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Los Angeles-Last week’s plea deal by a retired real estate mortgage broker brings federal prosecutors in Los Angeles one step closer to charging securities class action powerhouse Milberg Weiss Bershad & Schulman in a six-year probe. Fading from the case is William Lerach, who was a name partner at Milberg Weiss Bershad Hynes & Lerach, the former name of Milberg Weiss, before he left to form his own firm in 2004. But that doesn’t mean Lerach has gone entirely unscathed. Lerach, now a name partner at San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins, said the past year was a “harmful phase” for the firm as its lawyers, many of whom came from Milberg Weiss, fell under the microscope of prosecutors at the U.S. Attorney’s Office for the Central District of California. Prosecutors are alleging that current and former lawyers at Milberg Weiss paid kickbacks to named plaintiffs in high-dollar securities class actions against the nation’s largest companies. “It obviously was a negative factor, and it hurt us, and I’m sorry that it did, but it did,” Lerach said, refusing to give specifics. “Hopefully, with that behind us, we’ll see a lot of very positive recent developments in the new client front.” ‘Negative information’ Last week, Howard J. Vogel, who served as a plaintiff in dozens of Milberg Weiss lawsuits, admitted in a plea deal that he provided false information in federal court while in a 1997 class action against Oxford Health Plans Inc. Prosecutors allege that from 1991 through 2005, Vogel and his family received nearly $2.5 million in kickbacks from a “New York law firm,” believed to be Milberg Weiss, court papers say. Last year, prosecutors indicted another Milberg Weiss plaintiff, Seymour Lazar, a lawyer in Palm Springs, Calif., and his lawyer, Paul Selzer, on charges that Lazar took $2.4 million in kickbacks from the firm. In February, Lerach and Milberg Weiss partner Melvyn Weiss were told that they would not be indicted anytime soon as part of the probe. But for Lerach, the recent developments in the investigation have given “our competitors negative information, which they vigorously used to our disadvantage in interacting with potential clients.” He declined to name specific competitors or clients, but said, “there is intense competition within the business. It may be only by a limited number of law firms, but the competition is quite intense.” To maintain and drum up business, Lerach announced last week the hiring of Lawrence Irving, a former federal judge in San Diego who served as a consultant to the University of California, which claims to have incurred $154 million in pension losses because of Enron Corp.’s downfall. Lerach represents the University of California, which is now the lead plaintiff in the Enron shareholder suits. “That’s one of the reasons we were so pleased to have someone of his stature joining us,” said Lerach of Irving, who joins as special counsel to the firm. “We look forward to continue to dominate and lead this field.” The up-and-comer But that lead could be dwindling. While Milberg Weiss and Lerach Coughlin evenly split the vast majority of shareholder suits nationwide, both have come under the cloud of the investigation. Untouched by the ongoing investigation is up-and-comer New York plaintiffs’ firm Bernstein Litowitz Berger & Grossmann, which was lead counsel in recent settlements for $6.5 billion with WorldCom Inc. and $3.2 billion with Cendant Corp. Bernstein Litowitz partner John “Sean” Coffey did not return calls, nor did the firm’s marketing director, Alexander Coxe. But Brian Pastuszenski, a partner and co-chairman of the securities litigation and SEC enforcement group at Boston-based Goodwin Procter, said that Bernstein Litowitz is a formidable competitor in the field. “How those two firms are going to thrive over time is a real question mark,” he said of Milberg Weiss and Lerach Coughlin. “And that is in part due to the real ambiguity around this DOJ investigation,” Pastuszenski said.

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