Plaintiff’s lawyers indicted
Two partners at the famed plaintiff’s law firm of Milberg Weiss have been indicted for bribing people to file class action lawsuits against companies that they owned stock in and lost money on.
Milberg Weiss Bershad & Schulman, the law firm that has won more than $45 billion for investors in securities-fraud cases, and two of its partners were charged with participating in a scheme to pay illegal kickbacks to clients.
The New York-based firm, Steven Schulman, 54, and David Bershad, 66, were indicted on multiple felony counts including mail fraud and conspiracy, the U.S. attorney’s office in Los Angeles said today. Bershad and Schulman took leaves of absence from the firm this week.
The indictments might inhibit the firm’s ability to represent clients in securities cases. The charges might threaten its largest case in which the firm is managing a group of 309 class actions for shareholders who claim initial public offerings were manipulated by investment banks to inflate market prices. JPMorgan Chase & Co. agreed in April to pay $425 million to settle IPO claims against it, the first bank to do so.
“You can’t go into court as an indicted entity and say you ought to be able to represent the class,” said Adam Pritchard, a securities-law professor at the University of Michigan Law School. “It’s unfathomable to me that any judge would approve an indicted firm as counsel for the lead plaintiff.”
Marina Ein, a spokeswoman for Milberg Weiss, declined to immediately respond to the indictment. Andrew Lawler, an attorney representing Bershad, and Herbert Stern, a lawyer for Schulman, didn’t immediately return calls seeking comment.
Prosecutors said the firm from 1984 though 2005 paid three clients more than $11 million “in secret and illegal payments” for cases in which the firm made $216.1 million in fees. The payments were made in cash or checks through intermediary lawyers or other professionals.
The purpose of the payments were to “provide Milberg Weiss and its partners with a stable of persons who were ready, willing, and able to serve and whom the courts would likely approve to serve, as named plaintiffs,” according to the indictment issued today.
Two of the clients, Howard J. Vogel and Steven Cooperman, have reached plea agreements with prosecutors and agreed to cooperate with the investigation. A third, Seymour Lazar, was charged with mail fraud and money laundering last year and refused to assist prosecutors.
The firm obtained the money in a manner to make the payments difficult to trace, including from casinos, prosecutors said in the indictment. The money was kept in a safe located in a “credenza in Bershad’s office at Milberg Weiss, to which access was strictly limited.”
The indictment may give a boost to President George W. Bush and others who favor legislation to limit damages and to make it harder for shareholders to sue companies.
“It’s going to give a great deal of ammunition to lobbying groups who’ve long wanted to close down plaintiffs’ class actions,” said Columbia University law professor John C. Coffee Jr.
I’ve long believed that if you lost money on an investment it was your own fault unless somehow somebody made the investment for you without your authorization. That’s the way it goes, and you win some and you lose some, especially if you don’t do your own due diligence. Here’s a law firm which made hundreds of millions of dollars screwing over companies for nothing other than the fact that their stock prices went down, and as if that weren’t sleazy enough, we find that they were bribing people with some very serious cash to file the suits in the first place. If there’s any justice in the world, the guilty partners, as well as those bribed, will go to prison for a long time.
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