MIlberg Looks North for New Business
The Journal Scoffs at Milberg's New Hire, Herman Cahn
A Fat Win For Milberg Plaintiffs
The noted, and notorious, securities class action powerhouse is apparently focusing on Canada
when it comes to the development of new cases.
Labels: Canada, class action, Milberg, securities
Milberg Defendants Head to Prison
Milberg's David Bershad Gets Six Months
Yes, the firm has seen a bit of a rough patch. But this ain't a bad win...
And those Madoff cases keep on rollin' in.
Labels: Bernie Madoff, Milberg, Xerox
Indicted Milberg Plaintiff, Howard Vogel Sentenced
The former Milberg Weiss partner plead guilty last year to charges relating to his role in the law firm's 20 year scheme to to line up choice lead plantiffs thanks to generous, if illegal, kickbacks. Bershad, who has already forfeited about $8 million, was also assessed a $250,000 fine. More on Bershad's sentencing via Bloomberg.
Labels: David Bershad, Milberg, Milberg Weiss
Milberg Prosecutor Moves to Mortage Backed Securities Matters
Milberg Settlement Forthcoming
For his role in the firm's decades long, multi-million dollar plaintiff kickback scheme, mortgage broker Howard Vogel has received a sentence of three months in prison
. Vogel plead guilty back in 2006 and served as a witness in the prosecutions case against Milberg Weiss and former Milbergattorney, Bill Lerach. For more on Vogel's connection to the case see here
Labels: Howard Vogel, kickbacks, Milberg
$75 million is rumored number.
Larry Ribstein on the Melvyn Weiss Sentence
30 Months For Melvyn Weiss
The trial is set for August, but it seems increasingly likely we won't get there.
Labels: kickbacks, Milberg, Milberg Weiss, settlement
Well, they finally got their man...
Milberg Kickbacks, A Victimless Crime?
With the firm itself set to go before a judge in August, it sounds like we can expect another settlement before too much longer.
The Weiss docs are up - you can check out the settlement terms for yourself right here
Labels: Melvyn Weiss, Milberg, Milberg Weiss, settlement
33 Months Behind Bars for Mel Weiss?
Torkelson Pleads Guilty (Again)
Not so, says Michael Perino of St. John's University School of Law
Perino, in a paper sponsored by the trial lawyer-loving fellas over at the American Enterprise Institute
, compared 730 settlements negotiated by Milberg and found that those alleged to involve kickbacks actually saw a lower return to shareholders by a small but measurable percentage.
On the whole, Milberg collected some $25o million in legal fees on cases involving the kickbacks.
In addition to some interesting commentary on the impact of Milberg's illegal acts on the firm's clients, the paper also offers a pretty darn good re-cap of the kickback investigation and prosecution.
You can read Perino's The Milberg Weiss Prosecution: No Harm, No Foul right here.
Labels: kickbacks, Michael Perino, Milberg, settlement
Milberg in Settlement Talks
The End of Milberg Weiss?
This time former expert witness, John Torkelson's court date was in Philly
, where he plead guilty to one charges of perjury arising from a 1999 statement under oath. At issue was whether or not Torkelson took secret payments from his law firm clients (he did). Notable among Torkelson's clients was the continually beleaguered Milberg, LLC. For more on Torkelson's back story, check out the tags below this post.
Labels: John Torkelson, Milberg, perjury, plaintiffs bar
Melvyn Weiss Pleads Guilty
With the guilty plea from firm patriarch, Melvin Weiss you know the talk of Milberg's demise is going to make the rounds, never mind that they still top the lists of securities class action firms over the last year. Still, if you're interested in what various persons of interest from around the legal world have to say about Milberg's future, this Portfolio article is your huckleberry
Labels: class action, Melvyn Weiss, Milberg, Milberg Weiss, securities
Milberg Weiss Expert Witness, Torkelson, Pleads Guilty to Perjury
This has been a long road - a prosecution almost a decade in the making...
Melvyn Weiss, patriarch of securities class action powerhouse, Milberg Weiss, has plead guilty to one count of racketeering in connection with the government investigation into kickbacks meted out to lead plaintiffs in Milberg cases.
Weiss had been scheduled to go to trial in August. According to the terms of his deal with prosecutors, the 72 year old Weiss is expected to serve between 18 and 33 months and pay approximately $10 million in fines and forfeitures. More here, via the WSJ.
Through his legal representatives at Brafman & Associates, Weiss released this statement:
"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."
I cut my teeth as an investigator locating witnesses for Milberg cases and despite their obvious and at this point, clearly illegal, overreaching I retain a great deal of sympathy for their role - representing aggrieved shareholders. I've simply see too much of what companies will try to get away with to feel differently.
It is just a shame that Milberg, if in a slightly different context, became exactly the kind of entity they are supposed to protect clients against.
Labels: guilty, Melvyn Weiss, Milberg, Milberg Weiss, plea agreement
Lerach Writes Own Ticket on Sentencing (UPDATE - He Gets 2 Years)
John B. Torkelson is already serving time
, but the former star expert witness (he billed $60 million in expert fees between 1993 and 1996) still found himself pleading guilty this past week
on perjury charges...
Essentially Torkelson like any other expert had to attest to his independence each time he served as an expert. To protect this independence law firms are forbidden from paying experts on a contingency basis: i.e. - if they win. But that is exactly the type of arrangement Torkelson had over possibly hundreds of cases, including very many with what this press release wimpily refers to as
a law firm "with a principle office in New York."
Now, most people who'd bother to visit The Daily Caveat
might recognize this as a probable reference to Milberg Weiss and the phrasing as how that firm was referred to in the government investigation of class action litigation kickbacks prior to being officially named in the ensuing indictment. But a relationship between Torkelson and Milberg isn't exactly news.
We wrote about the connection and Torkelson's significance to the brewing Milberg indictment three years ago
. Torkelson, aside from whatever inappropriate payment arrangements
that he may have had with Milberg, was also involved in the AHI Healthcare lawsuit, which presented a perfect storm of informants for the Feds including involved parties: Torkelson himself, fraudster Steven Cooperman
and Milberg alum turned mortal enemy, Alan Schulman
Labels: Alan Schulman, John Torkelson, Milberg, Milberg Weiss, Steven Cooperman
Bill Lerach has requested a one year prison term
Prosecutors Seek Two year Term for Bill Lerach
, half of that to be spent at home. Prosecutors have been aiming for something more like two years. Specifically, "The federal probation office recommended a sentence of 15 to 21 months, two to three years of supervised release and a fine of $4,000 to $40,000."
The penalty would stem from Lerach's guilty plea on one count of conspriacy in relation to the governments investigation into plaintiff kickbacks paid by Lerach's former law firm, Milberg Weiss. Milberg co-founder Melvyn Weiss along with attorney Paul Selzer have both maintained their innocence and face trial later in the year.
SENTENCED: The final numbers are 2 years in prison, 250,000 fine, 1,000 hours of community service. Lerach is expected to surrender himself for incarceration in April
Labels: Bill Lerach, kickbacks, Lerach, Melvyn Weiss, Milberg, Milberg Weiss, Paul Selzer
Seymor Lazar Sentenced
Sentencing recommendation: two years in the clink, $250,000 fine, two years probation. This in response to Lerach's prior guilty plea on one count of conspiracy to obstruct justice and make false statements. February 11th will tell the tale.
