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With a guilty plea by one of his former partners, L.A. federal prosecutors inched closer in their eight-year pursuit of top plaintiff lawyer William Lerach. The Monday admission by David Bershad � a former partner at the firm once known as Milberg Weiss Bershad & Schulman � that he and other top partners paid illegal kickbacks to class action plaintiffs for more than two decades wasn’t unexpected. But the gravity of Bershad’s accusations became clear in the level of detail with which he implicated his ex-partners in admitting to obstructing justice and making false statements in court. He detailed arrangements by which Milberg Weiss would illegally pay a portion of its fees to lead plaintiffs. As part of his plea agreement, Bershad agreed to forfeit $7.75 million, pay a $250,000 fine, and cooperate in the government’s ongoing investigation and prosecution of other figures in the conspiracy. Bershad faces a maximum sentence of five years but it is unclear whether he would serve any time. His sentencing hearing was scheduled for next June. Bershad, former partner Steven Schulman, and the Milberg Weiss firm were charged in a May 2006 indictment, which accused Bershad of keeping cash in his office credenza to pay lead plaintiffs. That indictment spurred talks that resulted in Bershad’s plea and a possible deal for the firm. Lerach, too, has been discussing a plea in recent weeks, said several people with knowledge of the case. Despite a media report last month that said Lerach had turned down a deal that would have given him three to four years in prison, people briefed on the case have more recently said the Lerach talks are still alive and could result in a deal with significantly less prison time than that. In court documents filed Monday in the Central District federal court, prosecutors elaborate on how the partners allegedly handled cash for lead clients. “In the earlier years of the conspiracy,” a statement of facts filed with the plea deal says, a group of five partners “pooled their personal cash into a fund Bershad maintained in his office at Milberg Weiss, which was used by the conspiring partners to supply cash for secret payments to paid plaintiffs and others.” Those payoffs helped Milberg Weiss “secure a reliable source of individuals who were ready, willing and able to serve as named plaintiffs in class actions that Milberg Weiss wanted to bring,” prosecutors wrote in that statement. Such arrangements would be illegal because they would have given the lead plaintiffs disparate interests from the rest of the class � and because the firm would have misrepresented to the court the payments it was making. While the firm reimbursed the partners for those expenses, the document says, “Schulman did not contribute cash to the fund for paying plaintiffs because he claimed he lacked the money to do so.” Aside from Bershad and Schulman, the rest of the partners who contributed are referred to as Partner A, Partner B, and so on. But people familiar with the case say Partner A is lead Milberg partner Melvyn Weiss, Partner B is Lerach, and partner E � also alleged to have participated in the scheme � is former Milberg partner Robert Sugarman, who was given immunity in the probe in exchange for his cooperation. Two of the plaintiffs who allegedly received payments from Milberg Weiss, Steven Cooperman and Howard Vogel, have already agreed to cooperate with prosecutors. The investigation began in 1999 when Cooperman, facing jail time over his conviction in an insurance fraud case, told L.A. federal prosecutors that he could hand them Lerach in exchange for a lighter sentence.
Probing the Milberg Weiss ProbeFederal prosecutors have it in for the ailing class action leviathan. Follow our complete coverage of the kickback investigation.

Since then, the prosecutors have probed deeply into the finances of Milberg Weiss and Lerach, who left that firm in 2004 to form San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins. Since last year’s indictment, the prosecutors have been closing in on Weiss and Lerach, their original targets. Several people with knowledge of the case say Milberg Weiss is getting closer to a deal with the government in which it would pay a fine to escape prosecution. One issue so far is that Weiss has been unwilling to leave his firm, and that he has a reputation for being unafraid of apparently un-winnable fights. In addition to affecting Lerach and Weiss, the Bershad deal raises questions for Schulman, whose leverage for a favorable plea agreement is now significantly lower. Schulman is continuing to fight the charges and recently filed a motion to dismiss the case against him. Bershad’s lawyer, Robert Luskin of Patton Boggs, didn’t return a call by press time. Nor did Bryan Daly, a partner at Beck, DeCorso, Daly, Kreindler & Harris who represents Milberg Weiss. But the firm did release a statement Monday that Bershad’s deal “will have no effect on the firm’s commitment to its clients and its ongoing work to protect public shareholders and consumers.” New York Law Journal contributed to this story.

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