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In typical William Lerach fashion, news about his firm has been simultaneously great and awful over the past week. On Aug. 8, The Wall Street Journal reported that two former partners of the San Diego plaintiffs lawyer were cooperating with a five-year criminal probe of Lerach’s former firm — Milberg Weiss Hynes Bershad & Lerach — that has already resulted in an indictment of a former Milberg client for allegedly taking kickbacks from the firm. The next day, Lerach announced that he had won a $2.4 billion settlement on behalf of Enron shareholders from the Canadian Imperial Bank of Commerce. The situation is typical for the partner at Lerach Coughlin Stoia Geller Rudman & Robbins, which split from Milberg Weiss last year. He’s spent the past 30 years suing the country’s biggest companies, making millions of dollars but always operating on the brink of ignominy at the hands of government officials and plaintiff-bar rivals. Yet Lerach — despite ongoing predictions of his demise — has weathered a federal law aimed at shutting him down, biannual hit pieces by business magazines, and cutthroat competition from other plaintiff firms. He’s gotten by largely on cunning, fearlessness and aggression, gaining far more enemies than friends along the way. As one local securities plaintiff lawyer put it, “Even Lerach doesn’t get along with himself.” So with the federal investigation growing more active in recent weeks — and seeking informants from a trail of disgruntled former partners spanning Long Island to Los Angeles — the brash outspokenness with which Lerach typically faces down adversity is no more. After spending the past two years publicly dismissing the federal investigation, Lerach’s demeanor changed with the indictment. Lerach and partners at his current and former firms are hunkering down behind a wall of the best lawyers the criminal defense bar has to offer. They’ve also hired a high-powered PR team. While some lawyers are representing the Milberg and Lerach firms, others are representing senior partners individually. Lerach himself is represented by Keker & Van Nest’s John Keker, one of the country’s top defense lawyers. And Keker has hired Chris Lehane — a former spokesman for Bill Clinton, Al Gore and John Kerry — to talk with the press. New Yorker Melvyn Weiss, a partner at Milberg Weiss, has hired famed New York defense lawyer Benjamin Brafman of Brafman & Associates, while his firm is represented by another high-profile criminal defense lawyer, Zuckerman Spaeder partner William Taylor III. And Marina Ein — who handled PR for former Rep. Gary Condit during a 2001 scandal — is dealing with Milberg’s public relations. According to one lawyer familiar with the situation, most of the senior Milberg Weiss and Lerach Coughlin partners have retained their own counsel. Junior lawyers at the firms are also contacting attorneys: They’re sending out their resumes to competitors, say lawyers at securities firms on the East and West coasts who asked not to be named. No one, they said, is surprised that younger attorneys — who stand to reap little of the massive fee payouts from a total of $7 billion in Enron settlements — would try to get out as soon as possible. For the same reason, they said, few senior partners seem ready to leave. A BROAD NET Yet despite the seriousness with which the firms are taking the investigation, many securities lawyers — most of whom are reluctant to speak publicly about it — remain puzzled by the investigation’s focus and skeptical that it will result in serious charges. Their doubt is centered on the charges levied against Seymour Lazar, the former client in dozens of Milberg cases who was indicted in June. Even if the allegations are true — and Milberg was paying kickbacks to lead plaintiffs — that practice would have been ended by federal legislation a decade ago. A 1995 federal law aimed at handcuffing Lerach took away the advantage of having a client like Lazar, whose diverse stock portfolio allowed Milberg Weiss to be the first to file suit in response to stock price drops, thereby gaining lead counsel status. Instead, the law caused firms to turn toward large, institutional investors as clients, and they remain the preferred lead plaintiffs in securities fraud suits. “It seems like a stale case,” said Robert Lieff, a partner with Lieff Cabraser Heimann & Bernstein. In addition to the age of the allegations, skepticism was created by the amount of time and work the investigation has consumed, with little to show for itself. “I just think, if the government is going to do this, they ought to just do it or drop it,” Lieff said. He’s not the only lawyer who, until the Lazar indictment, assumed the investigation was flailing because it requested massive numbers of documents and testimony from unexpected places. One class action defense lawyer with a local firm, speaking on condition of anonymity, said an Assistant U.S. Attorney last year asked him to testify to the grand jury. The lawyer declined and said the prosecutor never followed up with a subpoena. Plaintiffs attorneys at several firms said they’ve been hearing from prosecutors on and off for the past two years, and many local firms have received notices that Milberg Weiss was providing documents to the government related to shared cases. Little seems to have come from that end of the investigation. “I was contacted,” said Paul Bennett, a partner with Gold Bennett Cera & Sidener who represents plaintiffs in securities suits. “They were looking for deposition transcripts of someone who was deposed like 20 years ago.” He told the investigator that he no longer had the document, and said he hasn’t heard anything since. Many plaintiffs lawyers also point out that the former partner who is reportedly cooperating with investigators, Alan Schulman, has credibility problems stemming from his publicly acrimonious departure from the firm. Schulman spoke ill of Lerach to Fortune magazine shortly after leaving, and he’s now a partner with a chief competitor, Bernstein Litowitz Berger & Grossman. Yet despite their questions about the investigation, several former Milberg partners seem unsurprised by the allegation that the firm paid off lead clients. They say that most lawyers at the firm didn’t know the details of relationships between high-ranking partners and repeat clients like Lazar, but that they wondered about what incentive someone like Lazar would have to be a plaintiff, since on the surface he had little to gain financially. “I was somewhat shocked” that an indictment came down, said one former Milberg partner, asking not to be identified. “But it makes perfect sense.” Yet with the exception of some former Milberg partners with particularly sour grapes, few lawyers are happy about the ongoing legal troubles of Milberg Weiss and its lawyers, said Boris Feldman, a partner at Wilson Sonsini Goodrich & Rosati who defends companies in securities fraud cases. “I’m happy to beat them in a case,” he said. “I’m not happy to see them indicted.”

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