Milberg Weiss loses bid to dismiss fraud charges
A judge rejects the law firm's contention that it didn't
illegally pay kickbacks to plaintiffs.
By Molly Selvin, Staff Writer
Los Angeles Times
Tuesday, August 7, 2007
A federal judge Monday denied motions to dismiss charges against
a New York law firm, a former partner in the firm and two other
defendants in a fraud and conspiracy case scheduled for trial in
Los Angeles next year.
U.S. District Judge John F. Walter rejected the defendants'
arguments that payments lawyers at Milberg Weiss made to some
plaintiffs in class-action lawsuits weren't illegal kickbacks.
Milberg Weiss helped pioneer securities class-action cases
during the 1970s and 1980s, recovering more than $45 billion on
behalf of shareholders and others. Milberg's enormous success
was attributable in part to the fact that the firm often was the
first to sue a company, thereby taking the lead in a case and
grabbing the largest share of the fees.
Prosecutors allege that Milberg Weiss won the race to the
courthouse because it kept a stable of plaintiffs on standby and
paid them kickbacks, often through intermediaries.
The firm and two former partners were indicted last year. The
20-count indictment didn't name firm co-founder Melvyn I. Weiss
or another former partner, William S. Lerach, but the two are
believed to be the "Partner A" and "Partner B" referred to
throughout the document. Lerach left Milberg Weiss in 2004 to
open his own San Diego-based class-action practice.
Last month, another former partner, David Bershad, pleaded
guilty to conspiracy, saying that he and others had pooled their
money in a fund he maintained that was tapped for the "secret
payments." His plea raised speculation that additional
defendants could be named.
In Monday's hearing, William Taylor, who represents Milberg
Weiss, told the judge that he was concerned that a sealed filing
made by the prosecution Friday might raise "possible mootness
issues" and wondered whether the indictment might change form
Walter answered that he didn't think it was unwise to proceed.
Court observers called the filing unusual and said it could be a
courtesy notice alerting the judge that a new indictment might
soon be filed.
Herbert Stern, a lawyer for former Milberg Weiss partner Steven
G. Schulman, argued Monday that the alleged kickbacks were
compensatory payments to the named plaintiffs in suits that
eventually won class-action status. Those plaintiffs have more
responsibilities than others, performing such tasks as giving
depositions and appearing in court.
The payments came out of the firm's fees in a case, not out of
the judgment awarded to class members and as a result, Stern's
argument went, there was no intent to defraud other plaintiffs.
"If Milberg Weiss made hundreds of millions of dollars [in
fees], the class members made billions," Stern said.
Walter was not persuaded, saying that "it seems to me that this
scheme, as alleged by the government" was a "classic kickback
scheme." He added, "Whether the government can prove these
allegations remains to be seen."
Walter denied other dismissal motions filed by Seymour M. Lazar,
a frequent plaintiff in Milberg cases, and his attorney, Paul
Selzer. Lazar is accused of receiving kickbacks and Selzer of
serving as an intermediary for those payments.