Houston's Clear Thinkers

My main concern about the Milberg Weiss indictment is similar to Professor Ribstein's. Although unclear to what extent, the criminal investigation of Milberg Weiss was at least facilitated -- if not initiated -- by opposing forces in the class actions that Milberg Weiss prosecuted. Why did these opponents not pursue an investigation of the firm in the particular class action cases in which Milberg Weiss was counsel for the class and illegal kickbacks were suspected? Broad discovery rights in those cases would have probably uncovered valuable evidence relating to the alleged kickbacks, and the defendants in those cases likely would have benefited from such an investigation. If such an inquiry had uncovered illegal kickbacks, then Milberg Weiss would have been subject to sanctions and disgorgement of fees by the trial court, which also could have referred the matter to the Justice Department for criminal investigation if the court believed that a crime had occurred.

The Seymour Lazar part of the Milberg Weiss investigation is a case in point. In connection with his indictment in California, lawyer Lazar denied he had conflicts of interest that compromised his status as lead plaintiff in certain Milberg Weiss class actions or that the payments he received from the firm were illegal. According to Lazar, he took litigation "ideas" to Milberg Weiss, which paid referral fees to Lazar's lawyers, including the firm of the other lawyer who was indicted with Lazar. Lazar's lawyers in turn allocated some of the firm's referral fees from Milberg Weiss to pay Lazar's personal bills from real-estate lawyers, appraisers and other professionals. Inasmuch as it's not unusual for lawyers to pay referral fees, Lazar contends that he had no reason to think that his arrangement with Milberg Weiss was improper and that the firm did not pay him to be a class representative in any of the class actions.

Now, Lazar's situation is different from that of Howard Vogel, whose recent plea deal appears to be the impetus for the Milberg Weiss indictment. Moreover, it's not at all clear that Lazar's explanation of his arrangement with Milberg Weiss would have passed muster with the courts that approved the firm's fees without disclosure of that arrangement. But doesn't it make more sense to have the arrangement between Lazar and Milberg Weiss vetted through the prism of the federal district courts that were allegedly misled about the Milberg Weiss' arrangements with class representatives before the Justice Department hauls off and starts prosecuting a law firm out of business?