The indefatigable Walter Olson, senior fellow at the Manhattan Institute for Policy Research and editor of the popular blawgs Overlawyered.com and PointOfLaw.com, chimes in today with this Wall Street Journal ($) op-ed that provides a fine overview of the key issues raised by the Milberg Weiss indictment. Olson’s op-ed runs along side this WSJ ($) editorial that also comments on the Milberg Weiss indictment.
In reviewing the issues raised by the indictment, Olson notes the irony of Milberg Weiss being indicted for allegedly paying illegal kickbacks when Milberg Weiss has profited from making similar accusations in a large number of its class action securities fraud cases over the years:

Milberg Weiss lawyers have been in the forefront of efforts to define kickbacks broadly and punish them with rigor. The firm’s Web site boasts that it “has sued major providers of private mortgage insurance for kickback violations, resulting in substantial settlements.” Melvyn Weiss and others at the firm have expressed indignation at, and filed lawsuits over, alleged kickbacks in the contexts of Wall Street initial public offerings, mutual fund sales, insurance brokerage commissions and doctors’ prescribing of pharmaceuticals.

Meanwhile, although no great fan of many of the class action securities fraud lawsuits that Milberg Weiss has pursued, Larry Ribstein remains troubled by the indictment:

We (and I) may not like Milbergís business. But the class action part of it was one enabled by legal rules. The right way to deal with the problems of this business is to change the rules, as Iíve argued for securities class actions in my Fraud on a Noisy Market. When we criminally condemn firms like Milberg because we don’t like their business, we set a precedent for other firms in controversial lines of work — e.g., Drexel Burnham.
More seriously, the power to criminalize a firm puts a potent tool in the governmentís hands to get the firm to cooperate in sacrificing the rights of criminal defendants. Here the cure seems patently worse the disease. The questions are no less in Milberg than in KPMG just because Milberg was in an unpopular line of work.

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?