Labels: Bill Lerach, kickbacks, Lerach, Milberg, sentencing
Milberg Fires Back With Dismissal Motion
Seymour Lazar, the 80 year old attorney - and serial securities plaintiff - who plead guilty in the Milberg kickback case has received his sentence
- six months home detention and two years probation. He was also fined $600,000. Lazar is the first to be sentenced in the Milberg probe.
Lazar has also already repaid $1.5 million, which amounts to what he was allegedly paid by Milberg Weiss in exchange for acting as a re-occurring lead plaintiff in the firm's securities class actions. Milberg stands accused (and seven people have already plead guilty in connection with) distributing $11 million in kickbacks to individuals they called upon to routinely serve as lead plaintiff in their cases.
Labels: Bill Lerach, kickbacks, Lerach, Milberg, Milberg Weiss, Seymour Lazar
Milberg Docs to Stay Protected
Five motions, actually - in five days. All attempting to pick away at the government's case against the firm. Similar moves from the firm in the past haven't found much success with U.S. District Judge John Walter, who is presiding over the kickback trial of the mega-plaintiff firm. Better luck this time? We'll see. Details on the most recent Milberg motions can be found at Law.com.
Labels: dismissal, kickbacks, Milberg, Milberg Weiss, trial
This decision from Justice Eugene Nardelli
Milberg Strategic Errors Risk the Survivial of the Firm
and his fellows at the court of appeals stymies the efforts of super-star investor, Sam Wyly, who had been seeking access to documents from Milberg, along with several other major class action litigation firms, including Stull, Stull & Brody, and Schiffrin Barroway Topaz & Kessler. Wyly was after docs from Computer Associates class action, in which his interests were represented (he would, in fact, argue misrepresented) by the above firms. Wyly also has a legal malpractice case pending against the three firms in Manhattan's Supreme Court.
Labels: class action, malpractice, Milberg, Sam Wyly, Schiffrin Barroway, Stull Stull and Brody
On the Seymour Lazar Guilty Plea...
Great piece from The Recorder at Law.com
. Lots of detail from the 7 or so year history of the Milberg investigation that may have slipped your mind, along with a detailing of some strategic missteps by Milberg that may end up costing the firm everything.
Of course, for a refresher on the investigation, all you need to do is click the tags below. There was a huge flurry of news coverage back in and around January '06 at right about the time Lazar was indicted. And The Daily Caveat
Labels: Bill Lerach, Lerach, Melvyn Weiss, Milberg, Milberg Weiss, Seymour Lazar, Steven Cooperman
Milberg Kickback Defendant, Seymour Lazar, Cops a Plea
Mel Weiss Pleads Not Guilty, Has Not Yet Begun to Fight
Melvyn Weiss Makes Bond
It is in. Reuters has details
. Sentencing will be January 28th, if the 80 year old Lazar makes in that far. Because of his age and relatively poor health, probation rather than jail appears to be in his future. Lazar has also agreed to forfeit $1.5 million and a fine of up to $600,000.
Labels: kickbacks, Milberg, Milberg Weiss, Seymour Lazar
Milberg's Schulman Enters Guilty Plea
Lerach Rivals Celebrate Fall
Melvyn Weiss Steps Down, Indictment Expected Today
He is currently free on $1 million bond and is, at a hearing today, expected to plead innocent to a variety of charges stemming from the government's investigation into kickbacks offered to Milberg clients. Weiss is facing four counts of conspiracy, racketeering, obstruction of justice and making false statements and could serve up 40 years based on the charges.
A trial is scheduled for January, where Weiss along with will co-defendants Seymour Lazar and attorney Paul Selzer, will get a chance to defend themselves against federal prosecutors' ever-expanding case. The Lazar and Selzer indictments kicked of a renewed push in the government's years-long investigation of Milberg Weiss. Lazar and Selzer were a multi-time Milberg plaintiff who purportedly received kickbacks from the firm.Further details on the Melvyn Weiss trial
can be found via Reuters... and of course, for past coverage from The Daily Caveat
, try the tags below.
Labels: kickbacks, Melvyn Weiss, Milberg, Milberg Weiss, Paul Selzer, Seymour Lazar
The word is out on the Mel Weiss indictment.
Melvyn Weiss Indictment Expected
Milberg issued a statement late yesterday indicating that, in anticipation of a revised indictment expected to be filed in short order (via the New York Observer
"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."
It has been reported
that the recent zeroing in on Weiss is the result of information obtained following the plea agreement of former Milberg lawyer, Steven Schulman. Over at CNNMoney,
Roger Parloff's Legal Pad blog has the Shulman plea agreement
linked if you want to review it for your own speculations. See Defendants Obligations
sub 18 for notes on Schulman's cooperation with authorities.
Labels: indictment, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss
The WSJ law Blog has details
Lerach Guilty Plea: To Serve 12 to 24 Months
and a statement from Milberg Weiss on the upcoming, revised kickback indictment, which is expected to include charges against Milbeg Weiss patriarch, Melvyn Weiss.
And as usual, at the WSJ Law Blog, half the fun is in the comments.
Labels: indictment, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss
Plaintiff Attorneys in the Cross-Hairs
Bill Lerach Retirement Date Announced
It is being widely reported today that William Lerach is expected to accept a plea bargain
in connection with the continuing kickback investigation into his former firm, Milberg Weiss. While Lerach had yet to be formally faced with any charges, it has been long assumed that he was one of the unnamed attorneys
mentioned throughout the government's case against Milberg.
The word coming in from all over creation is that Lerach will accept a guilty plea on one count of conspiracy for which he would face a sentence of 12 to 24 months and an $8 million fine. It is widely known that Lerach and his lawyers have been negotiating with federal prosecutors for some time now and this purported agreement apparently reflects the outcome of those talks. A judge would still have give final approval to the deal.
Lerach would be the second former Milberg attorney to plead guilty in connection with the case. The other would be indicted former partner David Bershad, who plead guilty back in July to similar charges. Steven Schulman, a third attorney from Milberg continues to deny kickback-related charges, as does the firm itself.
Please step back and allow the dancing on the grave to begin. Overlawyered
, I'm looking at you. Point of Law
, don't disappoint me now.
Personally, I'm biased. I'll admit it. I've worked in product safety and consumer advocacy. I also cut my teeth as an investigator working on too many securities class action lawsuits not to have my sympathies with Lerach and the plaintiffs' bar. Frankly, I can count the number of cases where something significant wasn't
found - probably on one hand. And yet clearly you must
play by the rules, rules which it seems were broken.
Of couse, the guilty plea isn't what burned Lerach's rep. Even before the kickback case got going in earnest (about 6 years into the 7 year investigation) Lerach was a already a polarizing figure.
His tactics over the year have done little to endear him to the other side of the aisle, but his success on behalf of investors have also not been insignificant.
The legal profession might be a bit dirtier for Lerach's influence and, lets call it zealous advocacy
, but you can't tell me that business isn't also a little cleaner as a result. I won't mourn his rightful prosecution but I don't plan on celebrating it either.
