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A federal indictment of two Southern California lawyers is most significant for who is not named: William Lerach and his former firm, Milberg Weiss Bershad Hynes & Lerach. Former U.S. prosecutors say Milberg Weiss lawyers could be next. Yet the firm is never even mentioned by name in a federal grand jury’s 67-page indictment accusing a former client of taking $2.4 million in kickbacks from a “New York law firm,” but levying no charges against the firm that allegedly paid the kickback. Lawyers with Milberg Weiss and Lerach’s current firm, Lerach Coughlin Stoia Geller Rudman & Robbins, are not commenting beyond a press release in which Milberg Weiss said, “we are saddened” by the charges. Last week’s indictment of Palm Springs lawyer Seymour Lazar — the former Milberg client — and his attorney, Paul Selzer, stems from a longstanding investigation into the Milberg Weiss firm. The investigation first came to light in 2002 and has since been the talk of the securities bar. “Over a year ago there was a lot of talk about it,” said James Finberg, a partner at Lieff Cabraser Heimann & Bernstein who represents plaintiffs in stock fraud suits. “We got some subpoenas. I think everyone who ever did a case with Lerach got subpoenaed.” He said the grand jury, convened in the Central District of California, was asking for documents about plaintiffs in cases in which other firms were co-counsel with Milberg Weiss. The speculation among securities lawyers is that the indictment is aimed at getting Lazar and Selzer to incriminate the former Milberg Weiss lawyers. “They’re going to flip him,” said an experienced securities lawyer — who requested anonymity “because I don’t want my car to get blown up.” San Clemente, Calif.-based Thomas Bienert Jr., who’s currently representing Lazar, agreed that the U.S. Attorney is trying to pressure his client. “The fact that they only charged my client is unusual, and I believe it’s an effort to get him to say bad things about his reputable legal counsel,” Bienert said. Cynthia Lozano, a spokeswoman for the Central District U.S. Attorney’s Office, wrote in an e-mail that lawyers there would not comment, but former federal prosecutors say starting at the bottom is a common tactic, especially in recent years. “The government likes to start at the bottom and work its way up the ladder of responsibility,” said Matthew Jacobs, a former assistant San Francisco U.S. Attorney. Ideally, he said, lower-level defendants will agree to a plea deal before an indictment and testify against bigger targets. But that doesn’t always work out, and prosecutors sometimes have to begin by indicting people they hope to use as witnesses. Another former Assistant U.S. Attorney in the Northern District of California who requested anonymity said that in recent years, federal prosecutors in California have increasingly taken a “fragmented” approach to such cases, beginning with indictments of lower-level defendants and working up to higher-profile cases. “It is a regular tool of the government to charge people to get these people to plead,” he said. “We’re seeing more that the government is doing it piecemeal to show other people they mean business.” But other lawyers said it seems peculiar that the apparent target of the investigation is named only as an unindicted co-conspirator when so many charges are levied against it. “It’s odd-looking,” said Theodore Cassman, a white-collar defense lawyer. “There were so many players in this case who weren’t charged.” Indeed, the complaint alleges specific cases and payments from “the New York law firm” through Selzer’s firm — he was a partner with Best, Best & Krieger until 1995 when he went solo — into accounts in the name of Lazar and his family members. The indictment said the New York firm reaped $44 million in attorney fees from 50 cases over two decades where Lazar was the lead plaintiff. “As an inducement to defendant Lazar to serve, and to induce defendant Lazar to cause his family members to serve, as named plaintiffs in the lawsuits, the New York law firm and others known and unknown to the grand jury offered, promised and agreed to secretly pay defendant Lazar kickbacks consisting of a portion of the attorneys fees,” the complaint says. Attorneys with — and for — the Lerach and Milberg firms would not comment on the indictment, though a PR firm that Milberg Weiss hired to handle inquiries on the indictment did issue a press statement lamenting the indictment and prodding the government lawyers. “Milberg Weiss has cooperated with the government’s investigation, which has continued for more than three years,” it said. It went on to say that Milberg has been a useful ally in government prosecutions. “We are also surprised and disappointed that, in the face of recent criticism of the government following the reversal of the Arthur Andersen conviction, the U.S. attorney’s office would risk harming the Milberg Weiss firm and its many fine lawyers and staff by making this accusation in circumstances where the firm cannot defend itself,” it said.

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