Sunday, July 15, 2007

Where's the Milberg Weiss Case Headed

The cooperation of former Milberg Weiss partner David Bershad most likely will lead the firm to negotiate a quick resolution of the criminal charges, so the issue becomes whether any other current defendants will cooperate and if the case will be extended to others who worked at the firm, such as Melvyn Weiss and William Lerach.  In filing a response to a motion to dismiss the honest services counts of the indictment filed by, among others, former name partner Steven Schulman, federal prosecutors included as an exhibit a short portion of the grand jury transcript of an unnamed broker.  The broker testified that Schulman gave him cash payments to provide the names of clients who owned shares of companies Milberg Weiss was considering suing so they could act as lead plaintiffs.  The payments, which consisted of packs of hundred dollar bills, were made in restaurants at a Howard Johnson or Holiday Inn in Newburgh, New York, by passing the money underneath the table -- I'd hate to think what else might be found under there. 

It's not entirely clear what law Schulman might have broken in making the payments, although paying cash to a broker to obtain clients is questionable.  It would not be a scheme to defraud the brokerage firm, nor would it be a fraud on the class of plaintiffs because the case had not been filed.  It is certainly unethical to pay a person, particularly a non-lawyer, for clients.  As with many other charges in the case, however, representations were made to the court about the representative plaintiff and the lawyer's role in the matter, so the payments could be part of a broader fraudulent scheme.  Regardless of whether the payment is illegal in itself, it does not put Schulman in a very good light and is consistent with Bershad's plea agreement about the use of copious amounts of cash in connection with the class actions.

A post on the CAL LAW Legal Pad blog (here) speculates that prosecutors are looking into payments to an expert witness used by Milberg Weiss to establish damages from the alleged misconduct as a possible avenue for charging Lerach.  The expert is in prison on an unrelated fraud charge, so he won't be an effective witness.  But if the payments can be traced through others, or if Lerach made  or authorized false statements to the court that the expert did not receive a contingency fee, which is prohibited, then a perjury or criminal contempt charge could be brought.  (ph)

Download us_v_milberg_weiss_grand_jury_transcript.pdf

http://lawprofessors.typepad.com/whitecollarcrime_blog/2007/07/wheres-the-milb.html

Legal Ethics, Prosecutions | Permalink

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