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"I deeply regret my conduct and apologize to all those who have been affected, including all of the wonderful and extremely talented lawyers and other employees of the Firm, none of whom had any involvement in any wrongdoing. I believe that it is very important to preserve this unique legal resource for the benefit of victims of wrongdoing affecting the masses, who historically have been under-served in so many ways."

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"Milberg Weiss understands that a second superseding indictment will be issued tomorrow that will include new charges against the Firm and also Melvyn Weiss. Mr. Weiss has decided to discontinue his participation in Firm management in order to focus on the defense of the charges against him. The Firm’s other partners, none of whom is alleged to have been involved in any wrong doing, will be responsible for its management and litigation activities. Mr. Weiss will remain available to counsel clients and Firm attorneys. The Firm remains proud of Mr. Weiss’s and the Firm’s accomplishments over the years and will continue to fight for its clients and class members and to produce the excellent results for which it is known. We do not anticipate any interruption in our work and we look forward to putting this difficult period behind us."

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One of the indicted partners, Steven Schulman, signed the amended complaint in the Organogeneis case, though the firm contended that he was no longer litigating it, an assertion that U.S. District Court Judge Joseph Tauro found "disturbing." Tauro also noted Milberg Weiss' "repeated failure" to oversee the class certification process.

Tauro noted that the firm and its partners were entitled to a presumption of innoncence, and that the firm "has a respectable record and reputation for litigating securities class actions." But he also wrote, "The court cannot ignore the fact that by virtue of the indictment, Milberg Weiss is a different firm than it once was... The indictment alone is not enough to cancel out the firm's respected history, but it is enough to make this court look carefully at lead counsel's adequacy in this case."

The judge also concluded that one of the named plaintiffs did not have standing because he did not suffer harm, and the other plaintiff couldn't serve as a suitable representative for the class because of the timing of his stock ownership.

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Morgan Stanley, Goldman Sachs Group Inc. and 11 other securities firms have been accused in a lawsuit of conspiring to rig the fees charged to short sellers...

...In a class action filed in federal court New York on Dec. 1, two short sellers claimed that the 13 firms conspired to charge excessive fees for certain ``hard-to-borrow'' stocks, in violation of antitrust laws. The defendants locate, borrow and deliver stocks involved in most short sales, the complaint said.

The firms "orchestrated a massive scheme whereby they have combined and conspired to raise, fix, and maintain, at artificially inflated levels, the fees paid by plaintiffs,'' the complaint said...

...Plaintiffs Forza Capital Management LLC of Bend, Oregon, and BHL Capital Partners LP of Westport, Connecticut, who are represented by Milberg Weiss Bershad & Schulman, are seeking unspecified damages...

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In Novel-Like Scene, Two Milberg Partners Plead Not Guilty

By Josh Gerstein
Sew York Sun
July 18, 2006

One of the nation's leading class action law firms, Milberg Weiss, and two of its name partners, David Bershad and Steven Schulman, pleaded not guilty here yesterday to a federal indictment charging the firm and the two attorneys with conspiring to make secret and illegal payments to plaintiffs.

Messrs. Bershad and Schulman each said, "Not guilty," when asked for their responses to the charges during a morning appearance before a federal magistrate, Carolyn Turchin. The plea for the firm, Milberg Weiss Bershad & Schulman LLP, was entered by a Los Angeles defense attorney, Bryan Daly.

In a scene torn from a Scott Turow novel, the Milberg Weiss attorneys shared the busy Monday arraignment courtroom with defendants known by aliases such as Destructo and Mainline.

Messrs. Bershad and Schulman have been free since their indictment, but most of the 20 or so defendants in other cases were clad in orange or turquoise jail smocks and looked on anxiously from behind a glass partition. The clanging of shackles as the men shuffled in and out added an air of gravity to the proceedings.

