‘Big fish’ lawyer may be indicted
Melvyn I. Weiss, one of the nation’s most powerful class-action lawyers, expects to be indicted today in connection with the government fraud case against the New York law firm he helped found 42 years ago.
The firm, Milberg Weiss, said in a statement that it also would face new charges in an indictment to be handed down in Los Angeles. The news of the indictment was first reported on Fortune magazine’s website.
The U.S. attorney’s office in Los Angeles wouldn’t comment and Weiss declined to be interviewed.
Milberg Weiss said in the statement that Weiss, 72, had given up his management role in the firm to focus on his defense.
In the field of class-action securities law, Weiss is “the big fish,” said Laurie Levenson, a Loyola Law School professor and former federal prosecutor, “the one you want to have your picture taken with.”
His former partner and onetime apprentice, William S. Lerach -- at least as powerful as Weiss and probably more feared by companies -- agreed Tuesday to plead guilty to one count of conspiracy in the Milberg Weiss case.
Another former Milberg Weiss partner, Steven Schulman, is nearing a deal that could also be announced today, the Daily Journal said. He is expected to plead to a single racketeering conspiracy charge, according to Fortune, and will agree to cooperate with prosecutors. His lawyer didn’t return phone calls.
On top of the conspiracy, mail fraud and money laundering charges against Milberg Weiss in an indictment handed down last year, one more charge -- obstruction of justice -- will be added today, according to lawyers involved in the case.
Prosecutors allege that Milberg Weiss secretly paid more than $11 million in kickbacks to persuade people to serve as plaintiffs in more than 150 class-action and shareholder lawsuits so that its lawyers could be among the first to file litigation, become lead plaintiffs’ counsel and receive a larger share of fees.
Weiss has long insisted that his firm did nothing wrong. He refused to make a deal with prosecutors over the summer, these people said, even as former partner David Bershad negotiated one. Bershad pleaded guilty to conspiracy and agreed to cooperate with the government.
“Mel didn’t get where he is by being a wimp,” said Stephen Gillers, a New York University law professor who knows Weiss. “He got where he is by staring people down.”
A New York native, Weiss began his career trying personal injury and real estate cases before teaming with Larry Milberg, a securities lawyer 22 years his senior. Milberg died in 1989.
In 1966, a year after the two men founded the firm that still bears their names, federal court rules changed, permitting shareholders who believed they had been bilked to sue as a class.
It was a monumental change. The damage an individual claimed was often too trivial to interest a lawyer. But by joining thousands of aggrieved shareholders together in a class action, companies could be forced into settlements worth hundreds of millions, even billions, with a third of the total payout typically going to the lawyers.
Each victory helped the firm bankroll new litigation and by the 1980s, Milberg Weiss had vaulted into the top tier of plaintiff firms.
During 47 years in practice, Weiss built a significant record of pro bono work -- recovering $5 billion from German banks for Holocaust victims, underwriting scholarships for law students and representing a group of Nigerian children who claimed they were seriously injured by drugs manufactured by Pfizer Inc.
Weiss’ indictment would effectively end the career of what Gillers called “a lion” of the legal profession. It would also raise questions about whether his firm, which all but invented shareholder class actions, can survive. It had 145 lawyers before the 2006 indictment; defections have cut the number to 76.
Loyola’s Levenson said Weiss might feel pressure to cut a deal.
“It’s a heck of a way to end your career,” she said. “But whatever years you have left, you probably don’t want to spend them fighting in court or sitting in jail.”
--
