Lawyer under cloud to retire
William S. Lerach, the class-action securities lawyer Wall Street loves to hate, is retiring Friday from the San Diego firm he co-founded to “focus single-mindedly” on resolving questions about his role in an alleged kickback scheme operated by the law firm where he made his name.
Lerach hasn’t been charged in the fraud and conspiracy case that federal prosecutors built against Milberg Weiss Bershad & Schulman and that is set for trial in Los Angeles next year. But he has been dogged by implication and speculation in the seven years since the government began investigating the New York firm where he was a partner until 2004.
The firm and two former partners were indicted last year on conspiracy and fraud charges. One of the defendants, David Bershad, agreed last month to cooperate with prosecutors in Los Angeles as part of a plea agreement that added to already heated speculation that Lerach and firm co-founder Melvyn Weiss might be indicted as well.
Neither was mentioned by name in the indictment but are widely believed to be the “Partner A” and “Partner B” referred to throughout the document. Lerach has been in on-and-off negotiations with prosecutors about a possible plea agreement, according to people familiar with the matter.
Lerach, who signaled his intention to step down in June, said in a statement Tuesday that he was leaving to work on “putting the matter behind me once and for all.” He declined to be interviewed.
In the statement and an e-mail to colleagues, Lerach said, in typically defiant style, that his court victories had made him a target.
When “you spend decades challenging powerful interests, the powerful interests will fight back with a vengeance,” he said. “Sometimes when you take the bull by the horns, you get gored -- this is the business we’ve chosen. I have to live with the world as it is -- not as I wish it was.”
Lerach’s huge class-action wins -- against R.J. Reynolds Tobacco Co., AT&T; Corp., Honeywell International Inc. and Apple Computer Inc., among others -- made him unpopular with corporate executives who slammed his cases as meritless shakedowns. Success also made him a millionaire many times over (his fees in suits against Enron Corp. alone could ultimately total more than $1 billion) and a generous Democratic campaign contributor.
He joined Milberg Weiss in 1976 and quickly earned a reputation as a scrappy courtroom fighter. When he left to form his own class-action practice in San Diego, Lerach took much of Milberg Weiss’ securities litigation with him, including shareholder suits against Enron that eventually won a record $7.1 billion on behalf of investors.
In the 20-count indictment, Milberg Weiss and the two former partners were charged with paying $11.3 million in illegal kickbacks over a 25-year period to clients who agreed to act as plaintiffs in class actions.
The illegal payments helped Milberg lawyers become the lead lawyers in class-action litigation, which entitled them to a larger share of legal fees, the indictment alleges.
This month a federal judge declined to dismiss charges against the remaining defendants: former Milberg Weiss partner Steven G. Schulman; Seymour M. Lazar, a frequent plaintiff in Milberg cases; and his attorney, Paul Selzer. Lazar is accused of receiving kickbacks and Selzer of serving as an intermediary for those payments. In July, former physician and frequent Milberg plaintiff Steven G. Cooperman pleaded to a federal conspiracy charge for his role in the alleged scheme.
With his departure, the San Diego firm will drop Lerach’s name, becoming Coughlin Stoia Geller Rudman & Robbins. In recent months, Lerach’s photograph, once prominent on the firm’s website, has largely been replaced by that of co-founder Patrick Coughlin.
Lerach, 61, will retire rather than become “of counsel” to the firm, a more typical route for senior and founding partners.
“That’s very unusual,” and a signal that the firm intends to disassociate itself from Lerach, said David A. Katz, a former assistant U.S. attorney now in private practice in Beverly Hills.
The 180-lawyer firm will continue to specialize in shareholder and consumer litigation, according to the statement released Tuesday.
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