If convicted on all charges, Messrs. Bershad and Schulman face possible sentences of up to 60 years in prison, though under federal guidelines any sentences are likely to be substantially shorter. Milberg Weiss faces possible seizure of up to $216.1 million, the amount of legal fees the firm was awarded in cases in which the government contends the lawyers committed fraud.

During the 15-minute session before Magistrate Turchin, Messrs. Bershad and Schulman said little, giving one-word answers to questions about whether they understood their rights and had received copies of the indictment...

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Law firm, partners, plead not guilty to federal charges in LA

ERIC BERKOWITZ
Associated Press
July 17, 2006

A top class-action law firm and two of its partners pleaded not guilty Monday to charges of secretly paying more than $11 million in kickbacks to get people to take part in shareholder lawsuits. Also pleading not guilty in federal court were Seymour M. Lazar, who is accused of acting as a paid plaintiff in some of the firm's cases, and Paul T. Selzer, who is charged with laundering money on Lazar's behalf.

In a 20-count indictment handed down in May, prosecutors alleged that Milberg Weiss Bershad & Schulman, along with partners David J. Bershad and Steven G. Schulman, secretly paid Lazar and others since 1984 to act as plaintiffs in class-action suits against major corporations.

Federal prosecutors alleged that secret kickback arrangements allowed the firm to be among the first to file lawsuits on behalf of shareholders and secure the lucrative position as lead plaintiffs' counsel. The indictment also alleged that "the paid plaintiffs purchased the securities at issue anticipating that the securities would decline in value, in order to position themselves to be named plaintiffs in securities fraud class actions and to obtain kickbacks" from the firm and others.

All the individual defendants were in court to enter their pleas except Lazar, who was unable to attend for medical reasons. Bershad and Schulman are on leave from the firm.

The case, which is the result of an ongoing federal investigation, has already resulted in plea deals with two people allegedly involved in the payoff schemes. Retired real estate mortgage broker Howard Vogel agreed in April to plead guilty to one count of making a false declaration before a court and admitted to receiving $2.5 million in kickbacks from Milberg Weiss in connection with class actions in which he was the plaintiff.

Los Angeles attorney Richard Purtich agreed in May to plead guilty to a federal tax offense by acting as an intermediary through which Milberg Weiss paid his former client Steven G. Cooperman more than $2.5 million in fees for acting as plaintiff in several class actions.
The firm denies any wrongdoing. In a statements released after Monday's arraignment, Bershad's attorney, Robert Luskin, said the indictment "is a disgrace and the charges are utterly baseless," and the firm said it is "confident that we will be fully vindicated"...

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US Congress slams Milberg Weiss indictment

The Lawyer
June 14, 2006

Milberg Weiss Bershad & Schulman, the US plaintiffs’ firm recently indicted for alleged referral fees, has picked up a powerful ally in the shape of the US Congress. Congress issued a statement slamming the US Department of Justice’s actions in indicting Milberg Weiss.

Signed by four Democrat Congressmen - Charles Rangel, Carolyn McCarthy, Gary Ackerman and Robert Wexler - the statement says: “The unprecedented recent indictment of Milberg Weiss Bershad & Schulman is a very thinly veiled attempt by the Bush Administration to accomplish by bullying and intimidation what it has not been able to do by law - to end class-action lawsuits, one of the few tools remaining to safeguard the American consumer.”

The statement comes almost a month after Milberg Weiss and name partners David Bershad and Steven Schulman were indicted by Los Angeles federal prosecutors for allegedly paying referral fees to named plaintiffs in shareholder lawsuits.

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...The departures of David Bershad and Steven Schulman were announced Monday by Milberg Weiss Bershad Hynes & Lerach.

The U.S. Justice Department has been investigating the firm for nearly six years. The case is currently before a federal grand jury in Los Angeles.

In a memo circulated to firm employees Tuesday, Bershad said his decision to leave was mutually agreed upon with the company's management and that he would be available at its request to represent clients.

