When Justice Department lawyers filed a 20-count indictment of the New York-based Milberg Weiss Bershad & Schulman LLP, it was the first time they had ever used federal anti-racketeering laws against a law firm, claiming it was a criminal enterprise.
But then, for more than 20 years, Milberg Weiss had often been among the key players in unprecedented court cases, but always on the plaintiff side, not as defendants.
The May 2006 indictment following a Los Angeles grand jury probe alleged that for two decades, senior members of the widely celebrated firm committed bribery, fraud, perjury, racketeering, filing false tax returns and obstructing justice. The indictment says those crimes were committed while the lawfirm operated what federal officials described as a systematic system for secretly paying off lead plaintiffs in class-action lawsuits.
The New York firm with offices in Manhattan, Washington, D.C., Los Angeles and Florida had long billed itself as “the most respected and effective plaintiff law firm” in the country. The firm has denied all allegations in connection with the indictment and promises a vigorous defense.
Milberg Weiss specialized in class-action suits on behalf of shareholders and aggrieved consumers against corporations that had suffered stock losses, often alleging securities fraud and other forms of financial and ethical malfeasance.
The firm had become so successful that Investor’s Business Daily observed that “what Babe Ruth was to the home run, Milberg Weiss is to shaking down business.”
The federal government claimed the firm had received more than $200 million in attorney fees as a result of its work in the 150 allegedly tainted cases. Lead plaintiffs are key players in such suits because they can agree to settlements that produce big checks for the lawyers butlittle for the rest of the plaintiffs in the class represented by the attorneys.
Milberg Weiss allegedly benefited from the kickbacks because, according to the government’s statement of facts in former managing partner David Bershad’s plea agreement, he “and other conspiring partners were able to secure a reliable source of individuals who were ready, willing and able to serve as named plaintiffs in class actions that Milberg Weiss wanted to bring.”
The kickbacks also enabled the firm to file more class actions and to file them more quickly than rival law firms, which “enhanced Milberg Weiss’ ability to obtain lead counsel status in cases,” the government said.
