Milberg Weiss Confirms Inquiry
The high-profile law firm Milberg Weiss Bershad Hynes & Lerach confirmed Friday that it is the subject of a Los Angeles federal grand jury probe that is examining whether the firm and others paid people to serve as plaintiffs in shareholder class-action suits.
Criminal defense lawyers said Friday that a wave of grand jury subpoenas issued to shareholders who had repeatedly appeared in the lawsuits had touched off a scramble for representation. “My firm must have gotten three or four calls from people who are looking for lawyers in that case,” said an attorney who would not speak for attribution.
Lawyers who had been contacted said it was unclear whether authorities are targeting the plaintiffs or seeking to pressure them to testify against law firms that might have paid them.
Prosecutors declined to comment Friday on how many law firms may be included in the investigation. “I’m not prepared to comment on the scope of the investigation,” said Assistant U.S. Atty. Richard Robinson--adding quickly that he was not even confirming that there is one.
Reflecting the high stakes in the case, Milberg Weiss has retained Washington law firm Williams & Connolly, which represented President Clinton in the Whitewater case and his impeachment trial, and Iran-Contra figure Lt. Col. Oliver North. Jerry Feffer, a Williams & Connolly partner, said Milberg Weiss “will cooperate with any government inquiry.”
Milberg Weiss has become a pariah in corporate America by filing hundreds of shareholder suits accusing companies of misleading investors. Milberg is the dominant player among several large firms that pursue these cases.
Milberg is competing to become lead counsel for shareholders suing failed energy giant Enron Corp. In recent days, its best-known partner, William Lerach, who is based in San Diego, has appeared in court in Houston and on news reports holding what he said were shredded Enron documents. Lerach declined to be interviewed Friday.
The investigation is believed to have started or gained momentum from the cooperation of Steven G. Cooperman, a Beverly Hills eye surgeon who is serving a prison term for staging an art theft to collect millions of dollars in insurance. Cooperman had been a plaintiff in more than three dozen shareholder lawsuits, some of them filed by Milberg Weiss.
He faced up to 183 years in prison based on his conviction on 18 counts, including conspiracy and wire fraud, but received a prison sentence of 37 months. People close to the investigation said Cooperman began cooperating with the shareholder investigation before his sentencing in July.
Michael Lightfoot, one of Cooperman’s lawyers, declined to comment.
Whatever the outcome, the investigation could be a blow to Milberg’s campaign to be appointed lead counsel for shareholders suing Enron for tens of billions of dollars. Lead firms typically get the largest share of fees.
Speaking of Lerach, Jim Newman, who heads a securities class- action research organization in New York, said it “dampens his chance” of getting the plum appointment “if there’s a cloud over his firm.”
Milberg has pursued numerous lawsuits against Silicon Valley firms over initial public offerings. “Being sued by Bill Lerach, in Silicon Valley especially, has come to be known as being ‘Lerached,’” said Bill Ballowe, assistant vice president of San Francisco insurance broker Woodruff & Sawyer.
In a move aimed largely at Lerach and his law firm, business firms convinced Congress to override a presidential veto and pass the 1995 Private Securities Litigation Reform Act. The law raised the standards of evidence required to establish corporate fraud and limited “professional plaintiffs” to appearing in no more than five class actions in three years.
In 1999, Lerach suffered a major defeat when he was forced to pay a $50-million legal settlement to one of his targets. Lexecon Inc. accused him of maliciously naming the Chicago-based legal and economics firm as a defendant in a suit against Lincoln Savings & Loan.
“Firms like Milberg Weiss provide an important service in the case of real corporate wrongdoing,” said Jan L. Handzlik, a partner at Kirkland & Ellis and chairman of the American Bar Assn.’s national committee on white-collar crime. “Individual shareholders do not have the power to vindicate their rights in some cases.
“But allegations that shareholders have been paid to pursue spurious claims are very serious and should be investigated thoroughly.”
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Times staff writers Jeff Leeds and Henry Weinstein contributed to this report.
