June 28, 2005
Witness May Be Cooperating in the Investigation of Milberg Weiss
A Wall Street Journal article (here) indicates that one Paul Tullman, who entered into a guilty plea last year to tax charges, may be cooperating in the grand jury investigation of alleged payments made by Milberg Weiss to representative plaintiffs in securities class action and shareholder derivative suits (see earlier posts here and here). The law firm was an unnamed coconspirator in an indictment hand up last week against Seymour Lazar, who was a representative plaintiff in a number of cases in which Milberg Weiss was lead counsel. Tullman, like Lazar, is an attorney (and also a stockbroker), but the Journal article indicates that payments he received related to referring clients to the law firm, not for serving as a representative or named plaintiff. A quick Westlaw check did not disclose any cases in which Tullman was among the named plaintiffs in a case in which Milberg Weiss was counsel.
A referral fee is permissible under the legal ethics rules, so long as the fee-sharing arrangement is disclosed to the client and, in some states, the referring attorney must do some work on behalf of the client. There must be an attorney-client relationship between the referring attorney and the client for the payment of a referral fee, otherwise the payment would be improper, just like a payment to a person working in an emergency room who refers patients to a lawyer is unethical. While payments to a representative plaintiff would be unethical for the attorney, and improper for the plaintiff acting as a fiduciary for the class, a referral fee is a legal fee that, if properly disclosed to the client and the court, would not be problematic. If Tullman is cooperating, it will be interesting to see what information he can provide about possible payments to representative clients, the focus of the investigation to this point. (ph)
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