Law Firm Linked to Kickbacks

A California man has been charged with taking illegal kickbacks to act as a plaintiff in dozens of corporate class-action lawsuits filed by Milberg Weiss Bershad & Schulman, a move that brings a three-year federal probe to the door of one of the leading U.S. securities law firms.

The indictment handed up by a federal grand jury in Los Angeles on Thursday comes as prosecutors try to make a case that Milberg Weiss improperly paid plaintiffs to file suits against publicly traded companies.

Although the indictment against former California entertainment lawyer Seymour Lazar names only “a New York law firm with principal offices in New York and California” as the source of the kickbacks he is alleged to have taken, the cases listed in the indictment were filed by Milberg Weiss.

A spokeswoman for the law firm said Friday that Milberg Weiss was subpoenaed in connection with the investigation and “has complied completely with the government.”

The 66-page indictment, which also names Palm Springs lawyer Paul T. Selzer as a defendant, describes a scheme in which Lazar or one of his family members agreed to serve as lead plaintiff for a share of the attorney fees.

The indictment said Lazar collected at least $2.4 million in “secret and illegal kickback payments” from the law firm through Selzer and others.

The federal probe into allegations against Milberg Weiss came to light in January 2002, when a flurry of subpoenas went out to scores of lawyers and stockbrokers from major firms and plaintiffs who had participated in Milberg Weiss lawsuits.

In a statement, Milberg Weiss said that although the indictment did not name the firm, it “unfairly implicates the firm in the wrongdoing alleged against Lazar.”

The 1995 Private Securities Litigation Reform Act, which was drafted with Milberg Weiss in mind, limits plaintiffs to no more than five class actions in three years.

The firm once dominated class-action law in the United States, accounting for 85% of all such suits filed in California and 60% elsewhere in 2001, according to San Francisco-based insurance broker Woodruff-Sawyer.