Divorce Sheds Light on Probe

Facing up to 10 years in prison for staging an art theft and an insurance swindle, Steven G. Cooperman was a desperate man. Luckily for him, he had participated in something bigger -- or so he told federal prosecutors.

In return for a big reduction in his sentence, the former Beverly Hills eye surgeon served up a tempting target: the powerhouse New York law firm of Milberg Weiss Bershad Hynes & Lerach.

The firm’s bare-knuckles representation of aggrieved shareholders in class-action cases had stirred fear and wrath in corporate boardrooms. Its ability to find clients and launch classaction lawsuits almost immediately -- sometimes within hours of bad financial news -- also had raised questions. Under rules in force through the mid-1990s, the first firm to the courthouse won control of the litigation and the largest helping of fees.

Cooperman told prosecutors, whose probe of Milberg Weiss became public in 2002, that he knew how the firm did it: with the help of people like him who served as ready-made clients in exchange for illegal kickbacks.

Although no Milberg Weiss lawyers have been charged with wrongdoing, the investigation continues; in June prosecutors indicted a retired Palm Springs lawyer, Seymour Lazar, and his attorney, Paul Selzer, alleging that they had received illegal kickbacks from Milberg Weiss.

Cooperman, who had also served as a plaintiff in as many as 60 class actions filed by the firm, was rewarded for his cooperation with a 37-month sentence in July 2001.

Although federal prosecutors did recommend leniency at Cooperman’s sentencing, they have not confirmed his role in the Milberg Weiss investigation and still decline to discuss it. But details have emerged from an unlikely corner -- a highly charged divorce trial last fall in Bridgeport, Conn., that brought the 21-year marriage of Cooperman and his third wife, Nancy, to an explosive end.

The five-day trial in October and November, captured in more than 800 pages of transcripts, opened a window on Cooperman’s dealings with Milberg Weiss and his cooperation with federal authorities.

According to testimony by Cooperman and others, between 1988 and 1997 he received about $5 million from his arrangement with Milberg Weiss -- about $1 million of which went directly to him and the rest to lawyers he owed money.

Cooperman, 63, was released in July 2003 after 21 months, and now lives in Connecticut. He could not be reached.

Milberg Weiss last year split in two, forming Milberg Weiss Bershad & Schulman in New York, and Lerach Coughlin Stoia Geller Rudman & Robbins in San Diego.

In a joint statement to The Times, lawyers for the two firms did not respond to Cooperman’s allegations in the divorce case but said those claims should be viewed in light of his “background and credibility.”

Milberg Weiss “and its past and present partners are proud of the contributions they have made to the rights of shareholders, consumers, racial minorities and other victims of corporate misbehavior,” the statement said. “The firm has always acted in an appropriate way.”

The firm maintains that any payments were legitimate fees to lawyers for referring clients. It is customary and legal for law firms to reward outside lawyers who refer cases to them but improper for such referral fees to be shared with clients.

Cooperman acknowledged in the divorce case that he did not view payments from Milberg Weiss as illegal at first.

“What was going on with Milberg Weiss was a very well-known activity,” he said. “They openly acknowledged, and we discussed, kickbacks and the relationship that we had.”

“I frankly didn’t think of it as a, quote, ‘criminal activity,’ ” he said. But “I think after a certain point, I realized it was.”

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Lavish Beginning

The Coopermans were married in 1983 after what was truly a whirlwind romance.

A month after meeting the divorced ophthalmologist at a party at his home, Nancy, now 54, flew off with Cooperman and his two daughters on a free-spending trip to Europe.

“Everything was totally, totally, totally ultra-luxurious, first class,” she testified last fall.

While on the French Riviera, they chartered a yacht for St. Tropez but ran into a powerful storm on the way back. “And I think we were on the floor, like, holding on to table legs. And he asked me if I would marry him,” Nancy Cooperman recalled.

The early years of the marriage were “just remarkably, magically wonderful,” she said. With Red Skelton as his celebrity spokesman, Cooperman -- a 1966 graduate of Northwestern University’s medical school -- had built up a lucrative practice with earnings in his best year of more than $2.3 million. He took the family on extravagant vacations, acquired paintings and lithographs by Picasso, Chagall and Monet, among others, and spent a fortune on jewelry for his wife, including a $50,000 Cartier ring and “numerous ... diamond earrings.”

But he wound up leaving his practice under a cloud. Facing complaints to the state Medical Board that he had fabricated records and performed unnecessary surgeries, he retired in 1989. State records show that in 1992 he agreed to let the board cancel his medical license to avoid a hearing on the allegations.

At the time of his retirement, the Coopermans had two homes in Brentwood and real estate in Palm Springs and Connecticut, rare artworks, valuable antiques and an autograph collection that included signed letters by Tchaikovsky, Brahms and Napoleon Bonaparte.