Labels: Bill Lerach, David Bershad, Lerach, Milberg, Milberg Weiss, Seymour Lazar, Steven Cooperman, Steven Schulman
WSJ's Lattman Muses Over the Future of a Lerach-less Lerach Coughlin
In a statement released earlier in the week
the firm of Lerach Coughlin Stoia Geller Rudman & Robbins announced that effective August 31st they would be dropping "Lerach" from their name. This move signals the expected retirement of firm co-founder and big gun (arguably the biggest gun in class action litigation), William S. Lerach.
Bill Lerach has spend the last year or so increasingly dogged by the results of a federal investigation into he and his former colleagues at plaintiff firm Milberg Weiss. After seven years of digging the probe heated up this year as authorities turned up the heat on key witnesses like former Milberg lead plaintiffs; retired entertainment attorney, Seymour Lazar and and the colorful eye doctor, art dealer and insurance fraudster, Steven Cooperman.
Since then we've seen indictments, resignations and, just perhaps, the end of an era. Lerach has yet to be indicted himself and may never be, but he remains one of the biggest fish in the case and - no doubt - the one prosecutors were looking to land all along. Amid all the speculation over whether an indictment of Lerach would be forthcoming murmers started about a potential retirement, one that might spare his current firm should Lerach be prosecuted.
It appears that August 31st will be the date
Lerach, with typical brass, had this to say, “I have appreciated the opportunity to fight for the victims of corporate fraud. However, I realize that my success has made me a target,” Mr. Lerach said in a statement. “These allegations have proven to be personally time-consuming, and I have decided to focus single-mindedly on putting the matter behind me once and for all.”
Labels: Bill Lerach, kickbacks, Lerach, Milberg, Milberg Weiss, Seymour Lazar, Steven Cooperman
Is that wistfullness I hear?
The American Lawyer Wonder Where the Security Class Actions Have Gone
As always with the WSJ Lawblog, half the fun is in the comments.
Labels: Bill Lerach, indictment, kickbacks, Lerach, Milberg, Milberg Weiss
Update onf Defense Filings in the Milberg Kickback Indictment
Motion(s) on the Milberg Indictment
Good read from Andrew Longstreth over at Law.com
... And for all the current stats on securities litigation, you know you can count on the Stanford Securities Class Action Clearing House
Labels: class action, Lerach, Milberg, securities
In Defense of Milberg Weiss
Several defendants in the Milberg kickback case have filed motions challenging the legitimacy of the charges against them, most particularly those charges relating to "honest services fraud." Federal prosecutors have just filed their first response to these dismissal motions. As you might imagine, they intend for the charges to stick. Details at Law.com.
Labels: Bill Lerach, indictment, kickbacks, Milberg
Milberg's David Bershad Pleads Guilty on Kickback Charges
Now there's a topic you don't see in the papers everyday... Noose tightening seems to be the general approach. However, some folks are stepping up to at least entertain the notion that perhaps these trumped up, politically motivated charges against the firm deserve further interogration. Ideoblog's Larry Ribstein
is just such a fellow. Check out the WSJ's Law Blog for details
on an upcoming paper from Ribstein and George Mason professor Bruce Kobayashi
that looks to interrogate the government's case against Milberg. And if you're not reading Larry's blog
on a regular basis, well, you should be.
Labels: class action, Ideoblog, Milberg, WSJ
Milberg's Schulman Continues to Battle Charges Against Him
Formerly a name partner at embattled plaintiff firm, Milberg Weiss, David Bershad has plead guilty on conspiracy charges
stemming from the Justice Department's seven year long investigation into business practices at his former firm.
Word on the street for the last few weeks had been that Bershad had started dealing
and that a plea deal was imminent. Coincidentally or not, this talk of a Bershad cutting a plea occurred simultaneously with the leak about Bill Lerach's planned retirement.
Whatever the other undisclosed terms of Bershad's deal might be, we know that Bershad will forfeit $7.5 million, pay a $250,000 fine and - most importantly - cooperate with prosecutors in their ongoing investigation.
The Feds are still working on landing the big fish - Bill Lerach and Melvyn Weiss. This move by Bershad definitely puts the hooks a bit closer than they were just a week ago.
Labels: Bill Lerach, David Bershad, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss
Lerach Partner Confirms Retirement By Year's End
Steven Schulman, one of the former Milberg Weiss partners facing charges in the ongoing probe of the firm, continues to pursue the dismissal of charges against him. While his former firm talks plea deal, Schulman has expanded his motion seeking a dismissal of charges against him.
His most recent filing addresses the charge of "honest services fraud" arguing that the government's definition is vague and arbitrary. Schulman is also attempting to pick apart the charges of mail fraud and failure to perform his fiduciary duty. Whether he's successful, we'll know in time. Law.com has further details on Schulman's legal maneuverings.
Labels: class action, indictment, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss, securities, Steven Schulman
Ideoblog Mulls the Anniversary of the Milberg Indictment
Well there it is...
"I anticipate that Bill will retire before the end of the year," said Patrick Coughlin, a co-founder of the San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins LLP.
Labels: Bill Lerach, kickbacks, Milberg
Typically great commentary
Better Day For Milberg, Tyco Settles for $3 Billion
from Larry Ribstein
as he considers the guv'ment's case against Milberg Weiss
one year after the indictment. The post is chock-a-block with additional links for further reading - give it a look at Ideoblog
Labels: Ideoblog, indictment, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss
Seymour Lazar, Serial Milberg Weiss Plaintiff, Angles to Avoid Indictment on Grounds of Bad Health
We've covered some of plaintiff firm, Milberg Weiss's travails
this week as it continues to struggle through an ongoing investigation into kickbacks the firm offered to repeat lead plaintiffs. But there are brighter spots for the firm, one being the recent $3 billion settlement of a class action lawsuit brought against Tyco International
Tyco is of course the famous former home of bad-boy CEO, Dennis Kozlowski. The Milberg-led class action (co-led by Schiffrin, Barroway, Topaz & Kessler) was brought in 2002 on behalf of several pension funds who suffered losses as a result of the fraud at Tyco.
Labels: class action, Dennis Kozlowski, Melvyn Weiss, Milberg, Milberg Weiss, Schiffrin Barroway, securities, Tyco
WSJ Law Blog Q&A With Melvin Weiss
79 year old Seymour Lazar was indicted in June 2005 by federal prosecutors in hot pursuit of class action giant Milberg Weiss. Lazar was accused of receiving kickbacks from Milberg in exchange for serving repeatedly as lead plaintiff in the law firm's class action suits.
Unlike others in similarly uncomfortable positions, Lazar steadfastly refused to deal or talk. Now, as Lazar's trial is gearing up a series of hearings have been scheduled, and the first already concluded, to determine whether the ailing almost-octogenarian can reasonably withstand the rigors of the courtoom.
For further details on the Lazar trial, check out the New York Sun
In related news, former Milberg partner and one of the individuals named in the firm's "kickback" indictment, Steven Schulman, has asked that the charges against him be dismissed
. Schulman, along with former Milberg partner David Bershad faces charges including conspiracy, mail fraud, money laundering, obstruction of justice and tax violation . Schulman requested the dismissal of charges based on the claim that shareholders in lawsuits where lead plaintiffs received kickbacks suffered no actual harm.
For background on all of the above shenanigans, check out the tags below, which will take you to The Daily Caveat's
past coverage of the long in coming Milberg indictment and all the colorful players it involves...