"I am taking this step in the belief that my action will improve the firm's chances to avoid unfounded charges that would be detrimental," said Bershad, who joined the firm nearly 40 years ago...

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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"...

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Milberg Weiss Partners to Be Indicted Within Month, Lawyer Says

Feb. 23, 2006
Bloomberg
By Jef Feeley

Steven Schulman and David Bershad, partners in New York's Milberg Weiss Bershad & Schulman, were told by prosecutors that they will be indicted within the next month on charges they participated in a scheme to pay kickbacks to clients, Schulman's lawyer said.

Assistant U.S. Attorney Richard Robinson told Schulman and Bershad on Feb. 20 that they are facing indictment on wire fraud and money laundering charges over the fees, according to Edward Hayes, who represents Schulman in a federal criminal probe over the payments. Robinson told the two men they could be indicted in the next 30 days, Hayes said in an interview yesterday.

A lawyer for Melvyn Weiss, the firm's lead partner, said Feb. 21 that prosecutors told Weiss and William Lerach, Weiss's former partner, that there are no plans to charge them in the five-year probe of possible kickbacks. The two men run firms that accounted for 57 percent of securities fraud settlements last year, according to a Cornerstone Research survey.

"Mr. Schulman absolutely denies he was involved in any kickback scheme and that any referral fees involved in his cases were 100 percent legitimate,'' Hayes said. Neither Bershad, a founding member of Milberg Weiss, nor his attorney, Andrew Lawler, were immediately available yesterday to comment on Hayes's statements. Tom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles, which has been conducting the investigation, declined to comment on "any aspect'' of the investigation.


Federal prosecutors have been investigating claims that Milberg Weiss Bershad Hynes & Lerach, the biggest firm representing shareholders in securities fraud cases before it split in two in 2004, illegally paid shareholders to file the suits. At the time of the breakup, Milberg Weiss had represented clients in half of all securities class actions filed in the past decade. The firm took part in suits that paid clients $30 billion in settlements.

Hayes said prosecutors allege Schulman knew about a scheme to pay referral fees to lawyers who sent them clients with securities-fraud claims. Some of the fees allegedly later made their way to the clients, he added. "The government contends there are millions in fees'' at issue in the case, Hayes said.

Schulman will be charged with fraud over allegedly knowing about the fee scheme and not taking steps to stop it, Hayes said. He'll face money laundering charges because he knew some lawyers were reportedly helping plaintiffs hide the source of money they received from the fees, Hayes said.

A referral fee is paid from one firm to another for referring a client and splitting up the work, said George M. Cohen, a law professor and legal ethics teacher at the University of Virginia at Charlottesville. "In many cases, it's not really a huge issue,'' Cohen said, though problems may arise if such fees are used by "lawyers who are less competent and can't get business in a legitimate way.'' "Basically, the rules say you can have some kind of referral fee as long as both lawyers are contributing to the representation or they agree to a joint representation,'' Cohen said. "Then it's OK, as long as the client understands that this is what's going on.''

The Milberg case may be a little different, and the claim "is that they were making payments to a named plaintiff in various class actions, that he was getting extra payments to bring the claims in class actions,'' Cohen said. "The argument is that if the person is paid extra for serving in that capacity, they may not necessarily act in the best interests of the class, but may act in the best interest of themselves or the law firm.''

Investigators are relying on accusations made by two former Milberg partners about the kickback scheme, Hayes said. "We don't believe these individuals have any legitimate proof of any wrongdoing,'' Hayes said. "Every document they've pointed to is inconsistent with the allegations'' over the fees, he said.
Hayes added the charges are an attempt to pressure Schulman and Bershad into cooperating with prosecutors in their continuing investigation of Weiss's and Lerach's actions. Lerach now leads San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins. Weiss leads New York-based Milberg Weiss Bershad & Schulman.

Before 1995, law firms that were the first to file suits against companies whose stock declined often received most of the legal fees when the cases were settled. A change in the law that year gave control of shareholder suits to firms that represent the biggest shareholders.

