Monday, July 18, 2005

Is the Milberg Weiss Case Slipping Away Due to Statute of Limitations Problems?

The New York Times has a long article (here) reviewing the grand jury investigation of the well-known plaintiff class action firm Milberg Weiss and its two lead partners, William Lerach and Melvyn Weiss (note that the firm split in two in 2004), for making secret payments to the representative plaintiffs in class actions for which the firm was lead counsel.  As discussed in an earlier post (here), the U.S. Attorney's Office for the Central District of California (Los Angeles) indicted Seymour Lazar on conspiracy, mail fraud, money laundering, and obstruction of justice charges that allege Lazar, while acting as a representative plaintiff, received secret payments from a "New York law firm" that has since been identified as Milberg Weiss.  The Lazar indictment (link below) contains counts, and a large number of the overt acts for the conspiracy, that took place more than five years ago, which would place them outside the usual five-year statute of limitations (see 18 U.S.C. Sec. 3282 here).  One interesting issue discussed in the Times article is that Lerach and Weiss refused the government's request to waive the statute of limitations and permit an indictment after it has otherwise expired for certain conduct.

For the conspiracy charge, only one overt act must come within the five year limitations period, so that acts much earlier can also be used to prove the criminal agreement.  The Lazar indictment alleges acts as early as 1981, so the government will have to prove a single conspiracy that lasted approximately 20 years.  The problem is that if the evidence does not establish one overarching agreement, but instead multiple agreements, then only that conspiracy (or those conspiracies) with an overt act within the last five years can be charged.  There is a risk that the government may lose significant parts of its case if it can't prove a single conspiracy, and its proof of a more narrow conspiracy may not be as strong.  The government could also face the problem of proving a larger conspiracy involving other plaintiffs -- the difficult issue of whether it is a "chain" or "hub-and-spoke" conspiracy.  For the other conduct outside the five-year limitations period, while it might be used for evidentiary purposes, it cannot be charged separately and the court might bar its introduction at trial.  The longer the government waits to file any charges, the more it loses of the case.  The role of people like Lazar who served as named plaintiffs in securities fraud class actions was largely eliminated in 1995 with the passage of the Private Securities Litigation Reform Act, which made institutional investors the likely lead plaintiffs.  Even If Milberg Weiss made secret payments to individuals serving as representative plaintiffs, they were no longer necessary after 1995.

Of course, even if the statute of limitations were to eliminate many of the potential criminal charges against the firm and any of its partners, that provides no protection from the disciplinary authorities, who do not face the same requirements to complete an investigation and file charges within a specified time period. (ph)

Download lazar_indictment.pdf

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/07/is_the_milberg_.html

Corruption, Fraud, Grand Jury, Investigations, Legal Ethics | Permalink

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