Grand Jury Probing Milberg’s Lawsuits

A federal grand jury in Los Angeles is investigating the activities of Milberg Weiss Bershad Hynes & Lerach, a controversial New York-based law firm that has brought hundreds of shareholder lawsuits against American corporations, sources close to the case said Thursday.

Led by San Diego attorney William Lerach, the firm has been at the forefront of a flood of investor lawsuits filed recently against bankrupt Enron Corp.

The sources said the probe focuses on Milberg Weiss’ financial arrangements with plaintiffs in a number of cases, in particular, a Beverly Hills eye surgeon who was convicted in 1999 of faking an art theft to collect $12.5 million in insurance. Dr. Steven G. Cooperman had been a plaintiff in more than three dozen shareholder lawsuits, some of them filed by Milberg Weiss.

Investigators are interested in whether plaintiffs received improper payments to appear in lawsuits. The U.S. attorney’s office in Los Angeles declined to comment. Calls to the law firm’s office in New York and to Lerach’s office in San Diego were not returned.

A source familiar with the probe said Milberg Weiss had received a grand jury subpoena asking for records concerning the firm’s dealings with Cooperman.

“If there is truth to this, it could have a serious impact on cases that have been resolved as well as cases that are pending,” said Bruce G. Vanyo, aleading securities defense lawyers in the United States and a partner at Wilson, Sonsini, Goodrich & Rosati in Palo Alto.

Lerach is considered the king of class-action shareholder lawsuits, a nemesis to countless corporations, especially those in Silicon Valley.

In a move aimed largely at Lerach and his law firm, American corporations successfully lobbied Congress in 1995 to override a presidential veto and pass the Private Securities Litigation Reform Act. The law raised the standards of evidence required to establish corporate fraud and restricted so-called “professional plaintiffs” to no more than five class actions in three years.