Labels: David Bershad, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss, money laundering, Seymour Lazar, Steven Cooperman, Steven Schulman
Milberg Loses Class on Organogenesis Action
Peter Lattman interviews Melvin Weiss over at the WSJ Law Blog
. Weiss comments on the the Tellabs case, the Milberg indictment. Worth a look. And if you're a snarky soul, maybe check out the comments as well.
Labels: indictment, Melvyn Weiss, Milberg, Milberg Weiss, securities, Tellabs
Milberg Investigation Inches Closer to Lerach With Guilty Plea From Serial Plaintiff, Steven Cooperman
Milberg Weiss recently lost out on their bid to receive class certification for a potential action against Masschusetts-based artificial skin maker, Organogenesis. Well, you win some, you lose some. But if you think this has nothing to do with the pending indictment against the firm, you'd be wrong. It looks like the once-powerhouse securities firm is going to be ice-skating uphill for the foreseeable future. From the Boston Business Journal
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.
More on the Milberg snub here
Labels: Melvyn Weiss, Milberg, Milberg Weiss, Organogenesis
Milberg Weiss Loses Anti-Trust Team
Steven Cooperman is a colorful character. Eye doctor, art dealer bitter divorcee and serial securities litigation plaintiff for the biggest firm in the business, the embattled Milberg Weiss
. And did I mention insurance fraudster? Well that too...Convicted in 2000 of insurance fraud
via faked art theft and facing years in prison, Cooperman offered information to prosecutors about Milberg's alleged kickback payments to selected lead plaintiffs in their securities class action cases. In exchange, Cooperman was hoping for the soft touch from federal prosecutors. The deal that Cooperman struck remains under seal.
Cooperman's information on Milberg's practices was seconded by Richard Purtich, a Los Angeles insurance lawyer who claimed that he had personally been the conduit for millions in payments from Milberg to Cooperman. Cooperman, in his own divorce proceedings had himself seperately admitted taking payments from Purtich's hand.
In his divorce testimony, Cooperman also mentioned two direct meetings with Bill Lerach, the former Milberg star who has so far remained untainted by the investigation and indictment of his former firm. Cooperman claimed that on one occasion Lerach personally gave him an enevlope stuffed with $16,000 in cash.
One case in particular in which Cooperman had served as the lead plaintiff proved to be of special interest to investigators: the 1995 AHI Healthcare shareholder class action. Former Milberg partner Alan Schulman
, who has been openly hostile to the Milberg's conduct was the team leader on the AHI case. Schulman is known to be cooperating
with investigators, giving prosecutors special insight into the case.
This week Cooperman plead guilty to taking more than $6 million in illegal kickbacks
from Milberg Weiss and the 50 some odd pages of documentation filed indicates that prosecutors are closing on on Lerach. Court documents filed earlier this week make specific reference to "Partner B," the unnamed individual in the Milberg indictment long believed to be Bill Lerach, placing him at the center of the kickback scheme.
Lerach's lawyers are playing tough
, but this can't be good news. Expected, but still not good...
Labels: Bill Lerach, Melvyn Weiss, Milberg, Milberg Weiss, securities, Steven Cooperman
J. Douglas Richards
Supreme Court to Tighten Securities Class Action Standards?
and Michael M. Buchman
(links go to Milberg bios, while they last) are evacuating to Pomerantz Haudek Block Grossman & Gross,
the latest attorneys to jump from the Milberg ship since the kickback-related indictments were announced last year. You can read the Pomerantz press release, here
Labels: indictment, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss, Pomerantz Haudek
More Details on Lerach Lawfirm Removal from Halliburton Litigation
They'll apparently get the chance when they hear the appeal of Tellabs, Inc.
, a telecom manufacturer
facing allegations that it fraudulently inflated revenues at the expense of shareholders. Further info on the case and the potential impact of the Supremes can be found here
, care of the Chicago Tribune
. You can also view the Tellabs case docket here
Labels: class action, Milberg, securities, Tellabs
The Daily Caveat mentioned in passing
Techdirt on Bank IPO Class Action Ruling
several days ago that Lerach Coughlin, home of the Wall Street Journal's favorite litigator, Bill Lerach, had been removed from upcoming securities fraud litigation against Halliburton. The client in that case, the Archdiocese of Milwaukee Supporting Fund Inc., has since given more details
on the removal of Lerach's firm as well as co-lead counsel, David Scott of Scott + Scott, linking the switch directly to the continuing indictment against Lerach's former firm, Milberg Weiss. As was previously mentioned, DC uber-attorny David Boies has picked up the reins of the case.
Meanwhile Milberg and the plaintiff's bar in general are bracing for what some are calling the trial of the century
Labels: Bill Lerach, class action, David Boies, Halliburton, indictment, Melvyn Weiss, Milberg, Milberg Weiss, securites
Steven Schulman Out at Milberg
And why they think, in this case, rejection was the right
move for the courts...
What are we talking about? Well, it goes something like this... Back in a mystical time we call the dot com boom
, there were lots of shady practices from internet-based companies that had a URL, a superbowl ad and not much else in the way of prospects for success. In turn, securities class action firms experienced their own boom, filing case after case, chasing busted dot coms on behalf of their investors (and boy, as a young investigator it was fun to be in the thick of it).
Another issue arising from this era has been the allegedly questionable conduct of the Wall Street bankers behind many of these IPOs. It has been suggested that they manipulated the prices of these public offerings in order to reap great monetary benefits for themselves on the backs of myriad small investors who got caught in their double-dealing wake.
There have been some individual settlements relating to this issue, but another suit had been working its way forward, in which the most of the biggest Wall Street banks would have had their dirty laundry aired. Earlier this month, plaintiffs received a serious setback
when a Federal Appeals Court ruled that several of the 310 conglomerated cases that are part of the potentially massive class action were wrongfully given "class" status.
While this doesn't mean the case, which is being led by embattled plaintiff firm, Milberg Weiss is dead, it is a certainly substantial setback for one of the longest running class actions kicking around the courts. So why does TechDirt say this is all so much the better? Find out
Labels: class action, IPO, Melvyn Weiss, Milberg, Milberg Weiss, securites, Techdirt, Wall Street
Milberg Trial Has a Date, New Charges Teased
He'll be pursing "new opportunities"
including defending himself against the criminal indictment
he's currently facing relating to kickbacks Milberg aledgedly made over the years to their lead plaintiffs who put in repeat performances. Current Milberg partner David Bershad is also under indictment on the same charges.
Labels: David Bershad, indictment, kickbacks, Milberg, Milberg Weiss
Milberg Attorneys Plead Not Guilty on 20 Count Indictment
Federal prosecutors made it known yesterday
that their ongoing probe into class action giant, Milberg Weiss
may yet expand further. The Feds have been doggedly pursuing information on Milberg bad acts for years. They finally hit paydirt with a perfect storm of informants and double-dealers, who provided regulators with details on kickbacks ($11.3 million over the last 25 years) allegedly given by Milberg to regular, repeated lead plaintiffs in its class action cases.
Thus far, indictments have been brought, lawyers have fled, offices have closed and not guilty pleas have been entered and Milberg partners, Steven Schulman and David Bershad are awaiting trial, a trial that now has a date
- January 8, 2008.
The new charges teased reportedly relate to potentially false invoices submitted on behalf of expert witnesses for work that was never performed. One wonders whether such false invoices might also relate to work conducted by outside investigators on Milberg's behalf. While in recent years Milberg had moved much of this work to internal staff, they have been a great and lucrative source of work for investigators for many years.
