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Milberg Weiss Case Yields Small Recovery
Of $251 million in tainted fees, only $32 million has been repaid -- so far
The National Law Journal
April 18, 2008
The defendants who have pleaded guilty in the Milberg Weiss case have collectively agreed to pay more than $32 million in monetary recoveries -- a far cry from the $251 million in attorney fees that federal prosecutors allege the firm and its lawyers obtained by paying kickbacks to lead plaintiffs.
A potential plea deal by the firm, which faces an August trial, could boost the recoveries significantly -- but not enough to collect more than $200 million.
"A firm like Milberg probably couldn't come up with $200 million," said John C. Coffee, a Columbia Law School professor who is following the case, "but probably could pay $50 million."
Nine defendants have pleaded guilty to federal charges including conspiracy and racketeering. Several have agreed to serve prison time, including William S. Lerach, a former partner of the firm, now called Milberg, and the firm's co-founding partner Melvyn Weiss, who pleaded guilty last month. Six defendants have agreed to pay fines and forfeit gains obtained from their alleged criminal activity.
From the start, federal prosecutors have sought to recover the entire $251 million. Soon after charging Milberg, Assistant U.S. Attorney Douglas Axel, one of the prosecutors in the case, called the tainted attorney fees "the pot we're after."
Axel did not return a call for comment. Thom Mrozek, a spokesman for the U.S. Attorney's Office for the Central District of California, which is prosecuting the case, said: "We believe that the settlements reached with the defendants who have pleaded guilty are equitable and serve the needs of justice."
A FRACTION OF FEES
In most cases, prosecutors don't obtain all the potential forfeitures sought due to several factors, such as whether individual defendants have the available funds or whether they are cooperating, said Andrew Weissmann, a partner in the New York office of Chicago-based Jenner & Block who was director of the Enron Task Force.
Prosecutors also might not have a good enough case. "But assuming you have a good case," Weissmann said, "you'll aim to have the defendants, to the extent they have the money, pay back what it is they got from the criminal activity."
In the Milberg case, most of the forfeitures are being paid by three former partners: Weiss, Lerach and David Bershad. Weiss, in pleading guilty to a federal racketeering charge, agreed to forfeit $9.75 million. In a superseding indictment brought against him last fall, prosecutors identified nearly $42 million in tainted attorney fees he allegedly received.
Weiss' lawyer, Benjamin Brafman of Brafman & Associates in New York, declined to comment.
Lerach and Bershad each pleaded guilty to a conspiracy charge and agreed to forfeit $7.75 million. Lerach's lawyer, John Keker of San Francisco's Keker & Van Nest, did not return a call for comment.
According to the 2006 indictment against Bershad, prosecutors identified $26 million in tainted attorney fees he allegedly obtained. Bershad's New York lawyer, Andrew M. Lawler, declined to comment about the details of the plea agreement.
Another partner, Steven Schulman, who pleaded guilty to a federal racketeering charge, agreed to pay $1.85 million in forfeitures. Prosecutors pinpointed $9.5 million in tainted attorney fees he allegedly received.
A 'BETTER ARGUMENT'
In arguing over the forfeiture amounts, prosecutors didn't have the "better argument," said Thomas Bienert, a partner at Bienert, Miller, Weitzel & Katzman in San Clemente, Calif., who represents Seymour Lazar, a lead plaintiff who agreed to forfeit $1.5 million. Prosecutors had sought up to nearly $58 million from him, including more than $2 million in kickbacks he received, according to the superseding indictment.
But the agreement came down to the cases in which Lazar served as plaintiff.
"Some were cases where Seymour Lazar was plaintiff, some where his wife was plaintiff and some where his children were plaintiffs," he said. "When Seymour was a plaintiff, that was wrong. But if you take a step back from that, is it wrong for me to refer my wife?"
Another lead plaintiff, Howard J. Vogel, agreed to forfeit $2 million in a 2006 plea deal.
One individual defendant remains in the case, Paul Selzer, a former lawyer for Lazar. But, for the most part, a potential plea deal from the firm, barring a conviction at trial, remains the primary avenue by which prosecutors could boost monetary recoveries.
William Taylor III of Washington's Zuckerman Spaeder, who represents Milberg, didn't return a call for comment.
