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L.A. federal prosecutors have won a behind-the-scenes discovery fight in the undying probe of plaintiff firm Milberg Weiss Bershad & Schulman. In a sealed ruling issued the day before Thanksgiving, U.S. District Judge A. Howard Matz ordered the production of reams of discovery that prosecutors had sought from various plaintiff firms, according to lawyers familiar with the case. Attorneys for Milberg � which was indicted in May, as were two of its name partners, on charges of paying kickbacks to clients � had argued that the material was covered by work-product privilege. The documents relate largely to payment agreements with other firms for John Torkelsen, a former expert witness for the plaintiff goliath, said the attorneys. Torkelsen has been the subject of intense interest as the prosecutors continue efforts to indict Milberg’s former star partner William Lerach, who now heads the top plaintiff shop Lerach Coughlin Stoia Geller Rudman & Robbins.
Probing the Milberg Weiss ProbeFederal prosecutors have it in for the ailing class action leviathan. Follow our complete coverage of the kickback investigation.

The May indictment of Milberg accused that firm of giving fees to outside lawyers who in turn paid lead plaintiffs in class actions, constituting illegal kickbacks. But the ongoing investigation looks beyond those charges at other transactions. Aside from the Torkelsen payments, prosecutors have spent years looking at referral fees Milberg allegedly paid to other lawyers � and possibly stockbrokers � in exchange for bringing them lead plaintiffs. STOCK SUSPECTS The stockbroker probes involve a group from Florida and brokers at the New York investment firm First Albany, said attorneys with knowledge of the case. A spokeswoman for First Albany didn’t return calls. Lawyers said the prosecutors are interested in whether Milberg paid brokers for referring investors to serve as lead plaintiffs in shareholder suits. While such payments were made explicitly illegal by a 1995 federal law, it’s not clear whether they were allowed in earlier years. That legal gray area, the lawyers said, muddles whether brokers could be forced to cooperate. Last year, a Long Island broker � and former Milberg partner � Paul Tullman, pleaded guilty to tax charges and � according to the Wall Street Journalis cooperating in the L.A. case. SQUEEZING TORKELSEN Torkelsen became central to the investigation some time after it was launched in 1999 by a former firm client who � in trying to dodge a long prison sentence for insurance fraud � told prosecutors he got kickbacks while serving as a persuasive expert witness who helped set the value of many Milberg class actions. After leaving the expert business, Torkelsen started an investment fund � largely with cash from plaintiff lawyers � that led to his downfall: He pleaded guilty last year to bilking the Small Business Administration of about $5 million invested in his fund. Torkelsen’s ex-wife, Pamela, is cooperating with prosecutors, testifying in the Milberg case while her ex-husband resists pressure to flip, said lawyers familiar with the probe. Torkelsen is serving a prison sentence of more than five years. L.A. federal prosecutors moved Torkelsen to a downtown Los Angeles detention center months ago to get a handwriting sample, and have kept him there. Lawyers familiar with the case � speaking on condition of anonymity due to the confidential nature of the proceedings � said Matz’s discovery order could provide detailed information on pay arrangements among Milberg, the expert and various plaintiff firms. That could lead to more pressure on Torkelsen: the threat of another criminal indictment. Torkelsen’s attorneys with the L.A. federal public defender’s office didn’t return calls by press time, nor did lawyers for the two indicted Milberg partners, David Bershad and Steven Schulman. And Bryan Daly, a partner at Beck, De Corso, Daly, Kreindler & Harris in Los Angeles who represents the firm, said he couldn’t comment on discovery issues. So did Thom Mrozek, a spokesman for the L.A. U.S. attorney’s office. 13 MONTHS TO GO While the investigation continues, defense lawyers for the firm, its partners and two Southern California lawyers indicted last year for alleged involvement with referral fees are preparing for trial. At a hearing last week, U.S. District Judge John Walter chose Jan. 8, 2008, to start the Milberg trial. And while speculation is still rampant about whether Lerach and lead Milberg partner Melvyn Weiss will face charges, Daly, the L.A.-based Milberg lawyer, said his focus now has to be on the pending case. “The trial schedule is something we’re going to work very hard to meet,” he said.

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