Big Law Firm Indicted For Kickbacks
One of the nation's highest profile class-action law firms, two of its top partners, and two other individuals were indicted by a federal grand jury Thursday on charges alleging a scheme that paid millions of dollars in illegal kickbacks to plaintiffs and others.
In a 102-page indictment, New York-based Milberg Weiss, Bershad & Schulman, and attorneys David J. Bershad and Steven G. Schulman were charged with secretly paying about $2.4 million to co-defendant Seymour M. Lazar, a Palm Springs lawyer, and others to act as plaintiffs in class-actions since 1984 and concealing the payments.
The indictment's 20 counts included conspiracy, money laundering, mail fraud and other crimes.
The charges follow years of investigation into the way Milberg Weiss conducts shareholder lawsuits against major corporations, which the indictment alleges generated hundreds of millions of dollars in attorneys' fees.
The indictment alleged that "unlike other class members in the lawsuits, the paid plaintiffs purchased the securities at issue anticipating that the securities would decline in value, in order to position themselves to be named plaintiffs in securities fraud class actions and to obtain kickbacks" from Milberg and the others.
The firm immediately defended itself in a statement posted on its Web site.
"The government's allegations of wrongdoing have been categorically denied by the indicted partners, and the firm intends to join with them in vigorously defending against the charges," it said.
"The firm is particularly incensed that the prosecutors decided to indict the firm itself," the statement added, asserting that its hundreds of employees will suffer personal and professional harm.
The firm was a lead plaintiff in more than half the federal shareholder suits settled from 1997 to 2004.
On Tuesday, the firm announced that Bershad and Schulman were taking leaves of absence
Some of the firm's lawsuits were against such companies as Standard Oil, Lockheed, and Denny's. In a suit against United Airlines, Lazar's son was paid $250,000 in illegal kickbacks, the indictment alleges.
Paul L. Seltzer, another lawyer in Palm Springs, was charged with acting as an intermediary in the payment of the kickbacks to Lazar and others.
The indictment further alleged that Howard J. Vogel and Steven G. Cooperman and their relatives and associates frequently served as plaintiffs for Milberg Weiss in dozens of lawsuits, for which they received illegal kickbacks totaling about $9 million, although Vogel and Cooperman were not named as defendants in Thursday's action.
Last month, Vogel pleaded guilty in Los Angeles to taking more than $2.4 million as payments to him and his family for serving as plaintiffs in about 40 suits between 1991 and 2005. Vogel or his wife was a plaintiff in various Milberg Weiss class-action lawsuits against Oxford Health Plans Inc., Velero Energy Corp. and Mercer Corp.