Milberg's Weiss May Face Indictment in Kickback Case
By Nathan Koppel
The Wall Street Journal
Thursday, September 20, 2007
Having secured a plea agreement this week with one of its
biggest targets in the criminal prosecution of the Milberg Weiss
law firm, the government is moving forward against another.
Melvyn Weiss, co-founder of the plaintiffs firm and a pioneer in
the field of securities class-action cases, is expected to be
indicted today in Los Angeles, according to people familiar with
the situation. An indictment would come more than a year after
Milberg and two then-name partners were charged with fraud for
allegedly paying kickbacks to clients to induce them to serve as
lead plaintiffs in lucrative securities class actions and
The firm released a statement saying it understood a new
indictment would be issued that would include new charges
against it and Mr. Weiss. Mr. Weiss, 72 years old, will stop
participating in firm management to focus on his defense, the
statement said. He will remain available to counsel clients and
It is expected that the indictment will charge Mr. Weiss with
helping to steer secret payments to clients who served as lead
plaintiffs in class actions; it will also raise a charge new to
the case -- that Mr. Weiss allegedly obstructed justice by
failing to turn over a document subpoenaed by prosecutors,
according to people familiar with the case.
Benjamin Brafman, counsel to Mr. Weiss, said, "I will not
respond to substantive questions about an indictment I have not
yet seen. If indicted, however, Mr. Weiss intends to vigorously
fight the charges and will bring to that fight all of the talent
and resources that have made him one of the most extraordinary
lawyers of this generation."
Mr. Weiss didn't respond to requests for comment.
While the federal indictment of Milberg made headlines last
year, many have long suspected that the government's main
targets were Mr. Weiss and William Lerach. The two men helped
build Milberg into a juggernaut that once dominated the market
in securities class actions, in which investors who suffer
losses typically claim that executives misled them about a
company's financial condition. Corporations came to loathe the
suits, seeing them as nuisance cases without merit. Mr. Weiss
and his firm maintained the suits helped keep corporations
Mr. Weiss stood out among competitors for his willingness and
ability to invest in and litigate complex financial cases.
Sometimes arranging for financing, lawyers say, he hired
forensic accountants, investigators and teams of contract
lawyers and paralegals to help his firm file cases in droves,
often more quickly than the competition. "He is one of the
architects of the present securities class-action bar," says
Stephen Best, a lawyer who has opposed Mr. Weiss in suits. "He
made this a very viable business."
For many years, Milberg dominated the field. In 2003, the firm
had 65 class-action settlements as a lead counsel, with the
next-highest firm having 14, according to Securities Class
Action Services, a subsidiary of Institutional Shareholder
Since the indictment, the firm has initiated fewer suits,
effectively reducing its "inventory" of fee-producing cases.
Many lawyers have left for competitors. The firm offered higher
bonuses to induce people to stay, according to a lawyer there.
A spokeswoman said she couldn't confirm that the firm had
offered higher bonuses.
While the government indicted two other partners last year, it
didn't charge Messrs. Lerach and Weiss. The prosecution gained
steam earlier this year when one of the other partners, David
Bershad, pleaded guilty and agreed to cooperate with the
government. Earlier this week, Mr. Lerach agreed to plead
guilty to a felony conspiracy charge. People familiar with the
situation say the second indicted lawyer, Steven Schulman, is
close to a plea agreement.
Write to Nathan Koppel at