Lerach, Weiss Avoid Charges; U.S. Builds Case Against Others
By John R. Wilke and Scot J. Paltrow
The Wall Street Journal
Wednesday, February 22, 2006
Federal prosecutors informed prominent class-action lawyers
William Lerach and Melvyn Weiss that they don't plan to
charge them after a five-year investigation of alleged
kickbacks in securities-fraud cases, lawyers close to the
But the U.S. prosecutors based in Los Angeles are continuing
to build a case against Mr. Lerach's former law firm,
Milberg Weiss Bershad Hynes & Lerach (now known as Milberg
Weiss Bershad & Schulman) and at least two senior partners,
others briefed on the case said.
A Milberg Weiss spokesman declined to comment; the firm has
denied the government's kickback allegations.
Prosecutors have been investigating whether Mr. Lerach and
his former partner, Mr. Weiss, conspired to pay kickbacks to
witnesses in scores of securities-fraud cases reaching back
20 years. Lawyers for both men were told Friday that they
aren't likely to be indicted. The status of the case, which
remains active, is under review at the Justice Department.
The two top Milberg Weiss partners who remain under scrutiny
and are expected to face indictment along with the firm are
David Bershad, who handles most of Milberg Weiss's finances,
and Steven Schulman, another longtime partner in the firm,
the lawyers and others close to the case said.
Mr. Bershad and his lawyer couldn't be reached for comment.
Mr. Schulman's lawyer, Edward Hayes, said his client and his
partners have collected billions of dollars in damages from
corporations that have cheated shareholders, and "there are
people who have very strong financial and personal motives
to make false accusations against him [and] the firm."
The outline of a possible case against Milberg Weiss
surfaced in indictments handed up by a Los Angeles grand
jury in June. It charged Seymour Lazar, a retired Palm
Springs, Calif., lawyer who was a plaintiff in at least 50
Milberg Weiss securities cases, with fraud and conspiracy,
saying he secretly had been given $2.4 million for taking a
leading role in those cases, which in turn generated tens of
millions of dollars in fees for Milberg Weiss.
Mr. Lazar's attorney denied the charge and said the
payments, which were made by Milberg Weiss to Mr. Lazar's
lawyer, were legal and that no effort was made to conceal
them. Milberg Weiss also denied wrongdoing, saying payments
to lawyers for the plaintiff referrals is legal and common.
The firm also has said that the practices under scrutiny
were largely eliminated by reforms of securities litigation
enacted in 1995.
Lawyers for both Mr. Lerach and Mr. Weiss declined to
comment yesterday. William Taylor, who represents Milberg
Weiss, said that "the firm has not been told that it is
going to be indicted."
After a bitter parting in 2004, Mr. Lerach formed his own
firm, Lerach Coughlin Stoia Geller Rudman & Robbins LLP, in
San Diego. Since Milberg's breakup, the two firms have
become power brokers. Lerach Coughlin is lead counsel in the
Enron Corp. securities class action and is seeking court
approval for a $7 billion settlement with banks that
allegedly aided in the fraud. The new Milberg firm is lead
counsel in a proposed $225 million class settlement with
KPMG LLP for allegedly selling fraudulent tax shelters.
Milberg Weiss and the Lerach firm have been viewed has as
major nuisances by some corporations. The firms file what
are derisively called "strike suits" when a company's stock
drops, often alleging fraud or misrepresentation.
Messrs. Lerach and Weiss see themselves as champions of
investors, standing up against inadequate disclosure and
accounting fraud. Both firms have won billions of dollars
for investors, but they also have been sharply criticized by
courts for sometimes putting their own interests before
those of their clients and entering into settlements that
brought big fees to the firm but little benefit to the class
--Nathan Koppel contributed to this article.
Scot J. Paltrow at