Risk Management

Milberg Weiss, Two Partners Indicted

Prosecutors contend that millions of dollars in kickbacks were paid in connection with more than 150 class-action and shareholder derivative lawsuits.
Stephen TaubMay 18, 2006

New York-based law firm Milberg Weiss Bershad & Schulman and two partners, David Bershad and Steven Schulman, were indicted Thursday by a federal grand jury for allegedly participating in a multimillion-dollar kickback scheme.

According to the U.S. Attorney’s office in Los Angeles, where the indictments were handed up, the law firm and the two attorneys paid kickbacks to individuals who served, or caused friends or relatives to serve, as named plaintiffs in lawsuits filed by Milberg Weiss.

The 20-count indictment — which includes charges of obstructing justice, perjury, bribery, and fraud — alleges that kickbacks were paid in connection with more than 150 class-action and shareholder derivative lawsuits. Prosecutors contend that the firm received more than $200 million in attorneys’ fees from these lawsuits during the past 20 years.

“This case is about protecting the integrity of the justice system in America,” said U.S. Attorney Debra Wong Yang, in a statement. “Class-action attorneys and named plaintiffs occupy positions of trust in which they assume responsibility to tell the truth and to disclose relevant information to the court. This indictment alleges a wholesale violation of this responsibility.”

Charged in an earlier version of the indictment, and charged again on Thursday, were Seymour Lazar, who allegedly served as a paid plaintiff and received about $2.4 million in kickbacks; and attorney Paul Selzer, who allegedly laundered kickbacks for the benefit of Lazar.

Also named as co-conspirators were Steven Cooperman and Howard Vogel, who allegedly served as paid plaintiffs and received $6.5 million and $2.5 million, respectively, in kickbacks from Milberg Weiss. Cooperman and Vogel have agreed to cooperate in the government’s ongoing investigation, the U.S. attorney noted.

The charges against Bershad and Schulman carry a maximum penalty of up to 20 years in prison.

In a statement, Milberg Weiss responded that “the government’s allegations of wrongdoing have been categorically denied by the indicted partners, and the firm intends to join with them in vigorously defending against the charges.”