Risk Management

No Indictments for Class-action Titans

A former client of the law firm Milberg Weiss was charged last year with receiving about $2.4 million in illegal kickbacks for serving as a plainti...
Dave CookFebruary 22, 2006

The U.S. Attorney’s Office for Los Angeles has no current plans to indict William Lerach and Melvyn Weiss, perhaps the two best-known proponents of shareholder class-action litigation, according to published accounts.

However, prosecutors may still indict David Bershad and Steven Schulman, two New York-based partners at the law firm of Milberg Weiss Bershad & Schulman, reported The New York Times. An indictment against the firm itself is also a possibility, the newspaper added.

A Los Angeles grand jury, convened in October 2004, has been hearing evidence of alleged illegal payments to plaintiffs who appeared in dozens of securities class-action lawsuits brought by the firm during the past 20 years, according to The Wall Street Journal. Many of those lawsuits were filed by a previous incarnation of the firm, Milberg Weiss Bershad Hynes and Lerach. After a bitter dispute with Weiss, who heads the New York office, Lerach, who had run the firm’s San Diego office, formed his own law firm.

Last summer, the investigation kicked into high gear with the indictment of Milberg client Seymour Lazar. Now a retired entertainment lawyer, Lazar was charged last year with receiving about $2.4 million in illegal kickbacks for serving as a class-action plaintiff in securities lawsuits, reported the San Diego Union-Tribune. Another former Milberg client, Steven Cooperman, has made similar accusations against the firm, according to the paper.

In a class action, noted the Union-Tribune, the lead plaintiff is supposed to represent the class as a whole and not enjoy any special interest or hidden inducement.

The Recorder reported that since Lazar has refuse to cooperate with the government, and since Cooperman made his accusations in exchange for a reduced sentence after a 2000 conviction, prosecutors have had little leverage. That may change now that Lazar is headed for trial, noted the legal newspaper. It is unclear whether indictments against Bershad and Schulman are intended to help build a case against Lerach and Weiss, the paper added.

Prosecutors, lawyers for Lerach and Weiss, and representatives of their firms are not currently offering comment on any possible litigation.