This fascinating Rhonda Rundle W$J article profiles Southern California attorney Seymour Lazar, who was indicted last year for supposedly taking illegal kickbacks from Milberg Weiss Bershad & Schulman, the former law firm of securities fraud plaintiffs lawyers, William Lerach and Melvin I. Weiss. Earlier posts on the investigation into Milberg Weiss are here.
The 78 year-old Lazar — who Peter Lattman characterizes as “one classic dude” — is in poor health and may not even make it through his criminal trial that is slated to begin later this year, but he is well enough to make the clearest statement to date of the government’s theory of the case against Milberg, Weiss:

During the recent discussion at his home, Mr. Lazar denied he had conflicts of interest or that the payments were illegal. He said he had taken litigation “ideas” to Milberg Weiss, which paid referral fees to his lawyers, including Mr. Selzer’s firm. Those lawyers in turn allocated some of the fees to pay Mr. Lazar’s personal bills from real-estate lawyers, appraisers and other professionals, he said. It’s not unusual for lawyers to pay referral fees and Mr. Lazar said he had no reason to think the arrangement was improper. Milberg Weiss “gave me part of their fees after the court set the fees and after they got paid,” he said. The fees amounted to 5% to 10% of Milberg Weiss’s compensation on some, but not all cases, he said. The payments, he maintained, didn’t reduce recoveries for other members of the class.
Lawyers for Milberg Weiss say Mr. Lazar wasn’t paid to be a plaintiff. Referral fees, they say, are lawful.

If this is all the government has, then my sense is that the government has a very difficult case against the Milberg Weiss lawyers. Not only are many of the alleged overt acts far beyond the applicable statute of limitations (prosecutors will probably try to bootstrap those acts through a conspiracy charge), proving that referral fees paid to law firms were really disguised kickbacks for Mr. Lazar will be problematic, to say the least. Prosecutors will have to establish that presumably legal referral fees were used to pay Mr. Lazar undisclosed and illegal payments for serving as a class representative. In short, the government’s theory of criminal liability against the Milberg Weiss lawyers is based on an undisclosed oral side deal. Sound familiar?
By the way, it’s with more than a touch of irony that Mr. Lerach is now the target of an investigation that is strikingly similar to the prosecution of agency costs that Mr. Lerach and his new firm are wildly profiting from in connection with the Enron class action securities fraud case. So it goes in the wacky world of criminalizing agency costs.