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San Francisco-Hindsight is unkind to John Torkelsen. Ten years ago, the renowned expert witness was basking in the cash he made testifying for plaintiffs in stock fraud suits. He had Aretha Franklin sing at his 50th birthday party, the funk band War perform for a crowd of tuxedoed lawyers at his Christmas gala, and he gave extravagant gifts-like tropical vacations -to attorneys he worked with. But now Torkelsen is out of business, and lost in a miasma of federal criminal and civil investigations that cast a pall over his entire career. Earlier this year, his wife, Pamela, agreed to spend about three years in prison-and to cooperate with ongoing investigations-in connection with a scheme to defraud the government via Torkelsen’s investment fund. And Torkelsen himself is now negotiating with prosecutors, according to a source with knowledge of the investigation. Torkelsen couldn’t be reached for comment, and his attorneys did not return calls. Government civil suits allege that Torkelsen used his venture capital fund to steal millions of dollars from investors that included the federal government. Many of the limited partners in the Acorn Technology Fund were plaintiffs’ lawyers who used Torkelsen’s expert testimony to help secure stock fraud settlements. Torkelsen ran the fund, for which he earned 2.5% of the fund’s value. The fund reported a value exceeding $50 million at one point But despite years of trying to discredit Torkelsen in court, securities defense lawyers apparently never found out about it. He knows inner workings Some lawyers who have used Torkelsen as a witness say the prospect of his cooperating with the government is a worrisome one: They say he knew the inner workings of the plaintiffs’ bar’s biggest players, most notably the firm formerly known as Milberg Weiss Bershad Hynes & Lerach, which is already the subject of federal criminal probes looking at its handling of money. “Flipping Torkelsen would be the end of the semblance of order as we know it,” said one plaintiffs’ securities lawyer, speaking on condition of anonymity. His sentiment was echoed by lawyers throughout the plaintiffs’ bar, including three former Milberg Weiss partners. Torkelsen became the pre-eminent plaintiffs’ expert in the 1980s. His aggressive and convincing damages model withstood many courtroom tests, and many within the securities bar still refer to plaintiffs’ damages assessments as “Torkelsen damages.” The Torkelsen model was a key cog in the workings of Milberg Weiss, whose success in the 1980s and 1990s made it a top enemy of large corporations-and a tempting target for prosecutors seeking high-profile indictments. In addition to the federal probe in Los Angeles, the lawyers are also the subject of an ongoing federal investigation in Philadelphia. In recent months, Los Angeles prosecutors have stepped up their pursuit of Milberg Weiss: They indicted a former Milberg client in June, and sources familiar with the investigation say they’re preparing to bring witnesses before a grand jury this week. But to many plaintiffs’ and defense lawyers, the June indictment-based on old allegations that Milberg Weiss paid the client illegal kickbacks-reeks of a stale investigation. They suspect that prosecutors are trying to salvage five years of work-and flipping Torkelsen may help them do that, say former Milberg partners. And the former witness’s current situation suggests he has little to lose: His venture fund is in receivership, his wife is cooperating with a federal investigation of the fund, and prosecutors are looking to cut a plea deal with Torkelsen, said a source familiar with the Washington-based criminal probe. Such a deal, several plaintiffs’ lawyers speculated, is likely to involve information Torkelsen may have on Milberg Weiss and its former attorneys, including San Diego-based William Lerach. He split from Milberg last year to form his own firm, Lerach Coughlin Stoia Geller Rudman & Robbins.

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