In related news, Bill Lerach, the famous former partner in Milberg Weiss who a few years back hung out his own shingle, has remained untouched by the case against Milberg. It seems at the present time, in fact, that no additional individuals will added to the prosecutors case. But that hasn't stopped the matter from having an impact.
One has to assume, for example, that the indictment played a role in the request to have Lerach's firm removed
as lead counsel in the ongoing $4 billion class action lawsuit against Haliburton, in favor of David Boies.
Labels: Bill Lerach, David Bershad, David Boies, kickbacks, Lazar, Melvyn Weiss, Milberg, Milberg Weiss
The Other Shoe Drops - After Years of Investigation, Plaintiff Firm Milberg Weiss Faces Indictment
kickback probe continues, this time court-side. Milberg partners, currently on leave, David J. Bershad
and Steven G. Schulman
both made their first appearance in an L.A. court room on Friday. Each was released on $1million bail and scheduled to appear on Monday to enter their respective pleas. Details follow on yesterday's L.A. court proceedings from The Mercury News
. The article is also a decent summary of the happenings to date in the Milberg kickback probe:
Law firm, partners, plead not guilty to federal charges in LA
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"...
Read the full Mercury News article here
. And if needbe, catch up on the story by reading some of our past coverage
Labels: David Bershad, Howard Vogel, hulman, kickbacks, Melvyn Weiss, Milberg, Milberg Weiss, money laundering, Steven Cooperman
The Daily Caveat
1995 AHI Healthcare Shareholder Lawsuit Key in Milberg Investigation?
has been following this story for as long as this blog has been around. Government investigators have been probing noted securities plaintiff firm Milber Weiss for more than five years now looking for improprieties in the way the firm handles the management of the large class action cases that often fall under its care. To a lesser extent, also in the cross-hairs was Bill Lerach, a former Milberg partner who, after a falling out with Milberg top-dog Melvyn Weiss, opted to leave the firm has open up his own shop.
Things really started to heat up in the seemingly aimless investigation last summer with the indictment of two Palm Springs, California attorneys
who alledgedly participated in a scheme of kickback payments from Milberg to individuals serving as lead plaintiffs for the firm. Seymour Lazar, a movie industry lawyer who once dated Maya Angelou was indicted on charges of receiving kickbacks from Milberg Weiss and Paul Selzer, a real estate lawyer was accused of helping to launder the payments. In the indictment against Lazar and Selzer, as much as $44 million alledgely passed through their hands in illegal kickbacks from Milberg Weiss.
The roots of the Lazar indictment lie in part with art dealer and convicted insurance fraudster, Steven Cooperman
. Cooperman was in seven kinds of legal trouble and facing a ten-year sentence when he offered federal prosecutor inside knowledge on Milberg's practices based on his own experience serving some 60 times as a lead plaintiff for the firm. A great deal of information was also gleaned from the briefs filed in Cooperman's nasty divorce. According to testimony by Cooperman in the divorce case, between 1988 and 1997 he received about $5 million from his arrangement with Milberg Weiss.
While Lazar has all along fought the charges against him and refused to roll on Milberg, another former lead plaintiff, Howard J. Vogel, signed a plea deal with prosecutors and, in exchange for avoiding prosecution himself, has offered up his knowledge of the firm. Vogel and members of his family have served as plaintiffs as many as 40 Milberg receiving approximately $2.5 million in illegal kickbacks.
Subsequently we also learned that former Milberg partner, Alan Schulman, who is now a partner at rival firm, Bernstein Litowitz cooperated with the California Grand Jury
investigating Milber Weiss. There was apparently no love lost between Schulman and his former firm, and he was all too happy to dish on what he saw as imappropriate tactics used by his former employer.
Midweek-last week saw two Milberg executive partners take a not expected leave of absence
. David Bershad and Steven Schulman, both of whom had been courteously informed a few months back that they should keep their dancecards open for the Feds, departed Milberg for the time being to face pending indictments against each of them in relation to the kickback investigation.
The question is, will they have a firm to return to?
Before The Daily Caveat
could even get a weekend to catch its breath the California Grand Jury handed down a 20-count indictment
against Milberg Weiss based on allegations that, from 1981 to 2005 , in the course of their management of plaintiff class action cases, the firm paid kickbacks to lead plaintiffs and other facillitators. Clearly for Milberg and the prosecutors who have been giving chase for the last several years, the past is prologue and the real story has only just begun.
Labels: Bernstein Litowitz and Berger, Howard Vogel, HP, Melvyn Weiss, Milberg, Milberg Weiss
Update on the Milberg Weiss / Lerach Coughlin Probe
The AHI case appears to be a bit of a perfect storm for investigators, with several well known players in Milberg's orbit all having a role in the lawsuit. Several key participants in the case have been granted immunity including frequent Milberg lead plaintiff, Melvyn Kinder, whose attorney has acknowledged that Kinder is assisting investigators.
Other familiar names involved in the case that will ring a bell for one following the Milberg kickback probe include:
Government informant Stephen G. Cooperman was involved in bringing the case to Milberg's attention. Cooperman offered up info
on Milberg Weiss in the hopes of reducing the decade-long sentence he was facing on insurance fraud charges.Former Milberg partner Alan Schulman
(now with Bernstein Litowitz
) who since leaving Milberg has been openly hostile to the firm's conduct was the team leader on the AHI case. Schulman is known to be cooperating
Also participating in the AHI case was John B. Torkelsen, a frequent Milberg expert witness who has had his own troubles with the law. Torkelson recently received a plea deal that was though to be related to his assisting federal prosecutors
in their Milberg probe.
Check out the full LA Times article
for a closer look the various players' connections to the AHI suit and how it all effects the ongoing government investigation into Milberg Weiss's alledged improprieties.
Labels: Bernstein Litowitz and Berger, Melvyn Weiss, Milberg, Milberg Weiss
Scandals Buoy Hedge Fund Investigative Business
Not much new here, except for an explanation for why the investigation into Milberg's legal tactics is taking so long. In short, Assistant U.S. Attorney Richard Robinson moves at a methodical pace. But the piece is worth a read for the few new names that pop up:
Complexity Slows Milberg-Lerach ProbeThe original article appears here.
October 31, 2005
After the dozens of news stories, flurries of grand jury activity and periodic inquiries by the Los Angeles U.S. Attorney's Office, there's one enduring mystery in the ongoing attempt to prosecute the former plaintiffs firm Milberg Weiss: Why's it taking so long? In the five years since prosecutors began probing the securities class action firm and star lawyer William Lerach, the investigation has produced a peripheral indictment, a trove of gossip and a look at some of Beverly Hills' less savory characters.
But it hasn't resulted in charges against its presumed targets. Lawyers familiar with the case cite a handful of contributors to the investigation's length: the difficulties of prosecuting a lawyer, the need for circumspection in going after deep-pocketed, high-profile attorneys, and a one-year fight to disqualify Milberg Weiss' defense counsel. But most of all, they ascribe the delay to a single person: Assistant U.S. Attorney Richard Robinson, the lead prosecutor in the case.
