November 3, 2006
Fortune Magazine Details the Milberg Weiss Investigation
Professor J. Kelly Strader (Southwestern Law School) - Guest Blogging on the White Collar Crime Prof Blog writes-
The current issue of Fortune magazine provides a detailed history of the events leading to May 2006 indictment of the country’s leading plaintiff’s class action law firm, Milberg Weiss, and others. Entitled “The Law Firm of Hubris, Hypocrisy, and Greed,” the article paints a portrait of the firm and its principals that is, to say the least, unflattering. The article also notes that the government has advised the judge in the case that there is “a significant chance” of a new indictment naming other defendants, apparently the firm’s principal founders, Mel Weiss and Bill Lerach. According to the article, both have received target letters.
The indictment contains 20 counts, but fundamentally rests on mail and wire fraud charges. The essence of the charges is that for over two decades the defendants arranged for $11.3 million in kickbacks to be paid to named plaintiffs in suits for which the firm acted as lead plaintiffs’ counsel, defrauding the unnamed class members. The government alleges that this arrangement also enabled the firm to have named plaintiffs at the firm’s disposal so that the firm could be first to the courthouse.
What the article does not mention is that, as previously discussed here, the mail and wire fraud theories are open to serious challenge. All this raises the age-old question about the proper exercise of prosecutorial discretion – should the government target the individual or the crime?
The article also cites the law firm’s assertion of the attorney-client privilege during the investigation as a lack of cooperation that justified the firm’s indictment. This once again raises issues arising from the Thompson Memorandum, now under attack in the KPGM case. (see here) .
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One area that is not well covered concerning Milberg Weiss and other "class action" law firms is a possible "pay to play" situation.
Since the Private Securities Litigation Reform Act gave large institutional investors (including large public pension plans) greater influence in selecting the lead plaintiff's counsel in class action law suits we have seen a larger concentration of "lead counsel status" being awarded to fewer firms.
Many such firms including Milberg Weiss directly and indirectly gave large amounts of political contributions to the politicians who either run such public pension plans or appoint members to their respective boards.
Many less “politically connected” law firms of equal competence are at a disadvantage when vying to be appointed lead counsel status.
The result is more legal fees being awarded to the “politically connected” law firms when other less “politically connected” law firms can competently represent the interests of the class action plaintiffs at a lower cost.
Posted by: Sam E. Antar (former Crazy Eddie CFO and ex-felon) | Nov 4, 2006 11:10:17 AM