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Of the four name partners at America’s most famous plaintiff firm, Lawrence Milberg seems to be in the most enviable position these days. And he’s dead. For the other three whose names are on the shingle at Milberg Weiss Bershad & Schulman, things are looking increasingly sticky: Lawyers for the firm are trying to negotiate a nonprosecution agreement with the Justice Department that would stave off an indictment � which isn’t likely to do much good for the name partners. Several lawyers familiar with the case said talks have been ongoing for weeks, although William Taylor III � a partner at Zuckerman Spaeder, which represents the firm � declined to comment Monday. The talks, lawyers close to the case said, have heated up over the last few months, as the L.A. U.S. attorney’s office closed in on Howard Vogel. A former lead plaintiff in Milberg class actions, Vogel fingered partners David Bershad, Steven Schulman and, to a lesser extent, Melvyn Weiss last month when Vogel pleaded guilty to taking kickbacks from the firm. It has been widely reported for several months that Schulman and Bershad face imminent indictments in the six-year kickback probe. And while prosecutors told attorneys for Weiss earlier this year that he won’t be indicted soon, he remains a target. Legal Pad Milber Weiss is in a no-win situation. But the timing of Bershad’s and Schulman’s indictments and the shape of the Weiss investigation depend on how the government decides to handle the firm. According to lawyers familiar with the case, prosecutors say they’re prepared to charge Milberg Weiss as a firm in the kickback scheme. Such an indictment alone, white-collar crime experts say, would be a fatal blow, since the firm would likely have to drop its caseload throughout a trial. “The firm would probably shut down,” said Peter Henning, a professor at Wayne State University Law School who specializes in white-collar defense. The danger of putting Milberg Weiss out of business, Henning and other white-collar practitioners say, could give pause to the Justice Department, which has been hesitant to put innocent staffers out of work by indicting firms since 2002, when accounting firm Arthur Andersen went out of business after it was convicted on obstruction of justice charges. Since then, the government has seized on nonprosecution deals � also called deferred prosecution agreements � in many criminal cases involving business entities. “They’ve been increasingly popular since, really, Enron and the Arthur Andersen prosecutions,” said Leslie Caldwell, a partner at Morgan, Lewis & Bockius and one of the Enron prosecutors. “The government is able to get everything they can get from a criminal guilty plea, and in most cases there’s no need for a company to plead guilty, because a company can’t go to jail.” The conditions In the case of Milberg Weiss, several lawyers close to the case said, discussions have centered on an agreement that would be similar to the high-profile deals signed by KPMG and Time Warner in recent years. The firm, the attorneys said, would pay the government a large cash sum � probably in excess of $100 million � and agree to cooperate with the ongoing investigation. The firm would also agree to do business under restrictions imposed by the deal, likely to be monitored for years by an outside observer. Several lawyers familiar with the investigation said such an arrangement is far from optimal for the firm, and not only because of its astronomical cost. First off, they said, it would create awkward situations between partners targeted by the probe and partners cooperating with investigators. Indeed, even approving the agreement would require an upheaval within the firm, because Weiss, Bershad and Schulman are the firm’s top rainmakers; deposing them would require a new group to assume power. There would also be difficulties in ongoing cooperation with the investigation, the lawyers said, since unlike a normal corporation, attorney-client privileges pervade every aspect of a law firm’s business, and can’t be easily waived by attorneys. Furthermore, the sources said, a deal would impose strict rules on relationships between the firm and class action clients and co-counsel � restrictions similar to some proposed unsuccessfully by Republican legislators over the years in attempts to curb class actions. Such restrictions could put Milberg at a competitive disadvantage in pursuing class action clients. And then there’s the issue of what kind of admissions the firm would make in such an arrangement. In recent years, Caldwell said, the government has become increasingly insistent on having firms admit wrongdoing. But as a law firm, even minor acknowledgements of guilt could be as damaging as an indictment. “That could cost you your license,” Henning said. “That’s where it becomes difficult for the lawyers. The law is strict, but the lawyer ethics rules are stricter.” Yet if Milberg and prosecutors can navigate those perils, the firm would avoid an indictment likely to put it out of business. And while that could be attractive to the firm as a whole, finalizing such an agreement is far from certain, largely because the Milberg Weiss partnership would have to approve it � possibly leading to cooperation in an investigation of their own partners. With a law firm that “can basically be impossible, if it’s really a democratic partnership,” Caldwell said. “I think it would be very difficult for a law firm to go into any monitorship or deferred prosecution agreement.” Lawyers familiar with the case agreed, and said the status of such an arrangement remains uncertain. Better such a deal than facing charges, they said. But Henning, the law professor, said a deferred prosecution deal is still no free pass. “It’s not a great PR move,” he said. “No one laminates this and puts it out on the credenza.”

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