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As old legal nemeses square off in a grand jury investigation into New York-based Milberg Weiss Bershad Hynes & Lerach’s business practices, one high-stakes client said the probe hasn’t shaken its faith in the firm. The University of California system’s top lawyer, who hired Milberg Weiss last month to represent the pension fund in the shareholder litigation over the collapse of Enron Corp., said it was not considering dropping Milberg Weiss. “It’s only an investigation as far as I know,” said James Holst, general counsel for the $54 billion fund. “The university has talked with Milberg Weiss about this issue. They’ve assured us that there’s no merit to the rumors,” UC spokesman Trey Davis said. He added that if the allegations became more substantive, UC might re-evaluate the situation. UC is seeking lead plaintiff status in a securities fraud class action over Enron’s collapse filed in federal court in Texas. If UC is successful in its bid, Milberg Weiss could be in line for legal fees in the nine-figure range. Several other institutional investors are also laying claim to lead status, including public retirement systems in Florida and New York (together represented by San Francisco-based Lieff, Cabraser, Heimann & Bernstein and Boston’s Berman DeValerio Pease Tabacco Burt & Pucillo) and similar funds in Ohio, Washington and Georgia (represented by Atlanta-based Chitwood & Harley). The probe is reportedly focused on whether Milberg Weiss had an improper financial relationship with plaintiffs in securities fraud class actions. Circumstantial evidence suggests former Beverly Hills, Calif., doctor Steven Cooperman is cooperating with federal authorities. Cooperman has served as the lead plaintiff in dozens of securities suits brought by Milberg Weiss. In 1999, he was sentenced to three years in prison for his role in a $17.5 million art theft and insurance scam. At the time, his lawyer told a newspaper that Cooperman received a light sentence in exchange for cooperating in a separate, undisclosed federal investigation. Cooperman, who had moved to Connecticut by the time the scam was discovered, was sent to a federal medical facility in Fort Devens, Mass., to serve his time. However, a Bureau of Prisons spokesman said Tuesday that Cooperman is now in the custody of the U.S. marshal in Los Angeles, where the probe is centered. A call to the U.S. marshal’s office was not returned. Meanwhile, one knowledgeable source said the investigation is headed by Assistant U.S. Attorney Michael Emmick, head of the Los Angeles U.S. Attorney’s public corruption unit. Emmick was a member of the Office of Independent Counsel during its investigation of President Clinton during the Monica Lewinsky affair. At the time, Clinton was represented by Washington, D.C.’s Williams & Connolly — the same firm now representing Milberg Weiss during grand jury proceedings, according to a Los Angeles Times report. Milberg Weiss star lawyer William Lerach, incidentally, is a major fund raiser for and contributor to the Democratic party. Williams & Connolly’s Gerald Feffer was out of the office and did not return a phone call seeking comment. Emmick said as a matter of policy he neither confirms nor denies the existence of any grand jury investigations. Cooperman’s possible role in the investigation is supported by a 1999 California Law Week article on the art theft case. The article quoted a Cooperman accomplice, former entertainment lawyer James Tierney, saying he received a million dollars in referral fees from a New York law firm for referring Cooperman to serve as a plaintiff in securities fraud cases. Tierney is currently serving out the rest of his sentence in a halfway house in Los Angeles. He is scheduled to be released in March. The Enron securities fraud case is before U.S. District Judge Melinda Harmon in the Western District of Texas. As yet, none of the parties have made an issue of the grand jury probe. Normally, the designation of lead plaintiff goes to the class member with the largest losses. UC lost nearly $145 million. The clients of Lieff, Cabraser and Berman DeValerio have the largest combined losses, nearly $444 million. However, the Florida fund comprises more than $335 million of those losses, and is facing a challenge that it should be disqualified for having served in too many securities fraud cases over the years. Although 1995′s Private Securities Litigation Reform Act bars such frequent lead plaintiff appearances, Florida is arguing that those rules don’t apply to institutional investors. Chitwood & Harley’s clients lost a combined $331 million when Enron’s stock collapsed.

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