Saturday, June 2, 2007
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)