Unprecedented: Securities Law Firm Indicted for Fraud

It's about time.

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.

"Falsely" accuse? Says who? They're probably guilty as sin and decided to let the firm burn rather than give themselves up.

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.

VILLAINS OR WHITE KNIGHTS?

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.

What a lame excuse. Keep in mind that their clients are shareholders, NOT taxpayers.

These are the same people who insist that workers get laid off, or their pensions dumped to improve the company's bottomline.

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.

One of those clients, Howard Vogel, agreed recently to plead guilty to charges stemming from the case and cooperate with prosecutors as part of a plea agreement.

U.S. Postal Inspector In Charge Oscar Villanueva told a news conference that more indictments could be forthcoming.

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.

See - I told you! Same game, different name.

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.

Good. By the stench of the legal profession, it's long overdue.

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 [that are paid for by corporate foundations, no doubt].

Congress has tried repeatedly through a series of securities litigation reforms passed in the late 1990s to curb Milberg Weiss' dominance in corporate class actions, but has been largely unsuccessful.

The firm and its allies have portrayed the case as 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.

Lerach, a longtime Democratic Party contributor, also has claimed to be the target of Republican ire.

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.

Leave it to a lawyer to cry partisan foul when someone calls him to task for his shenanigans.