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LOS ANGELES – Melvyn Weiss, founding partner of Milberg Weiss, has been indicted on charges that include obstruction of justice and making false statements to the grand jury in the government’s investigation of kickbacks that Milberg Weiss paid to named plaintiffs in its securities class action lawsuits. Milberg Weiss, which was indicted a year ago, also faces an additional charge of obstruction of justice, and Steven Schulman, a former Milberg Weiss partner, has agreed to plead guilty on a charge of racketeering. The unfolding house of cards began on Tuesday, when William Lerach, another former Milberg Weiss partner, pleaded guilty to a federal conspiracy charge. As part of the deal, Lerach has not agreed to cooperate with prosecutors. Another former partner, David Bershad, and Steve Cooperman, a frequent named plaintiff, pleaded guilty earlier this year to the same charge but have been cooperating in the investigation. In a superceding indictment brought last year, prosecutors alleged that Milberg Weiss, Schulman and Bershad collected more than $200 million in attorney fees by paying secret and illegal kickbacks to named plaintiffs. The original indictment, in 2005, was brought against named plaintiff Seymour Lazar and his personal lawyer, Paul Selzer. Today’s second superceding indictment expands the case to include Weiss. The case alleges that seven lawyers at the firm conspired as part of a 25-year scheme in which they received about $250 million in attorney fees in lawsuits in which named plaintiffs were paid at least $11.3 million in illegal kickbacks. Prosecutors also upped their criminal forfeiture demands to $251 million from $216 million. “The indictment outlines a decades-long kickback scheme that was deliberately concealed from courts across the nation that were overseeing significant class-action cases,” said U.S. Attorney George Cardona in a statement. “The scheme furthered personal greed at the expense of the integrity of the courts and the interests of absent class members.” The new indictment charges Milberg Weiss, Weiss and Lazar with one count of conspiring to obstruct justice, make false declarations under oath, use mail for commercial bribery purposes, commit mail and wire fraud and make illegal payments to a witness. Prosecutors also charged Weiss with conspiring to commit racketeering, obstruction of justice and making false statements in relation to documents that the grand jury subpoenaed. If convicted, Weiss could face up to 40 years in federal prison. He is scheduled to appear in court on Oct. 12 and will be arraigned on Oct. 15. Weiss’s lawyer, Benjamin Brafman, a partner at New York-based Brafman & Associates, issued a statement: “Although this indictment is a bitter disappointment, Mr. Weiss intends to fight these charges with all of the energy and talent that has made him one of the most outstanding members of the Bar for more than 40 years. We are confident that when the evidence is carefully reviewed at a trial of these charges, Mr. Weiss will be fully exonerated.” In the new indictment, Milberg Weiss also faces an additional count of obstruction of justice in today’s indictment. The firm still faces one count of money laundering and three counts of mail fraud. “Despite the government’s announcement today we will continue to fight for our clients and class members and to achieve the record recoveries for which our firm has long been known,” Milberg Weiss said in a statement issued on Thursday. “The firm’s active partners, none of whom is alleged to have been involved in any wrongdoing, will maintain responsibility for the firm’s management and litigation activities. We will not be deterred from our work and will persevere throughout this difficult period.” Yesterday, the firm issued a statement saying that Weiss would discontinue his participation in firm management to focus on the charges against him. Weiss co-founded Milberg Weiss in 1965 with Lawrence Milberg. The firm has recovered billions of dollars in securities class action settlements from large companies including Tyco International Ltd. and Raytheon Co. In pro bono work, the firm has represents the families of victims of Sept. 11 and Holocaust victims. In addition to Weiss and Milberg Weiss, the new indictment charges Lazar with an additional charge of conspiring to commit racketeering. Separately, Schulman has agreed to plead guilty to a federal racketeering charge and acknowledge that he and others hid secret payments to named plaintiffs in class action lawsuits from the judges in those cases. As part of the plea deal, Schulman has agreed to forfeit $1.85 million to the government and pay a $250,000 fine. Specifically, Schulman admits negotiating kickbacks to named plaintiff Howard Vogel, who usually received 12% of attorney fees in Milberg Weiss’s class action cases. In one case against Oxford Health Plans, Vogel was paid $1.1 million through an intermediary law firm in a case in which Milberg Weiss received $40 million in attorney fees. That payment was made in 2003, while Milberg Weiss and Weiss were under investigation. Schulman is scheduled to appear in court on Oct. 19 and be arraigned on Oct. 22. Under the plea deal, Schulman could spend 27 months to 33 months in prison. But the prison sentence is not binding and could be changed depending on Schulman’s decision to cooperate with prosecutors in the investigation. Calls to Schulman’s lawyers, Gordon Greenberg of McDermott, Will & Emery, and Herbert Stern of Stern & Kilcullen, were not returned. Schulman, Milberg Weiss, Lazar and Selzer had been fighting charges against them in recent months. Last month, U.S. District Judge John Walter for the Central District of California denied their motions to dismiss. The judge has scheduled a status conference for Friday that involves Milberg Weiss, Lazar and Selzer. On Tuesday, prosecutors charged Lerach with conspiring to obstruct justice and make false statements under oath in cases spanning more than two decades. Lerach, who split from Milberg Weiss in 2004, resigned from his firm, now called Coughlin Stoia Geller Rudman & Robbins, on Aug. 31. In his plea deal, Lerach agreed to forfeit $7.75 million to the government, pay a $250,000 fine and serve one or two years in prison, depending on the judge’s discretion. Lerach could serve home detention as part of his prison time. In an emailed statement, Lerach said he had “regrettably crossed the line and pushed too far. For my actions, I apologize and accept full responsibility for my conduct.” Lerach is scheduled to appear in court for an arraignment in coming weeks. The deal could fall through if Judge Walter rejects its provisions.

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