This NY Times article reports that Mel Weiss and Bill Lerach received good news and bad news earlier in the week regarding the longstanding criminal investigation against the two men and the Milberg Weiss Bershad & Schulman law firm over allegations of paying kickbacks in connection with class action lawsuits that the firm handled over the past decade.
The good news is that federal prosecutors have apparently informed Weiss and Lerach’s individual counsel that they will not seek an indictment against the two men.
The bad news is that the prosecutors still may go Arthur Andersen on the Milberg Weiss firm.
According to the Times article, two top Milberg Weiss partners — David Bershad and Steven Schulman — appear to be the main targets of the investigation. The heat on Milberg Weiss and its current and former partners was turned up last year when prosecutors indicted 78 year-old Seymour Lazar, a retired Southern California Palm Springs lawyer who was a plaintiff in at least 50 Milberg Weiss securities cases, with fraud and conspiracy. Prosecutors alleged that Lazar was involved in an alleged scheme with Milberg Weiss in which the firm secretly funneled him about $2.5 million for being the class representative in class action lawsuits that the firm handled. Lazar and Milberg Weiss contend that the payments were legal referral fees and deny that there was any effort to conceal them.
As noted in my previous posts on this matter, despite the irony that Weiss and Lerach are embroiled in a criminal investigation that is strikingly similar to the prosecution of agency costs that Weiss and Lerach profit from in connection with a good number of their class action securities fraud cases, I have great reservations about the government criminalizing the plaintiff’s lawyers’ conduct in these cases. Larry Ribstein shares those concerns, and notes with his usual keen insight:

To the extent that a goal of the case is to curtail securities class actions, this is not the way to do it. . . . Lerach and company are just products of the system that has been created by current law. Real reform requires changing the game, not just the players. How about this solution: getting rid of the ìfraud on the marketî theory?

Meanwhile, Bruce Carton has more on the ubiquitous Lerach in this second excerpt from Joseph C. Goulden’s new book, The Money Lawyers (previous excerpt here), which includes Lerach’s description of how his first meeting with Weiss transformed him from a boring Pittsburgh defense lawyer into an exciting plaintiff’s lawyer:

“Mel sat there like the complete master of the universe. He was barking orders right and left, saying which lawyer would do what, laying out the scenario for what would happen in court the next day. He was in complete charge, and all of us sat there saying, ‘Yes, Mel, you’re right, whatever you want. . . .’ Man, I was impressed. Mel was the smartest lawyer I had ever seen. I was used to dealing with the uptight, stuffy defense lawyers. Now I was definitely on the other side of the spectrum.”