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Los Angeles-The top lawyer at Milberg Weiss Bershad & Schulman may have averted a potential indictment by federal prosecutors, but the plaintiffs’ firm faces possible financial challenges as the probe centers on the firm and two of its name partners. Earlier this month, prosecutors at the U.S. Attorney’s Office for the Central District of California told Melvyn Weiss and William Lerach, a former partner at their previous firm, Milberg Weiss Bershad Hynes & Lerach, that they would not be indicted anytime soon as part of a five-year investigation. Prosecutors are looking into whether Milberg Weiss lawyers paid kickbacks to lead plaintiffs in its class action securities lawsuits. But New York-based Milberg Weiss Bershad & Schulman and two other firm partners in New York, David Bershad and Steven Schulman, may face charges in the coming weeks. Edward W. Hayes of New York’s Edward W. Hayes P.C., a New York lawyer representing Schulman, said that prosecutors are unlikely to have a case against the firm, especially since most of the partners did not work there during the time period under investigation. A ‘device’ against firm The “motivation is to try to force Bershad or Schulman to testify against Lerach and Weiss to put a grossly unfair amount of pressure on the firm,” Hayes said. “They don’t share criminal liability but they’re at risk financially.” He added, “This is just a device to put the firm out of business.” Thom Mrozek, a spokesman at the U.S. attorney’s office, declined to comment. The possibility of financial hardship is real, even if the firm averts charges. One lawyer familiar with the investigation, who requested anonymity, said, “If the firm’s lawyers are indicted, that has an impact on the morale of the firm and the clients’ willingness to go forward with them.” Weiss, founding partner of the firm, did not return calls, nor did Lerach. Bershad did not return calls, either. And calls to the firm were referred to William Taylor, a partner at Zuckerman Spaeder, the Washington law firm representing Milberg Weiss. Taylor did not return calls. For the past decade, Milberg Weiss has been the top plaintiffs’ firm for securities class actions. In 2004, Lerach split from Milberg Weiss and formed his own firm, which is now called Lerach Coughlin Stoia Geller Rudman & Robbins and is based in San Diego. Last year, Milberg client Seymour Lazar and his lawyer, Paul Selzer, were indicted as part of a federal investigation that began when Dr. Steven G. Cooperman, an ophthalmologist who was a plaintiff in many of Milberg Weiss’ suits, offered to provide prosecutors with information about the firm. He assisted prosecutors in exchange for a reduced sentence on art fraud charges. Now, as the investigation begins to focus on Milberg Weiss and two of its partners, the firm could be facing a challenge to its business. “You’re looking at the firm’s reputation, not just the people but the firm’s reputation,” said Cheryl Bame, principal and owner of Bame Public Relations, a Los Angeles-based communications firm for law firms. “But it is a unique situation, and I don’t think it comes up very often-so there’s no protocol as to how you handle this type of situation.”

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