L ast week, U.S. District Judge Paul Barbadaro of New Hampshire approved a $464 million payout to three law firms in a shareholder class-action lawsuit against Tyco International, as part of a $3.2 billion settlement. One of the firms splitting those exorbitant fees is Milberg Weiss, four of whose principals pleaded guilty in 2007 to various felonies in a tawdry kickback scheme that federal prosecutors say started nearly 30 years ago.
Three kickback recipients have also pleaded guilty. In a 102-page indictment, the Justice Department said the scheme resulted in more than $200 million in tainted legal fees from at least 150 cases being paid to Milberg Weiss. The firm itself and one of its named partners, Mel Weiss, have denied all charges and face criminal trials later this year.
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On its face, $464 million in legal fees (plus another $28.9 million for “expenses”) is far too generous to the firms. To earn such fees, 50 lawyers would have to work 80-hour weeks at $500 an hour for 4 1/2 years, with no breaks. Or look at it this way: The previous record for legal fees paid in one case was the $366 million in the WorldCom suit. That was just three-fourths the size of the fees in the Tyco case, but the WorldCom settlement of $6.1 billion was some 70 percent larger than the Tyco settlement. The WorldCom lawyers got just 6 percent of the settlement, compared with the 14.5 percent to be paid to Milberg Weiss and the other Tyco case firms.
The bigger point here is that the Milberg Weiss guilty pleas point to a criminal racketeering enterprise that undermines the firm’s credibility on every case it has worked on since 1979.
That’s one reason why last month San Francisco Chief District Judge Vaughn Walker refused to approve the legal fees demanded by Milberg Weiss in a $30 million settlement of the In Re Chiron Corp. case. Judge Walker said “the criminal charges against [Milberg Weiss] pose a concern here, because the kickback arrangements alleged criminally are that lead counsel gave the paid plaintiffs a greater interest in maximizing the amount of attorneys fees awarded to lead counsel than in maximizing net recovery to absent class members.” The same considerations should make Judge Barbadaro revisit his ruling. At the very least, Milberg Weiss’ fees should be put into escrow in the Tyco case and in all others involving the avaricious firm. To do otherwise would be akin to giving pirates first dibs at the loot.