Robinson, according to several former prosecutors speaking on condition of anonymity, is known for moving at a methodical pace, spending as much time as he is allowed to gather documents, interview witnesses and develop cooperators before filing an indictment. While this quality has a tendency to frustrate defense attorneys -- and sometimes fellow prosecutors -- Robinson is known for developing particularly thorough indictments.
"I think most prosecutors, when dealing with a high-profile entity and partners of the entity as targets, will move cautiously and deliberately," said Walter Brown Jr., a partner at Orrick, Herrington & Sutcliffe and a former L.A. federal prosecutor. "If you couple that with a prosecutor who is cautious, deliberate and slow-moving, it's not that strange" to spend five years on a case.
Robinson's successes include the 2000 insurance fraud conviction of Steven Cooperman, which sparked the Milberg investigation. After his conviction for faking the theft of two paintings to collect on an insurance policy, Cooperman -- in an attempt to reduce his sentence -- told prosecutors that he received kickbacks from the Milberg firm in cases where he served as the lead plaintiff.
Since then, Robinson and several other prosecutors, including Assistant U.S. Attorney Michael Emmick -- who assisted in Kenneth Starr's investigation of President Clinton -- and, more recently, Assistant U.S. Attorney Robert McGahan, have ranged far and wide in their attempt to prosecute the firm. In addition to Cooperman, they've interviewed two other former lead plaintiffs who have immunity -- and claim to have received kickbacks.
Since 2000, the prosecutors have also been focused on Richard Purtich, a Los Angeles insurance lawyer, according to attorneys with knowledge of the investigation. Those sources say prosecutors have been investigating Cooperman's claim that -- in cases where Cooperman was the lead plaintiff -- Purtich improperly passed referral fees from Milberg Weiss on to Cooperman.
The Los Angeles Times reported in August that, in divorce proceedings, Cooperman said he took direct payments from Purtich, and that Milberg Weiss paid Purtich about $2 million to cover Cooperman's outstanding legal fees. A similar set of payments was alleged in a June indictment of former Milberg client Seymour Lazar and his lawyer, Paul Selzer.
Purtich -- whose attorney, L.A.-based William Genego Jr., wouldn't say whether his client appeared before the grand jury -- represented Cooperman in a suit against insurance companies after he faked the theft of a Picasso and Monet in 1992. And while he has never faced criminal charges, Purtich also represented another notorious Beverly Hills insurance fraudster, lawyer Rex DeGeorge.
DeGeorge, who is currently not eligible to practice law, was convicted in 2002 of artificially inflating the value of his yacht before sinking it off the coast of Italy in 1992. Purtich represented him in a suit against the company that insured the boat. The fact that Purtich -- like the investigation's targets -- is an attorney can make things especially sticky, said three former prosecutors.
"The biggest difference investigating criminal allegations against a lawyer is the very important but cumbersome process of going to Main Justice and getting permission for subpoenas and search warrants," said Patrick Robbins, a former San Francisco prosecutor and a partner at Shearman & Sterling.
In addition to navigating privilege issues, two lawyers familiar with the case said prosecutors spent nearly a year working to disqualify Williams & Connolly, the Washington, D.C., firm that had been representing Milberg Weiss, since it had briefly represented Cooperman. Williams & Connolly was disqualified about a year ago. Milberg Weiss is now represented by Bryan Daly at L.A.'s Beck, De Corso, Daly, Kreindler & Harris, who didn't return phone calls. Lerach is represented by Keker & Van Nest's John Keker.
Labels: Melvyn Weiss, Milberg
Movement on Milberg Weiss Indictment, Former Plaintiffs, Firm Accountants Testify Before Grand Jury
KL Group...Bayou Management...Liberty Corner Advisors...Wood River...If you follow hedge funds - and really in investment today, what could be hotter than hedge funds - these are the names that keep you up at night. In order to avoid biting into the next bad apple many individual and institutional investors are turning to corporate investigators such as ourselves
to vet investment opportunities.
Scandals make hedge fund sleuthing pay off -experts
October 12, 2005
By Svea Herbst-Bayliss
BOSTON - Back-to-back hedge fund scandals are sending investors a frightening message: Spend a few thousand dollars now to sidestep a multimillion-dollar fraud later. Lawyers and investigators said this week that the collapse of hedge fund Bayou Group and suspected fraud at hedge fund Wood River Partners likely will prompt investors to take more precautions before stepping into the fast-growing $1 trillion industry.
"The circle of who has gotten burned is getting bigger and the trend is that people will ask for more due diligence because they realize it pays to conduct these inquiries," said Peter Turecek, who manages the hedge fund business at Kroll, a New York-based security consulting firm. Financial regulators are sorting out what went wrong at Bayou, where investors are said to have lost $300 million, and Wood River, which once said it was managing $500 million.
Investors and lawyers have not been able to reach Wood River in the last few days, and in a lawsuit filed by Lehman Brothers against Wood River, the Wall Street investment bank said that it suspected the hedge fund ceased operating. Wood River is under investigation by the U.S. Securities and Exchange Commission.
These are the latest blowups in an industry that has attracted billions of dollars from pension funds, endowments and charities since becoming a hot asset class by delivering outsized returns in the late 1990s and positive returns during the stock market's almost three-year sojourn in bear territory.
Many investors, particularly funds of funds like Glenwood Capital Investments and Mesirow Financial that select hedge fund portfolios, already rely on investigators to snoop around and verify a manager really is who he says he is. For fees ranging between $2,000 and $50,000, firms will compile dossiers that can turn up anything from unpaid parking tickets to lawsuits to lies on resumes.
"Getting reports on managers shows that for $2,000 up front, you can avoid people like this instead of having to spend hundreds of times that amount to recoup millions of dollars in losses later," said Randy Shain, executive vice president of First Advantage CoreFacts LLC, which investigates hedge funds. "It is cheap insurance," he added.
Still, there are plenty of investors who pick managers based on a gut feeling and who consider due diligence a cost -- heaped on top of hedge funds' already hefty fees -- that is not part of their investment, lawyers and investigators said. But these are the people who might come around now, they added. "Every time there is a fraud, investors profess to do more due diligence and this is no different," said Scott Berman, a partner at law firm Friedman Kaplan Seiler & Adelman.
Those who still trust their gut may change their minds after hearing what firms like First Advantage CoreFacts turned up. This summer, a report on Wood River founder John Whittier showed the former technology analyst faced four tax liens, was sued for not paying rent and was sued for $1.6 million in securities losses, Shain said. His clients passed on Whittier. "Taken together, these three things added up to a red flag," Shain said, explaining that "the report shows Whittier ran out of money or that he's sloppy. Neither inspires confidence."
Fact checking also turned up discrepancies on Bayou founder Samuel Israel's resume when Shain's analysts tracked down the hedge fund manager's former employer, Leon Cooperman, who said he hadn't been head trader and wasn't there for four years.
As investors burned by these blowups wait to recoup money, the trend will be for people to spend a premium on "reputational reviews" that highlight behavior patterns which could become a liability later, investigators said. "People will want to know that the person is a good trader, but they'll also want to hear if the guy heads off to the bar and drinks all night every night," Kroll's Turecek said.
Looking ahead, investors also are likely to press for more clarity on operational matters like who checked the books after Bayou fabricated a firm to certify its returns. "We were able to discover that Bayou's auditor was bullshit," Shain said. This week, Reuters reported that Wood River told potential investors it had retained two firms as independent auditors. But those auditors on Tuesday denied any relationship with the controversial hedge fund.
