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The most conspicuous thing about John Torkelsen’s guilty plea Thursday was what it didn’t include: an agreement to cooperate in the ongoing probe of the securities plaintiff firm Milberg Weiss and its former lawyers. In a little-noticed hearing before U.S. District Judge Reggie Walton of Washington, D.C. — it occurred an hour before White House staffer I. Lewis “Scooter” Libby pleaded not guilty in the CIA leak case — the plaintiff bar’s former star expert pleaded guilty to one federal count of making false statements to the U.S. Small Business Administration. In exchange for the plea, prosecutors from the U.S. attorney’s office in D.C. agreed to recommend a sentence of 70 months in prison for the offense, which involved an attempt to divert $5 million of government investment money into Torkelsen’s bank account. The charge came in connection with a venture capital fund that Torkelsen ran. Many of its investors were plaintiffs lawyers for whom he served as an expert witness, testifying in court to the value of securities fraud claims. The venture fund failed when the dot-com bubble burst, prompting the Small Business Administration to seek a way to recoup some of the $32 million it invested in the fund. In 2003, a series of civil suits by the SBA accuse Torkelsen, his wife and several of the fund’s investors of wrongdoing. The criminal cases against Torkelsen and his wife (she entered a guilty plea earlier this year) were based on the civil probe. It has long been thought that any plea deal between Torkelsen and prosecutors would hinge on his willingness to provide information to Los Angeles federal prosecutors. They’ve spent the past five years investigating charges that Milberg Weiss and former top partner William Lerach paid illegal kickbacks to lead plaintiffs in securities class actions. Lerach formed his own firm, San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins, last year. A source familiar with the Torkelsen investigation said prosecutors last year were confident that they could put Torkelsen in jail for 10 to 15 years and that a plea deal for less than 10 could indicate cooperation. But the plea agreement detailed in a letter from D.C. Assistant U.S. Attorney John Griffith does not explicitly say whether Torkelsen is cooperating. “There’s nothing in this plea agreement that suggests cooperation,” said Leo Cunningham, a former assistant U.S. attorney for the Northern District of California and a partner at Wilson Sonsini Goodrich & Rosati. “Then again, for those of us who can get crafty about it, it doesn’t foreclose cooperation.” Preston Burton, a D.C.-based partner at Orrick, Herrington & Sutcliffe and a former D.C. assistant U.S. attorney, agreed. “There is no way to determine from the language in this plea agreement whether he is or isn’t,” he said. Cunningham, Burton and other former federal prosecutors said that plea agreements based on cooperation generally make that requirement explicit. But, they agreed, in cases where prosecutors don’t want the names of cooperators to become public, they often go to lengths to keep such information under wraps. For example, they said, the prosecutors could file additional sentencing recommendations prior to Torkelsen’s Jan. 27 sentencing hearing. Or Torkelsen could have been rewarded for cooperating by being charged with a single crime, rather than multiple offenses. There was no talk of cooperation at the Thursday hearing, where Walton told Torkelsen — who has three DUI arrests, including one in May — to watch himself. “Make sure you don’t commit any more criminal offenses,” the judge said. “Because if you did, I would not go along with this agreement, and we’d be talking about a lot more time.” Walton’s reminder that the charge carries a maximum sentence of 30 years prompted tears from Torkelsen’s two daughters. As they wait for the sentencing hearing, West Coast securities lawyers remain anxious to find out whether Torkelsen will be involved in the Milberg probe, which has been quiet in recent weeks. Martha Boersch, a former San Francisco federal prosecutor and a partner at Jones Day, said the plea deal’s vague language makes her wonder. “It also, to me, suggests that the two U.S. attorney’s offices are not necessarily working together,” she said. Sarah Kelley is a reporter for Legal Times , a Recorder affiliate in Washington, D.C.

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