Saturday, June 2, 2007

Rumblings of a Plea from Milberg Weiss

There are indications that partners at Milberg Weiss are negotiating a plea deal with the government to put an end to the prosecution of the firm for making secret payments to named plaintiffs in class actions for which the firm was lead counsel.  Recent reports that former name partner David Bershad is also negotiating to plead guilty for his role in the scheme (see earlier post here) means that any hope the firm had of defending itself on the charges goes down the tubes if Bershad admits to criminal conduct in the course of his work on behalf of Milberg Weiss clients.  The criminal liability of organizations, such as law firm partnerships, is based on respondeat superior, so Bershad's conduct would be attributed to Milberg Weiss.  An article in The Recorder (here) includes speculation that the firm may be required to pay a fine of $50 million to $100 million, a substantial amount of money. 

For the firm, more important than the fine is avoiding having to enter a guilty plea, which would haunt it in the future as it tries to obtain appointments in securities class actions.  I expect the government is willing to enter into a deferred prosecution agreement under which Milberg Weiss will admit to violations and agree to certain reforms in its operations and governance, and after a period of time the current charges will be dismissed.  While not a pleasant outcome for the firm, it sure beats a criminal conviction by a jury, which would be a foregone conclusion if Bershad admits his own guilt.  What reforms the government demands will be interesting -- might it seek the removal name partner Melvyn Weiss from his role at the firm he helped found and turn into a plaintiffs class action powerhouse?  (ph)

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Comments

Questions- Is the plea of an individual acting in his own self-interest admissible against the firm under respondeat superior? How does Crawford affect that possibility?

Posted by: Lawrence Goldman | Jun 6, 2007 5:08:54 PM

The answer to the first question is yes, I think, so long as he admits he was acting on behalf of, or for the benefit of, the partnership. Partners are agents of the partnership, and his conduct would likely be on its behalf, so it would be attributed to the firm. On the second question, the plea (and allocution) alone would not be admissible to show Milberg Weiss' liability, and Crawford would require the witness testify (assuming he enters a plea and it includes a cooperation provision, which I suspect it would). Crawford would only bar the evidence if the witness did not testify. Circuit courts have held that statements made in a plea hearing are "testimonial" for puposes of Crawford and the Confrontation Clause.

Peter Henning

Posted by: Peter Henning | Jun 6, 2007 5:48:51 PM

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