The original article appears here
Labels: Bayou Group, John Whittier, Kroll, Milberg, Wood River Capital
Hedge Fund Investing Requires Doing Your Homework
It's been a while since we've had any new news on this front, but it sounds like West Coast prosecutors have been busy...
Grand Jury Busy in Milberg Weiss Probe
September 30, 2005
Federal prosecutors have taken a couple of strides forward in the investigation of former plaintiff firm Milberg Weiss and its star securities lawyer, William Lerach. Last week, a Los Angeles grand jury heard testimony from Melvyn Kinder, a Beverly Hills psychologist and author of "Smart Women/Foolish Choices." Kinder served as a lead plaintiff for Milberg Weiss in securities suits in the 1990s. Kinder and his attorney, Peter Morris, declined to discuss his testimony.
Thursday, the grand jury was scheduled to interview accountants from Milberg's New York office, said two lawyers familiar with the investigation who spoke on condition of anonymity. The witnesses include Milberg Weiss' head accountant, William Matschke. He didn't return messages left at his New York home or at his Los Angeles hotel room Wednesday.
Since 2000, prosecutors led by Assistant U.S. Attorney Richard Robinson have been looking into allegations that Milberg Weiss Bershad Hynes & Lerach paid illegal kickbacks to clients who served as lead plaintiffs in stock fraud suits. Lawyers for the firm and Lerach have denied any wrongdoing. Milberg Weiss split into two firms last year -- New York-based Milberg Weiss Bershad & Schulman, and California's Lerach Coughlin Stoia Geller Rudman & Robbins.
The investigation began in 2000, when former client Steven Cooperman -- who was then facing indictment on unrelated crimes -- told prosecutors of the alleged kickback scheme. Federal prosecutors in Philadelphia are also reportedly looking into business practices at Milberg Weiss and other securities firms, while D.C. prosecutors are investigating a former expert witness used by the firm in many of its cases.
The L.A. probe appeared to languish until earlier this year, when the grand jury indicted a former Milberg client, Palm Springs lawyer Seymour Lazar. He stands accused of taking illegal kickbacks from the firm funneled through his attorney, Paul Selzer. Such payments are illegal because they give the lead plaintiff a substantially larger stake in a case than other class members.
The Lazar indictment was seen by many securities lawyers as an attempt to force Lazar to testify against Milberg Weiss and breathe new life into the aging investigation. Absent Lazar's cooperation -- and with Cooperman's questionable credibility as a convicted felon -- it's no surprise that prosecutors are interviewing other Milberg plaintiffs, said attorneys familiar with the investigation. Those lawyers said prosecutors are likely interviewing the accountants as part of their efforts to trace money from the firm to clients like Lazar.
While former federal prosecutors say the stepped-up grand jury activity may indicate that an indictment of Milberg Weiss or Lerach is imminent, the probe has proceeded haltingly since the beginning, in part because of difficulties prosecutors face in subpoenaing attorneys and information that may be subject to attorney-client privilege.
The original article appears here
Divorce Papers Shed Light on Convicted Fraudster's Role in Milberg / Lerach Investigation
The popularity of hedge fund investing has engendered growth in the investigative industry, as wealthy individuals as well as institutional investors seek assistance in vetting potential investment opportunities. Hedge funds make lots of money for lots of very happy people, but as in any business endeavor there are the unscrupulous few who, in the interest of enriching themselves, turn an hontest transaction into a horror story for investors.
The following article, which originally appeared in the New York Times
provides an excellent overview of the potential pitfalls of investing without adequate caution and preparation. In these areas, the services of a quality corporate investigative firm
can be a tremendous asset.
Via The Ledger.com
Want a Hedge Fund? Here's Your Homework
By Geraldine Fabrikant
New York Times
September 11, 2005
IF you're thinking about investing in a hedge fund, how can you steer clear of the likes of the Bayou Group, the recently imploded hedge fund company and brokerage firm run by Samuel Israel III? Unfortunately, getting information about individual hedge funds isn't easy.
While hedge funds have generally had positive returns, experts point out that some of them can be big money losers - and that this makes the decision to invest in any single fund a very risky business. A variety of databases provide information about hedge funds, but they are by no means infallible, and in any case many of them are often unavailable to the average investor.
The collapse of Bayou is a case in point. Federal prosecutors in Manhattan sued Bayou on Sept. 1, saying the company had defrauded investors since 1998 by misrepresenting the fund's performance. The complaint said that Bayou had misstated its assets and that its books, which it had claimed were evaluated by independent auditors, were certified by a bogus accounting firm whose registered agent, Daniel Marino, was also the chief financial officer of Bayou.
The case against Bayou began to develop in May, when Arizona authorities seized $101 million held by a man to whom Mr. Israel had turned it over in a seemingly desperate effort to make some fast money to cover his fund's losses.
For hedge fund investors determined to avoid such debacles, there are some free Web sites that offer data on legal and financial developments, including the sites of the Securities and Exchange Commission (www.sec.gov) and the National Association of Securities Dealers (www.nasd.com). While such sites contain a wealth of information, the often do not include the most telling signs of trouble in a hedge fund.
Randy Shain, the co-founder of BackTrack Reports, which researches hedge funds for institutions and some wealthy individuals, says that in the Bayou case, several red flags - including questions about Mr. Israel's character - would not have been evident to people contemplating an investment in the fund. For example, it would have been difficult to learn from publicly available data that Mr. Israel had exaggerated his position at one hedge fund, had been charged with drunken driving and had been accused in a lawsuit by a former employee of violating securities regulations.
A litany of problems like this is hardly typical of hedge fund managers, but it does underscore how difficult it is to vet a fund, said Charles Stevenson, a veteran hedge fund manager who now runs the Navigator Diversified Strategies fund, which is a fund of hedge funds. (A fund of funds is a group of individual hedge funds that has been assembled by a third party, an arrangement that provides diversification and, perhaps, a margin of safety.) "If a manager's character is not reliable enough for you to trust them with your wallet," Mr. Stevenson said, "then the returns will be less relevant than whether they actually return any of your money."
In promotional material for the Bayou funds, Mr. Israel told investors that he had worked as the head trader at Omega Advisors, a hedge fund run by Leon Cooperman, a former Goldman Sachs partner. But Mr. Israel had misrepresented the length of his employment at Omega as well as his position there, Mr. Cooperman said in an interview. Mr. Israel had worked there as a trader for 18 months, but had not been there for four years as the head trader as he had claimed, Mr. Cooperman said.
Many hedge funds do not have a public relations operation geared toward answering such questions raised by outsiders. Would Mr. Cooperman have taken a call about Mr. Israel's credentials from a prospective investor in the Bayou funds? "I can't answer that," Mr. Cooperman said. "If somebody calls me for a reference check, I will respond factually and appropriately. But certain firms are very cautious about talking about former employees."
Another cautionary piece of news for Bayou investors should have been that while Omega oversees two funds of hedge funds that invest money with 25 different managers, Mr. Israel's group wasn't among them. "We never invested in Sam Israel's hedge fund nor did one trade with his securities company," Mr. Cooperman said.
