Early last week the word on the street was that neither Welvyn Weiss or Bill Lerach need to worry about the possibility of federal charges stemming from the government's years-long probe into an alledged kickback scheme orchestrated by noted plaintiff firms Milberg Weiss and Lerach Law (and of course for those keeping score Lerach was a former, and quite famous, partner at Milberg Weiss).

However, by Thursday Bloomberg reported that while Weiss and Lerach can sleep easy, two Milberg attorneys remain under the gun. Steven Schulman and David Bershad, both partners in New York's Milberg have apparently been informed by prosecutors that they can expect charges within weeks, alledging that were part of a scheme to funnell kickbacks to clients.

Two other lawyers, Seymour Lazar and Paul Selzer have previously been indicted. Lazar was a frequent lead plaintiff in Milberg cases and has been alledged to have received kickback payments. Selzer has been accused of helping launder the alledged payments.

The New York Sun has an updated with the latest details in this continuing story and reports that RICO charges against Milberg itself may also be pending:

U.S. Readies Case Against Tort Lawyers

BY JOSH GERSTEIN
Staff Reporter of the Sun
February 24, 2006

Federal prosecutors have told two partners at a leading New York class-action law firm to prepare to be indicted on charges stemming from an investigation into alleged illegal payments to plaintiffs in securities lawsuits, a lawyer involved in the case said yesterday.

Facing indictment are David Bershad and Steven Schulman of Milberg Weiss Bershad Schulman LLP, according to an attorney for Mr. Schulman, Edward Hayes. He said he was informed that criminal charges could also be brought against the firm itself. "They're talking about a Rico case against the firm," Mr. Hayes said, referring to the federal Racketeering Influenced and Corrupt Organizations act.

A spokeswoman for Milberg Weiss declined to comment yesterday, but an attorney for the firm told the Wall Street Journal this week that the firm had not been advised that an indictment was forthcoming...

...An indictment of the Milberg Weiss firm could jeopardize its viability, regardless of whether the government ultimately wins a plea or conviction. "They do so much work that requires them to be appointed as lead counsel acting in the public interest by a court. It would be a mess," a lawyer for Mr. Selzer, David Weichert, said.

Papers filed in connection with the criminal case pending in Los Angeles suggest that payments from Milberg Weiss did end up benefiting Mr. Lazar. One question key to the prosecution is who, if anyone, at Milberg Weiss, knew that Mr. Lazar was getting some of the legal fees paid to Mr. Selzer. "My clients say what went on, if it went on, was not their business," Mr. Hayes said. "To what extent are our people obligated to supervise people on the other side of the table? That's a debatable issue"...

...The indictment filed last year says repeatedly that the payments that allegedly flowed to Mr. Lazar were illegal. However, several lawyers with no ties to the prosecution said yesterday that they were not confident in the truth of that assertion, which is central to the prosecution.

A Philadelphia attorney who has written treatises on legal ethics, Lawrence Fox, said that sharing a referral fee with a client violates legal canons but is not, per se, a violation of the law. "That rule is simply a rule of discipline. It does not have any criminal implications," he said.

The indictment argues that Mr. Lazar committed fraud and obstructed justice by failing to disclose to courts hearing the securities lawsuits the fact that he was to be paid money out of the legal fees in the cases. Mr. Fox said if that took place lawyers involved in the cases may have violated ethical precepts. "I'd again say it's more of a disciplinary problem," he said. "I don't get anywhere criminal there"...

We shall see what transpires. Check out the full NY Sun piece here.

-- MDT

Labels: Melvyn Weiss, Milberg Weiss