Thursday, May 18, 2006

Milberg Weiss and Two Partners Indicted

Leading plaintiff securities class action firm Milberg Weiss and two of its name partners, Steven Schulman and David Bershad, were indicted on mail fraud, conspiracy, and RICO conspiracy charges in the Central District of California (indictment below).  The defendants were added in a superseding indictment to the earlier prosecution of Seymour Lazar and another attorney related to alleged payments by Milberg Weiss to Lazar when he (and members of his family) served as a representative plaintiffs in a variety of class action suits in which the law firm served as lead counsel.  The indictment sets forth payments to three different plaintiffs, including Howard Vogel, who entered into a guilty plea in April 2006 related to making false statements in federal court that he had not received any payments for serving as the representative plaintiff while admitting to receiving money from Schulman and Bershad.  The new indictment adds the lawyers and firm as participants in an alleged general conspiracy and the scheme to defraud.  Interestingly, Milberg Weiss is not named in the RICO conspiracy count, instead serving as the so-called RICO enterprise operated by Schulman, Bershad, and Lazar.  As a technical pleading matter, an organization cannot be both the enterprise and the defendant under Sec. 1962(c), and for a conspiracy under Sec. 1962(d) to violate that provision, so Milberg Weiss could not be charged in this count under the government's theory.  The indictment also seeks forfeiture of assets from the defendants, including the law firm.

This case certainly marks a new phase in the use of criminal laws against business organizations.  I am not aware of a law firm of this size being charged in a criminal case.  In the early 1990s, Kaye Scholer settled civil charges related to its representation of Charles Keating and Lincoln Savings & Loan, but as a civil matter that did not implicate the same concerns as a criminal prosecution.  Milberg Weiss issued a statement (available below) asserting that the government's demands during plea negotiations made it impossible to reach an agreement.  The firm states:

The firm has held intense negotiations with government officials in Los Angeles and Washington over the past six months in an effort to avoid this unjust result. The government’s insistence that the firm waive attorney-client privileges as a condition to avoiding indictment is in derogation of one of the bedrock principles of American law and extended to parties the firm did not control. Governmental insistence on such broad waivers has been criticized by the American Bar Association and the U.S. Chamber of Commerce, and is currently being reviewed by Congress. The prosecutors also insisted that the firm make unfounded statements accusing its own partners of crimes and otherwise become an agent for the government. Unfortunately, the prosecutors insisted on indicting the firm unless it made these impossible concessions.

A key issue will be whether the law firm can survive a criminal indictment, and issue considered in an earlier post (here).  (ph)

Download milberg_weiss_indictment.pdf

Download milberg_weiss_statement.pdf

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/05/milberg_weiss_a.html

Fraud, Legal Ethics, Prosecutions, RICO | Permalink

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