Cooperman, who had a heart condition, also retired with an annual income of nearly $500,000 from disability insurance payouts. Cooperman acknowledged in divorce testimony that he had deliberately failed to disclose a 1984 heart attack when he applied for disability policies before his retirement.

And yet it wasn’t enough. Cooperman had suffered big stock losses and had run up debt of at least $4 million, but he couldn’t seem to moderate his spending, which included mortgage payments of $23,000 monthly on his Brentwood homes. When his wife tried to talk him out of buying more art, she testified, he complained: “You are like a cold, wet blanket spoiling my fun.”

In what he described as a moment of “absolute stupidity and bad judgment,” Cooperman decided his financial salvation lay in faking the heist of a Picasso and a Monet and collecting on a $12.5-million insurance policy.

His friend James P. Tierney, a former federal prosecutor turned entertainment lawyer, removed the paintings from one of the Coopermans’ Brentwood homes in July 1992, while the Coopermans were spending a month at the New Jersey shore. When insurers balked at paying for the suspicious disappearance, Cooperman sued -- and extracted a settlement of $17.5 million.

In 1997, after the Coopermans had moved to Connecticut, the paintings were found in a storage locker in Cleveland, where a lawyer who formerly worked for Tierney had stashed them.

Tierney wound up admitting his involvement, signed a plea agreement and testified against the man he said he had considered his best friend. In July 1999, Cooperman was convicted on 18 counts, including insurance, tax and wire fraud.

Facing a likely term of seven to 10 years, Cooperman brought in a new criminal lawyer, Russell Gioiella of New York, who later said in the divorce trial that he had interviewed his new client “to find out if there was anything he knows about anything that might be of interest to the U.S. attorney’s office.”

In testimony in the divorce case, Cooperman and Gioiella said that Milberg Weiss not only made direct payments to Cooperman but also paid on his behalf about $2 million to lawyer Richard Purdich, who had represented Cooperman in insurance litigation and other matters. Purdich did not return several phone calls.

Another $2 million or so went to Tierney “for his participation in the art theft,” Gioiella said. Tierney could not be located for comment.

Cooperman also described a pair of meetings with William Lerach, the firm’s best-known partner. At one, he said, Lerach gave him an envelope with $16,000. Beyond their general statement addressing accusations against Milberg Weiss, lawyers for Lerach declined to comment.

Cooperman testified that Lerach invited him to help promote legislation favorable to class-action lawyers. Although his wife was reluctant to attend a fundraiser for former Alabama Sen. Howell Heflin, Cooperman said he told her, “I think that we need to show up,” noting that the couple was “going to make a lot of money from this.”

And Cooperman infuriated his wife by providing information to prosecutors on her relatives, including Bruce Bjork, the husband of her sister.

Nancy Cooperman acknowledged telling her husband that it would have been better for him to serve more time than to turn informant. At one point, she testified, she told Cooperman that if prosecutors continued pestering Bjork, “our marriage will be over.” Cooperman had helped Bjork get a job at Milberg Weiss. And, Cooperman testified, Bjork received a cut of the ophthalmologist’s payments in return for acting as a conduit. Bjork, who has not been charged, did not return calls.

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A Bitter End

Cooperman spent part of his 21 months in custody at the federal prison at Ft. Devens in Massachusetts. He also was shuttled to lockups in Los Angeles and Kern County to assist prosecutors sifting through mountains of documents. He met with Assistant U.S. Atty. Richard Robinson, who had prosecuted him in the art theft case.

“Literally, I think we looked at maybe 800 boxes of records,” Gioiella said.

While he was in prison, Cooperman also committed insurance fraud, the divorce judge later concluded, referring to testimony by Nancy Cooperman that he forged his physician’s signature on disability insurance forms -- an act that he said inflicted fresh damage on his wife’s “already fragile psyche.”

Under terms of an agreement between the Coopermans before he entered prison, virtually all of the couple’s assets were put in Nancy Cooperman’s name. While he was behind bars, she sued for divorce.

Relations between the two had deteriorated so badly that when Cooperman left prison in July 2003, she refused to give him any of her 11 TV sets, according to the case transcript.

He still owed large legal fees and restitution, although he continued to receive his disability income, then about $400,000 a year.

But Cooperman showed that despite being out of practice, he had not forgotten his free-spending ways. In the 14 months leading up to the divorce trial, he had run up about $500,000 in credit card charges -- for vacations in Italy and Vail, Colo., for limousine service and for diamond jewelry for female friends, according to evidence in the case.

In November, a Connecticut judge ordered Nancy Cooperman to pay $2.5 million in alimony to her former spouse and to contribute $300,000 toward his restitution payments and an additional $125,000 toward his legal bills.

Steven Cooperman also got the signed letters of Napoleon, Brahms and Tchaikovsky.

The Coopermans still face a $22-million collection suit by Lloyds of London, which is still trying to recover money from the art swindle. The trial is scheduled for January.