On Milberg Weiss's Web site, Bershad is listed as a securities and commercial litigator. The site said he has negotiated "more than 100 complex class-action settlements,'' including cases against Lucent and Rite Aid that brought in a total of $900 million for investors. Schulman also is listed as a securities fraud litigator on the site and recently represented Disney investors seeking to recoup former company President Michael Ovitz's $140 million severance.

Two other men already have been indicted in connection with the federal investigation of referral fees among securities lawyers. Paul T. Selzer, a California lawyer, and Seymour Lazar, a retired attorney, have been charged with money laundering in connection with the alleged kickback scheme. Selzer is accused of helping to funnel illegal payments to Lazar, who served as lead plaintiff in securities fraud cases. Selzer allegedly used referral payments made to him by Milberg Weiss to settle Lazar's legal bills with his firm and to make political contributions on his behalf.

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U.S. won't indict high-profile lawyers

February 21, 2006
AP Newswire
Seattle Post Intelligencer

Federal prosecutors have decided not to seek charges against class-action lawyer William Lerach and his former partner, people familiar with the investigation said Tuesday. Lerach and Melvyn Weiss, former partners who had a bitter falling out in 2004, were told Friday that they would not be prosecuted in connection with a five-year investigation into whether they paid kickbacks to people who served again and again as the lead plaintiffs in shareholder lawsuits, some which date to the 1980s.

It is unclear whether Weiss' law firm, Milberg, Weiss, Bershad & Schulman, or other partners will be indicted, the people said on condition of anonymity because the Justice Department has not made any public comment about the lawyers.

Lawyers for Lerach and Weiss did not immediately comment Tuesday.

Retired lawyer Seymour Lazar was indicted in June, accused of accepting kickbacks from Milberg, Weiss in exchange for serving as plaintiff, or getting others to serve, in more than 50 suits. Paul Selzer, Lazar's lawyer, also was indicted on charges he laundered the payments to Lazar.

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Man Faces Trial for Taking Payments To Serve as Class Action Suit Plaintiff

By Josh Gerstein
Staff Reporter of the Sun
New York Sun
January 13, 2006

A man awaiting trial on charges that he received illegal payments for serving as a plaintiff in more than a dozen class action securities lawsuits was released from house arrest yesterday by a federal judge.
During a hearing in federal court, Seymour Lazar, 78, sat in a wheelchair at the defense table, as his lawyers argued that his age and ill health made the home confinement unnecessary and cruel.

In court papers, Mr. Lazar's attorney, Thomas Bienert Jr., wrote that forcing Mr. Lazar to stay at home pending trial was "likely the equivalent of a life sentence."

Mr. Lazar and his longtime personal attorney, Paul Selzer, were charged in June with operating an illegal scheme under which Mr. Lazar received more than $44 million in exchange for serving as a named plaintiff in class action lawsuits, and for arranging for his family members to bring such suits. The indictment refers to a "New York law firm" that paid Mr. Lazar "millions of dollars in secret and illegal kickbacks through various intermediary law firms and lawyers."

The prosecution has drawn close attention in legal circles because the "New York law firm" was one of the most successful and most feared firms in the class action plaintiffs' bar, Milberg, Weiss, Bershad, Hynes & Lerach. In 2004, the firm split up. Most of the East Coast lawyers stayed on at a firm that kept most of the Milberg Weiss name and is headed by a legendary trial lawyer, Melvyn Weiss. The West Coast attorneys formed a new firm, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, under the direction of a renowned plaintiff's lawyer, William Lerach.

Mr. Lerach and others involved with Milberg Weiss have acknowledged that a grand jury was investigating the firm. However, no charges related to the alleged kickback scheme have been filed publicly against anyone other than Messrs. Lazar and Selzer.

