Milberg lawyers sued by ex-partners

Convicted securities class-action lawyers Melvyn Weiss, William Lerach and Steven Schulman, who admitted paying kickbacks to clients to win bigger fees, were sued by two former partners at their old firm, now called Milberg.

Douglas Richards and Michael Buchman, who quit the New York-based law firm last year, alleged that the three men lied to them while denying any wrongdoing, according to separate complaints filed Tuesday in federal court in Manhattan. Buchman also sued David Bershad, another convicted ex-Milberg lawyer.

Richards’ career and financial interest in the firm “have been seriously injured,” he said in his complaint. “These appalling allegations caused distress and professional embarrassment” to him and other Milberg partners.

The former Milberg lawyers, suing on their own behalf, allege fraud and breach of fiduciary duty and are seeking more than $1 million each in damages.

U.S. prosecutors in Los Angeles agreed Monday to dismiss an indictment that accused the firm of taking part in the scam, which involved paying clients to sue companies so the firm could lead litigation and receive higher fees.

Milberg agreed to pay $75 million to settle the case. The firm isn’t named in Richards’ complaint.

Milberg spokeswoman Marina Ein declined to immediately comment on behalf of the firm.

“Instead of seeking to take unfair advantage of a difficult situation, Mr. Richards should take note of the extraordinary success he was able to enjoy and participate in, largely as a result of the genius and great legal skills of Mel Weiss,” Weiss’ lawyer, Ben Brafman, said in a statement about Richards’ suit.

Attorneys for Lerach, Schulman and Bershad didn’t immediately comment.

Milberg, which got $45 billion for investors through securities-fraud lawsuits, faced extinction if convicted of federal charges that it secretly paid three clients more than $11 million to serve as lead plaintiffs.

The tactic, dating to 1979 and continuing to as recently as 2005, helped the firm file cases faster than rivals, ensuring a bigger share of settlements, federal prosecutors said.

Milberg, which had 117 lawyers when it was charged in 2006, now has 65.

Four former Milberg Weiss partners have pleaded guilty in the kickback scheme, including co-founder Weiss, who was sentenced June 2 to 2 1/2 years in prison, and Lerach, who is serving a two-year term.

Schulman and Bershad pleaded guilty and cooperated with the government. Bershad isn’t named in Richards’ lawsuit.