gtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.

< Houston attorney pleads guilty in kickback scheme | Main | Ripples from the Kelo decision >

June 25, 2005

Is Lerach a target?

Lerachenrondocs150ap2.jpgThe dozens of securities fraud lawsuits against Enron and various other parties are consolidated under the federal multi-district litigation rules in Houston federal court. The legal community involved in those cases is abuzz today with the news that a federal indictment last week of two Southern California lawyers is a sign that the lead plaintiff's lawyer in the Enron securities fraud litigation -- William Lerach -- and his former firm (Milberg Weiss Bershad Hynes & Lerach) may also be targets of the investigation. Mr. Lerach and Milberg Weiss split last year, and Mr. Lerach started a new firm based in San Diego.

The indictment of almost 70 pages (press release here) accuses a former Milberg Weiss client -- Palm Springs lawyer Seymour Lazar -- of taking $2.4 million in kickbacks from a "New York law firm," presumably Milberg Weiss. Although Mr. Lazar's personal attorney -- Paul Selzer -- was also named in the indictment, the indictment contains no formal charges against "the New York firm." The indictment alleges that the New York firm reaped $44 million in attorney fees from over 50 cases in which Mr. Lazar was the lead plaintiff. As an inducement for Mr. Lazar and his family members to serve as lead plaintiff, the indictment alleges that the New York firm and others secretly paid Mr. Lazar kickbacks out of a portion of the firm's attorneys fees.

The indictment is the result of an investigation that began in 2002 that resulted in subpoenas being issued to dozens of law firms that have been co-counsel with Milberg Weiss in securities fraud class action cases over the years. Speculation is rampant throughout the plaintiffs' securities class action bar that the purpose of the indictment of Messrs. Lazar and Selzer is to pressure them to turn on the former Milberg Weiss lawyers.

In addition to observing that it is "saddened" by the indictment, a Milberg Weiss press release stated the following:

"We are also surprised and disappointed that, in the face of recent criticism of the government following the reversal of the Arthur Andersen conviction, the U.S. attorney's office would risk harming the Milberg Weiss firm and its many fine lawyers and staff by making this accusation in circumstances where the firm cannot defend itself."

As usual, Professor Ribstein provides insight and caution regarding this latest use of governmental power against an unpopular target (i.e., plaintiffs' class action securities fraud lawyers) of the day. Moreover, check out