Top Lawyers Plead Not Guilty to Class Action Kickback Charges

October 17, 2007

The co-founder of a prestigious New York law firm and two co-defendants pleaded not guilty this week in California to federal charges related to a major class-action kickback scheme.

Firm co-founder Melvyn Weiss entered his pleas through his lawyer to two counts of conspiracy and one count each of obstruction of justice and making false statements in relation to documents that were the subject of a grand jury subpoena.

Not guilty pleas were also entered on behalf of plaintiff Seymour M. Lazar, who did not attend the hearing and was represented by his attorney, and lawyer Paul Selzer, who appeared in court, to charges contained in a superseding indictment filed last month.

Lazar, who allegedly received kickbacks, and Selzer are each charged with four counts of money laundering. Selzer also is charged with one count of conspiracy to launder money.

Prosecutors said the firm previously known as Milberg Weiss Bershad & Schulman made an estimated $250 million by filing class-action lawsuits against some of America’s largest corporations. Kickbacks were allegedly paid to people who agreed to be plaintiffs.

The firm also has been charged in the case and pleaded not guilty Monday to one count each of conspiracy, mail fraud, money laundering and obstruction of justice in the superseding indictment.

The seven-year investigation has resulted in guilty pleas by several former partners and lawyers at the firm.

If convicted of all four counts, Weiss faces a maximum sentence of 40 years in prison. He remained free after posting a $1.5 million bond on Friday.

Weiss, 72, said little during a hearing before U.S. District Magistrate Charles Eick, only confirming his name and declining to have his indictment read to him in court.

In a prepared statement issued after the bond hearing, Weiss said, “I look forward to clearing my name and returning to a practice to which I have devoted my professional life, one that has given access to the courts to millions of Americans who would not otherwise have been able to achieve justice.”

Last week, former partner Steven Schulman, 56, pleaded guilty to a racketeering conspiracy charge. He agreed to forfeit $1.85 million to the government and to pay a $250,000 fine.

Sentencing was scheduled for June 23 when Schulman could face up to 20 years in prison.

In addition, prosecutors have said William S. Lerach, a former top attorney with the firm, now known as Milberg Weiss, agreed to plead guilty to conspiring to obstruct justice and making false statements under oath.

Lerach, who is awaiting arraignment, will forfeit $7.75 million to the government, pay a $250,000 fine and accept a sentence ranging from one year to two years in federal prison, prosecutors said.

He resigned last month from the firm he founded in San Diego, now known as Coughlin Stoia Geller Rudman & Robbins.

Former Milberg Weiss Bershad & Schulman partner David Bershad also has pleaded guilty to conspiracy and agreed to cooperate with the government. He will be sentenced early next year.

The firm co-founded by Weiss has sued some of the nation’s largest companies, including Lucent, Microsoft and AT&T.

He and top lawyers dominated the industry in securities class-action lawsuits, which involves shareholders who claim they suffered losses because executives misled them about a company’s financial condition.

Prosecutors believe the firm, which also has been indicted, enlisted people to take part in more than 225 class-action and shareholder lawsuits by secretly paying them millions of dollars in kickbacks.

In doing so, it allowed Milberg Weiss attorneys to be among the first to file litigation and secure the lucrative position as lead plaintiffs’ counsel.

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