On May 18, a California grand jury indicted a couple of bigwig lawyers. Some background will show why that’s a very big deal.
Of all the abuses of civil law, class actions are the worst. They allow a single law firm to represent millions of “injured clients,” who often end up with pocket change while the lawyers make fortunes.
Of all the law firms running these fleecing operations, the slickest and fattest of them all is Milberg Weiss Bershad & Schulman. When the latter two partners, David Bershad and Steven Schulman, were charged on May 18 with bribery, perjury and fraud, it was a long-awaited tolling of the bell for this school of sharks.
Milberg Weiss specializes in securities class actions that claim fraud on behalf of stockholders. Since 1995, the firm has handled half of all such cases. They’ve cleaned many a company’s clock and collected millions in fees.
For decades, competitors have wondered how Milberg did it. According to the grand jury indictment, they did it the old-fashioned way: They bribed lead plaintiffs.
Federal prosecutors began investigating Milberg in 1999. Along the way, Robert Sugarman, a former Milberg partner, began cooperating. He said Bershad and Schulman had masterminded a scheme to pay illegal kickbacks to stock broker Howard Vogel (among others) by passing them through a separate law firm as “referral fees.” Last month Vogel, who was lead plaintiff in 40 Milberg cases, pleaded guilty and began helping investigators.
As the prosecution of Bershad and Schulman proceeds, investigators hope to catch even bigger fish: Milberg kingpin partner Melvyn Weiss and William Lerach, a former partner who split last year to form his own firm. Weiss and Lerach perfected the art of class actions during the 1990s and began pulling down $10 million salaries. Lerach once bragged, “I have the greatest practice of law in the world: no clients.”
The 102-page indictment named not only Bershad and Schulman but also the firm itself. This will probably shut Milberg down, eliminating the jobs of 125 lawyers and 240 other employees, yet another measure of the harm done when lawyers are consumed by greed.
Milberg, of course, denies all and proclaims itself “the nation’s leading defender of the rights of victims against corporate and other large-scale wrongdoing.”
We’ll see. Bill Lerach said last year, “You have to assume the worst about corporations.” If the government proves its charges in court, we won’t have to assume the worst about Milberg Weiss. We’ll know it.