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Federal prosecutors have taken a couple of strides forward in the investigation of former plaintiff firm Milberg Weiss and its star securities lawyer, William Lerach. Last week, a Los Angeles grand jury heard testimony from Melvyn Kinder, a Beverly Hills psychologist and author of “Smart Women/Foolish Choices.” Kinder served as a lead plaintiff for Milberg Weiss in securities suits in the 1990s. Kinder and his attorney, Peter Morris, declined to discuss his testimony. Thursday, the grand jury was scheduled to interview accountants from Milberg’s New York office, said two lawyers familiar with the investigation who spoke on condition of anonymity. The witnesses include Milberg Weiss’ head accountant, William Matschke. He didn’t return messages left at his New York home or at his Los Angeles hotel room Wednesday. Since 2000, prosecutors led by Assistant U.S. Attorney Richard Robinson have been looking into allegations that Milberg Weiss Bershad Hynes & Lerach paid illegal kickbacks to clients who served as lead plaintiffs in stock fraud suits. Lawyers for the firm and Lerach have denied any wrongdoing. Milberg Weiss split into two firms last year — New York-based Milberg Weiss Bershad & Schulman, and California’s Lerach Coughlin Stoia Geller Rudman & Robbins. The investigation began in 2000, when former client Steven Cooperman — who was then facing indictment on unrelated crimes — told prosecutors of the alleged kickback scheme. Federal prosecutors in Philadelphia are also reportedly looking into business practices at Milberg Weiss and other securities firms, while D.C. prosecutors are investigating a former expert witness used by the firm in many of its cases. The L.A. probe appeared to languish until earlier this year, when the grand jury indicted a former Milberg client, Palm Springs lawyer Seymour Lazar. He stands accused of taking illegal kickbacks from the firm funneled through his attorney, Paul Selzer. Such payments are illegal because they give the lead plaintiff a substantially larger stake in a case than other class members. The Lazar indictment was seen by many securities lawyers as an attempt to force Lazar to testify against Milberg Weiss and breathe new life into the aging investigation. Absent Lazar’s cooperation — and with Cooperman’s questionable credibility as a convicted felon — it’s no surprise that prosecutors are interviewing other Milberg plaintiffs, said attorneys familiar with the investigation. Those lawyers said prosecutors are likely interviewing the accountants as part of their efforts to trace money from the firm to clients like Lazar. While former federal prosecutors say the stepped-up grand jury activity may indicate that an indictment of Milberg Weiss or Lerach is imminent, the probe has proceeded haltingly since the beginning, in part because of difficulties prosecutors face in subpoenaing attorneys and information that may be subject to attorney-client privilege.

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