Prosecutors, who have been investigating the case for several years, reportedly have testimony from insiders at Milberg Weiss about how the alleged kickbacks were paid, but little or none of that evidence has been made public. However, late last month, prosecutors filed a memorandum with the court indicating that a colleague of Mr. Selzer had concerns about the financial arrangement with Mr. Lazar as early as 1994.

The memo from the law firm where Mr. Selzer was a partner at the time, Best, Best & Krieger of Southern California, said that Mr. Lazar wanted fees a class action law firm in New York was paying to Mr. Selzer's firm used to offset Mr. Lazar's other legal bills at the firm. In some instances, Mr. Lazar wanted the California firm to make car lease payments or charitable donations at his direction. Under the law, law firms can receive referral fees but cannot share them with clients.

"We have indicated to him on several occasions our concern over participating in some type of conspiracy to defraud the Internal Revenue Service or to otherwise violate the laws prohibiting plaintiffs in class actions from receiving fee splits," the February 9, 1994, memo said. "To us it just smells bad, and probably would to an investigator."

The name of the author of the two page memo, addressed to the "file," was blacked out from the copy the government filed with the court. Mr. Selzer left Best, Best & Krieger in 1995. Lawyers at the firm did not return calls seeking comment yesterday. Earlier this month, a partner at the firm told a legal newspaper, the Recorder, that the firm was neither a subject nor a target of the government's probe.

Mr. Bienert, Mr. Lazar's criminal attorney, said after yesterday's court hearing that the 1994 memo supports his client's defense. "It's significant because it shows Best, Best & Krieger, who are not charged in this case were giving consideration to the legal ramifications of what could and could not be done with this money," Mr. Bienert said.

Mr. Bienert said he would argue that Mr. Lazar had advice from many attorneys that the financial arrangements were legal and he also assumed prestigious lawyers would not take part if the financial dealings broke the law. "There are going to be many, many lawyers who figure into this and I suspect that the government will not accuse them of committing any crime," the defense lawyer said. "That is a huge issue at trial."

In the legal community, there have been years of speculation that the government wanted Mr. Lazar or Mr. Selzer to make a deal with prosecutors and testify against top lawyers at Milberg Weiss. So far, there is no sign that either man will do so.

One problem for the government is that Mr. Lazar is so old and infirm that prosecutors lack the leverage over him that they have over most defendants. According to court filings, the retired entertainment lawyer suffers from congestive heart failure, diabetes, lymphoma, and at least half a dozen other serious health problems.

For a time last summer, Mr. Lazar was required by the court to wear an anklet that was linked to a satellite and would inform authorities if he ventured out. However, in August, the device was removed so Mr. Lazar could undergo openheart surgery.

A trial date is set in April, but Mr. Bienert told reporters yesterday that he doubted Mr.Lazar will be up to it. "There will be a serious issue of how able Mr. Lazar is to actively participate and sit through a trial," the defense lawyer said.

During the hearing, Judge Dean Pregerson seemed irked that the two sides could not work out the conditions of Mr. Lazar's pre-trial release. The judge noted that Mr. Lazar was already essentially on his honor not to leave home. "He could leave if he really wanted to anyway," the judge said.

In exchange for lifting the home confinement, Judge Pregerson doubled Mr. Lazar's bond from $5 million to $10 million. A prosecutor, Robert McGahan, said Mr. Lazar owns between $45 million and $60 million in property. The prosecution has accused Mr. Lazar of not disclosing all of his assets and of refusing to repatriate money he sent abroad.

Prosecutors also argued to Judge Pregerson yesterday that Mr. Bienert has a conflict of interest because he represented both Messrs. Lazar and Selzer earlier in the probe. The judge said Mr. Lazar has the right to choose his lawyers, as long as he understands the potential conflict.

Mr. Lazar, who used special headphones due to a hearing impairment, said somewhat cantankerously that he knew what he was doing. "Can I point out that I was a lawyer for 30 years or 40 years, a practicing lawyer?" he told the judge. "I'm conscious of the fact that I can fire my lawyer, and can waive the conflict."

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