Promotional materials also stated that Mr. Israel began his career at F. J. Graber & Company, a money management firm geared "toward high-velocity trading" and run by its founder, Fredric Graber. One person who knew both men, but requested anonymity, recalled that Mr. Israel had worked for Mr. Graber as a summer intern, a position arranged through a family friend, but added that Mr. Israel "never had a leadership role" at the firm. Mr. Graber, who closed his firm some years ago, could not be reached for comment.
Potential investors might also have been concerned if they had learned other information. Mr. Israel had been arrested in New York State in 1999 and accused of "driving under the influence" and charged with criminal possession of a "controlled substance," Mr. Shain of BackTrack Reports said; the case was discontinued a year later. That case was reported without elaboration on LexisNexis, a subscription data base, where Mr. Shain's firm found it while researching Bayou for a potential investor. In order to get details about the case, Mr. Shain had to send a researcher to State Supreme Court in Manhattan.
Sometimes red flags are more immediately visible. The documents that Bayou made available to its investors say that Richmond-Fairfield Associates was Bayou's accounting firm. Charles Levenberg, a private investigator who researches hedge funds, said that lack of information about the accounting firm was a warning sign. "If they are not using somebody you have heard of, that is a big red flag," he said. "You have to wonder why." The government has contended that Richmond-Fairfield was controlled by Bayou.
Evidence of possible problems can sometimes be uncovered in news reports. James R. Hedges IV, a partner at the Imperium Partners Group, a hedge fund based in New York, recalled that in 2002 his firm was looking into an investment in the Lancer Group, a hedge fund based in Manhattan. But Mr. Hedges said he had seen a news report about a lawsuit filed in Federal District Court in Miami that same year in which the S.E.C. had accused Bruce Cowen, a managing director of the Lancer Group, of participating in a conspiracy to divert funds from Lancer investors and, ultimately, funnel some of it to his own pocket. That information "told us to stay away" from the Lancer Group, Mr. Hedges said.
A year later, the S.E.C. accused the Lancer Group of inflating the net asset values of its funds in an effort to mislead auditors and attract investors. The agency continues to seek fines, permanent injunctions against the group and penalties. For investors who are intent on picking hedge funds themselves, despite the risks, experts say that it may pay to subscribe to services that track lawsuits. For example, an investor can subscribe to Pacer, an online index to federal civil, criminal and bankruptcy cases nationwide.
A Pacer subscriber could have found that a suit was filed against Bayou in 2003 in Federal District Court for the Eastern District of Louisiana by a former employee, Paul T. Westervelt Jr., and his son. The plaintiffs contended that Bayou had failed to provide them with necessary business documents and that Mr. Westervelt discovered "possible violations of the S.E.C. regulations governing the operating of hedge funds."
The case has moved from federal court to arbitration. Lawyers on both sides did not return phone calls seeking comment. In 2004, Mr. Israel wrote to investors telling them of the suit. But an earlier warning of a former employee's decision to sue the company might have been helpful to investors. The problem for individual investors is that many of them "have made a lot of money doing something else," Mr. Shain said. "They have a false sense of security about their own sophistication in analyzing financials," he added.
To winnow out potential problems, investors may want to look for some common-sense warning signs. In addition to checking for evidence of possible deception or illegality, some analysts say they try to check whether the manager is in the midst of a difficult divorce, as Mr. Israel was, which can add psychological and financial pressures.
One basic metric is the manager's employment record. Michael Steinhardt, a manager who ran his own fund for 29 years and is now starting a group of exchange-traded funds, said, "A long track record is the best endorsement." In 1997, a fund run by Barbara Doran, who had previously been an institutional equity sales executive at First Boston and then a senior vice president at Lehman Brothers, shut its doors after losing 80 percent of its value. Ms. Doran had started the fund just three years earlier. At its height it was worth only $35 million. Ms. Doran declined to comment last week.
Of course, big financial institutions have made bad bets on hedge funds, too. Through a fund offered by an investment unit, J. P. Morgan had $662,602 in Bayou as of March 31, which it has written down to zero. A spokeswoman for J. P. Morgan said that as a result of the investigation, the firm was no longer marketing the fund to investors. But over all, the odds favor big institutions. "They have a better chance of weeding out the problem funds," Mr. Shain said.
The original article appears here
Labels: Bayou Group, Louisiana, Milberg
The Daily Caveat
Beyond th Lazar Indictment...NYT Explores the Roots of the Government's Investigation into Milberg and Lerach
has done his level best to kept abreast of the continuing government investigation into the conduct of noted plaintiff firms Milberg Weiss
and Lerach Coughlin
. While much of the recent coverage of the government's probe has centered of the indictment of retired California attorney, Seymour Lazar, another interesting figure whose role in the investigation goes back several years is convicted insurance fraudster, Steven Cooperman (Try this recent post
which links to a NY Times article
describing Cooperman's relationship to the government's investigation).
Long story short Cooperman, facing a ten year sentence offered federal prosecutors, knew he had something of value to offer; something that might help him reduce his time behind bars. Here's a hint...it involved kickbacks and a prominent plaintiff's firm.
"Cooperman told prosecutors, whose probe of Milberg Weiss became public in 2002, that he knew how the firm did it: with the help of people like him who served as ready-made clients in exchange for illegal kickbacks...Cooperman, who had also served as a plaintiff in as many as 60 class actions filed by the firm, was rewarded for his cooperation with a 37-month sentence in July 2001."
While the government is not talking just yet, indications of what information Cooperman might have fed to prosecutors are now available via an unanticipated source - Cooperman's divorce papers:
The five-day trial in October and November, captured in more than 800 pages of transcripts, opened a window on Cooperman's dealings with Milberg Weiss and his cooperation with federal authorities. According to testimony by Cooperman and others, between 1988 and 1997 he received about $5 million from his arrangement with Milberg Weiss — about $1 million of which went directly to him and the rest to lawyers he owed money.
...Cooperman acknowledged in the divorce case that he did not view payments from Milberg Weiss as illegal at first. "What was going on with Milberg Weiss was a very well-known activity," he said. "They openly acknowledged, and we discussed, kickbacks and the relationship that we had." "I frankly didn't think of it as a, quote, 'criminal activity,' " he said. But "I think after a certain point, I realized it was."
...In testimony in the divorce case, Cooperman and Gioiella said that Milberg Weiss not only made direct payments to Cooperman but also paid on his behalf about $2 million to lawyer Richard Purdich, who had represented Cooperman in insurance litigation and other matters. Purdich did not return several phone calls...
...Cooperman also described a pair of meetings with William Lerach, the firm's best-known partner. At one, he said, Lerach gave him an envelope with $16,000. Beyond their general statement addressing accusations against Milberg Weiss, lawyers for Lerach declined to comment. Cooperman testified that Lerach invited him to help promote legislation favorable to class-action lawyers. Although his wife was reluctant to attend a fundraiser for former Alabama Sen. Howell Heflin, Cooperman said he told her, "I think that we need to show up," noting that the couple was "going to make a lot of money from this."
While the preceding graphs from this L.A. Times article
offer insight into what Cooperman had up his sleeve regarding Milberg Weiss that would interest the U.S. Attorney's office, it should be noted that state and federal authorities were plenty interested in Cooperman for his own sake. His litany of frauds and illegalities and just general chicanery really has to be seen to be believed. Take a look at the full article
and you'll understand why businesses hire firms like ours
to vet potential partners, executives, board members, etc.
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
- 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.
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. 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...
Read the rest of the NYT piece here