why shareholder litigation as it’s mishandled by the legal profession today is looked upon so favorably by the WORMs (Worn-Out Reactionary Media, known to most as The Mainstream Media), except to attribute it to a knee-jerk “business bad, plaintiff good” mentality. No amount of abuse by the plaintiffs’ bar, even $11 million in alleged kickbacks, seems to move their mindset. They don’t seem to get that their 401(k) and other savings efforts are hampered by these vultures, as are yours and mine.

UPDATE: The ever-versatile Captain kicks in his thoughts, and provides info on where some of the ill-gotten booty goes (it won’t be too tough to guess).

Previous Posts:

  • April 30, 2006 — Is the Jig Finally Up on Milberg Weiss?
  • Dec. 14, 2005 — Quebec’s Lawyers Are Mimicking Milberg Weiss’s US Class-Action Tactics
  • Nov. 18 — Update: Investigation into Illegal Payments to Shareholder-Suit Plaintiffs
  • Aug. 19 — Update: The Multi-Billion Dollar Shareholder-Suit Payoffs Investigation Is Gaining Steam; Only the WSJ Cares
  • June 27 — Payoffs to Shareholder Suit Plaintiffs Alleged


  1. Listen up blowhard! These are ALLEGATIONS! It appears that this is truly “a partisan attack by a Republican U.S. administration trying to do in court what it could not accomplish in Congress with class action reform proposals.” The reason why most (sane) people think that business is largely bad is because IT IS!!!!

    Comment by darrian nayz — May 19, 2006 @ 2:14 pm

  2. #1 —
    - The investigation, as the article notes, dates back to 1999 and the Democrat Clinton Administration’s Justice Department headed up by Janet Reno. So they worked on it for 13-25 months before handing it over to the Bush DOJ.

    Yes, I know they are allegations, and that has been made abundantly clear in the post.

    Taking kickbacks to be a class-action participant is illegal. What is there not to understand about that, except to wait and see if the prosecution can prove its case?

    In the meantime, it’s “odd” how the Forbes 400 contains so many rich trial lawyers who have made a career of plundering “largely bad” businesses like the household names mentioned in the article, yet somehow manage to portray themselves as heroes of the little guy.

    What a crock.

    Comment by TBlumer — May 19, 2006 @ 2:27 pm

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