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He was a notoriously effective witness for Milberg Weiss in dozens of securities cases during the 1990s. Then, when the prominent class-action law firm came under scrutiny for allegedly doling out illegal kickbacks to plaintiffs, he remained loyal, declining to cooperate with government investigators. But now, five years into the probe, it appears John Torkelsen might have caved after being charged by federal prosecutors in Washington last month in an unrelated matter. According to lawyers familiar with the investigation, the work of prosecutors in the U.S. Attorney’s Office in Washington might assist their Los Angeles counterparts, who have spent years struggling to indict the now-defunct plaintiffs firm Milberg Weiss Bershad Hynes & Lerach and its one-time star partner, William Lerach. The single count against Torkelsen was filed Sept. 9 by Washington prosecutors and relates to a venture capital fund he managed and funded in part with money from Lerach and other plaintiffs lawyers. Torkelsen is expected to appear in the U.S. District Court for the District of Columbia on Friday and plead guilty to reporting false information to a government agency. Beginning in 2003 the U.S. Small Business Administration filed a number of civil suits accusing Torkelsen, along with his wife and associates, of using the fund — called Acorn Technology — to bilk the SBA out of millions of dollars. The criminal charge against Torkelsen follows a plea deal between D.C. prosecutors and Torkelsen’s wife on related charges that was unsealed earlier this year. “I was involved in this because of my husband — my ex-husband. I did not know everything that was going on in this matter,” Pamela Torkelsen told U.S. District Judge Reggie Walton at her Jan. 8 plea hearing, according to court transcripts. Pamela Torkelsen pleaded guilty to interstate transportation of stolen and fraudulently obtained property in connection with the venture fund. As part of the plea deal, she agreed to pay $1.9 million in restitution to the SBA and cooperate “completely, candidly and truthfully” with ongoing investigations, according to court documents. Neither Lerach nor Milberg Weiss is mentioned in court documents or transcripts from the Torkelsens’ D.C. criminal cases. Lawyers representing Milberg Weiss and Lerach have denied wrongdoing throughout the investigation. William Taylor, a defense attorney with Zuckerman Spaeder’s D.C. office, did not return calls seeking comment about his client Milberg Weiss. Lerach did not respond to messages left at his San Diego law office, Lerach Coughlin Stoia Geller Rudman & Robbins, the firm he launched last year after leaving Milberg Weiss. While no plea agreement between John Torkelsen and prosecutors has been made public, the way in which Torkelsen was charged — through a criminal information, which bypasses the grand jury process — typically is used when a plea deal is in place. “If he has waived his right to an indictment, there is almost definitely an agreement between the defense and the government,” says Barry Boss, a partner at the D.C. office of Cozen O’Connor and a former federal public defender. Leo Cunningham, a former federal prosecutor in California, agrees. “That’s only done when you have a plea deal,” says Cunningham, a partner at Wilson Sonsini Goodrich & Rosati. Torkelsen’s lawyer, Ralph Caccia, a partner with Powell Goldstein, was out of the country last week and could not be reached for comment. Torkelsen, whose published home phone number had been disconnected, also could not be reached. Channing Phillips, principal assistant U.S. attorney in Washington, declines to say whether prosecutors have offered Torkelsen a plea deal, adding that local court rules prohibit comments on pleas before they are filed. Assistant U.S. Attorney John Griffith, who is prosecuting both of the Torkelsen cases before Judge Walton, did not return a message left at his office last week. SQUEEZE PLAY Torkelsen, a prominent financial analyst from Princeton, N.J., testified in scores of shareholder’s rights cases brought by Milberg Weiss, and lawyers with knowledge of the investigation say he has long been viewed as a potential gold mine for prosecutors investigating the firm. They say Torkelsen’s long history of financial ties with Lerach and other plaintiffs lawyers, and the persistent accusation that he was paid illegally on a contingent basis — a charge Torkelsen seemed to acknowledge in a 1998 deposition — have made him a coveted witness. But until now, Torkelsen had never cooperated with prosecutors. That began to change earlier this year when his wife pleaded guilty. Pamela Torkelsen is scheduled to appear in court Nov. 30. Her attorney, Eric Yaffe of Schmeltzer, Aptaker & Shepard in Washington, says it’s unclear whether she will be sentenced at that time. When asked about the extent of his client’s cooperation with prosecutors, Yaffe said, “I can’t comment until this thing has been settled. . . . I’d like to, but it’s nothing I can comment on while this is pending.” Earlier this year, Walton reluctantly agreed to release Pamela Torkelsen at the request of prosecutors pending sentencing, but he first demanded to know why he should let a “greedy person” walk out of the courthouse. According to transcripts, she told the judge, “I am not going to do it again, and I do need to go home tonight so that I can start cooperating and help them with the other people that are involved.” At sentencing, Pamela Torkelsen faces up to 10 years in prison, but likely will receive between 30 and 37 months, according to the U.S. Attorney’s Office. Since the charges against John Torkelsen became public, Los Angeles prosecutors have signaled a renewed interest in him. In recent weeks the L.A. team, led by Assistant U.S. Attorney Richard Robinson, has canvassed securities defense lawyers, seeking documents related to Torkelsen, lawyers familiar with the case say. Meanwhile, prosecutors have also recently been interviewing other former lead plaintiffs in Milberg Weiss class actions. Torkelsen’s cooperation could signify a broadening of the investigation, which originated in 2000 when Steven Cooperman — a convicted felon and former Milberg lead client — told prosecutors that he received illegal kickbacks from the firm. Boss, who is not affiliated with the case, acknowledged that Torkelsen’s apparent plea agreement could mean he is working with prosecutors investigating Lerach. “You have to indulge a lot of inferences, but there is certainly an inferential path you could follow to hypothesize he is cooperating against Lerach,” Boss says. Allegations of kickbacks have continued to be the main focus of prosecutors, say lawyers familiar with the probe. With Cooperman’s credibility in question, they have spent years trying to bolster their case with a handful of other former clients. Earlier this year they indicted Seymour Lazar, a Palm Springs lawyer and former Milberg client, along with his former attorney, for allegedly taking such kickbacks, a move that was widely seen as an attempt to pressure Lazar into testifying. More recently, prosecutors have given immunity to at least two other former clients who claim they received kickbacks, say lawyers familiar with the case. The flurry of recent grand jury activity was surprising to many securities lawyers, since there had been seemingly little activity in the case since 2003. But earlier this year two new prosecutors were assigned to work with Robinson, say lawyers familiar with the investigation. And they say a Torkelsen plea could also help jump-start the Milberg effort. Cunningham, who is not involved in the case, says the recent inquiries by L.A. prosecutors — and the aggressive tactics by prosecutors in Washington — would seem to indicate that Torkelsen is a coveted figure. Cunningham says Pamela Torkelsen’s plea signaled that the prosecutors were serious about getting John Torkelsen to cooperate. “Squeezing the wife,” he says, “that’s hardball.”
Justin Scheck is a reporter for The Recorder , an ALM publication. Sarah Kelley can be reached at [email protected].

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