An new article that ran yesterday offers expanded details on the roots of the governmental investigation into two powerful plaintiffs firms - Milberg Weiss and Lerach Coughlin. While no attorneys from either firm have as yet been charged with a crime, the recent indictments of California lawyers Seymour Lazar and Paul Selzer on charges of receiving kickbacks from an un-named lawfim are widely acknowledged as a tool for gaining leverage against the two plaintiff firms. New information about this currently unfolding legal drama is scant but the New York Times ran an interesting piece yesterday that addresses the roots of the government's investigation, which began more than three years ago.

Made available on the web via the International Herald Tribune:

Kickbacks' case embroils class-action powerhouse

By Timothy L. O'Brien
and Jonathan D. Glater
The New York Times
JULY 19, 2005

Three months ago, William Lerach, a class-action lawyer both feared and loathed in executive suites across the United States, received a disturbing call from his attorney. Federal prosecutors, Lerach was told, wanted more time to build a criminal case against him. Until then, a three-year investigation into whether Lerach and his former New York law firm, Milberg Weiss Bershad & Schulman, had used illegal tactics in shareholder lawsuits that made him and the firm rich and famous had appeared to be dormant. The phone call meant that the inquiry had suddenly gained traction...

You can read all about the "traction" here and here - but how did all this get started? Well, thereby hangs a tale...

...The investigation of Milberg Weiss began in the late 1990s with the prosecution for art fraud of Steven Cooperman, a multimillionaire ophthalmologist who collected fine art and opulent houses on the East and West coasts of the United States. He was also a frequent plaintiff in shareholder lawsuits brought by the firm.

Struggling with more than $6 million in personal debt, Cooperman engineered the theft of two of his own paintings - a Picasso and a Monet - from one of his homes and collected $17.5 million from insurers for the missing artwork, according to court documents from his divorce proceedings.

After the paintings turned up in a climate-controlled storage facility in Cleveland, Cooperman was prosecuted and convicted on fraud charges in 1999 and faced a 10-year prison term. To reduce his sentence, said a number of people with direct knowledge of the case, he offered prosecutors a bigger fish: Milberg Weiss.

Federal prosecutors in Los Angeles declined to comment. But former government lawyers said the prospect of securing Cooperman's cooperation had to be tempting to the authorities because taking on Milberg Weiss guaranteed a highly publicized, exacting legal battle.

"Your reaction to that is, there's an interesting scalp, more important than my two-bit art fraud thief," said Michael Shepard, former chief of special prosecutions in the U.S. attorney's office in Chicago, who is now in private practice in San Francisco and played no role in the Cooperman prosecution.

The deal that Cooperman signed with prosecutors remains under seal.

But he was not sentenced for two years, until July 2001. His sentence was reduced, and he ended up serving less than two years in prison. According to the judge in the divorce case, Cooperman received "large sums as kickbacks from attorneys in one of the leading class-action firms in the nation" - Milberg Weiss. In cooperating with prosecutors, the judge said, Cooperman would help implicate "members of the Milberg Weiss law firm."

For several months, nothing happened. Then, in early 2002, federal prosecutors in Los Angeles sent out a barrage of subpoenas to law firms that had worked with Milberg Weiss. Word of the federal investigation leaked to the news media...

Lots more great detail in the full article, including reaction from various members of the legal community and a continued exploration of the possible political motivations of the investigation.

Read the rest of the NYT piece here.

-- MDT

Labels: Milberg