Milberg Accused of Conspiring with Expert Witness in Securities Fraud Case, Sued for $54 Million
By Ben Hallman
March 25, 2009
Wednesday was a good news/bad news day for the plaintiffs firm Milberg. Despite the firm's legal woes (hint: the name on business cards was once much longer), the firm won $253 million in securities class action settlements last year, according to data supplied by Securities Class Action Services, a unit of RiskMetrics Group. That was good enough to score ninth nationally in settlement dollars.The bad news is more legal trouble. As first reported by Courthouse News, Lakes Entertainment, a casino company, has sued Milberg for $54 million in Minnesota federal district court, accusing the firm of employing a damages expert who had a strong motive to inflate his damages estimate in a since-settled 1997 securities fraud action against Lakes's predecessor. Lakes, represented by George Eck of Dorsey & Whitney, alleges conspiracy, fraud, and civil RICO against Milberg.
According to the casino company's complaint, Milberg's expert, John Torkelsen of Princeton Venture Research, estimated damages to the class to be more than $165 million. Lakes claims that Torkelson's estimate was a big factor in its eventual decision to settle the class action for $18 million in 2000.
During his deposition, Lakes alleges, Torkelson said he billed Milberg by the hour and was paid about $35,000. But the casino company says that it later learned Torkelsen had actually been hired on a contingency fee basis, giving him a strong incentive to inflate his damages estimate. Lakes claims Torkelsen and his firm earned more than $145,000 for their services--far more than the $35,000 Torkelson testified to. The company is demanding treble damages on the $18 million settlement it claims it was extorted to reach.
Milberg told the Litigation Daily in an e-mail statement that it doesn't think much of Lakes's complaint. "This company's claim that our former West Coast partners 'extorted' settlement of a securities case in early 2000 is absurd on its face and will be vigorously defended," the firm said.
The suit is a bit of a throwback to the bad old days at Milberg. Named as an individual defendant is long-gone partner (and convicted felon) William Lerach, along with Kevin Roddy and Spencer Burkholz, who are also no longer with the firm.
