In Dicta

Sunday, July 17, 2005

Probing the plaintiff's bar

"THREE months ago, William S. Lerach, the powerful class-action attorney both feared and loathed in executive suites across the country, received a disturbing call from his lawyer. Federal prosecutors, Mr. Lerach was told, wanted more time to build a criminal case against him.

Until then, a three-year investigation into whether Mr. 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.

Federal authorities made a similar request to Mr. Lerach's former partner, Melvyn I. Weiss, asking him to waive statute-of-limitations requirements. Mr. Lerach and Mr. Weiss declined to give them freer rein, said individuals with direct knowledge of the investigation.

In a more telling indication of where the inquiry was headed, the federal authorities also asked Milberg Weiss itself to give prosecutors more time to assemble their case. The meaning was clear: A firm that had spent decades winning multimillion-dollar lawsuits against huge corporations was now in the cross hairs of an investigation and a possible indictment that could put it out of business.

On June 23, the exact parameters of the federal investigation became clear when the United States Attorney's office in Los Angeles indicted an eccentric 78-year-old Palm Springs investor named Seymour M. Lazar. The indictment charged Mr. Lazar with accepting millions of dollars from an unidentified law firm in what the government describes as "kickbacks" for serving as the lead plaintiff in dozens of fraud suits the firm filed against corporations from 1976 to 2004. Milberg Weiss and others have acknowledged that it is the unidentified firm cited as Mr. Lazar's co-conspirator in the court papers.

Though Mr. Lerach and Mr. Weiss are not named in the indictment either, both are clearly embroiled in a wide-ranging investigation, the outcome of which is likely to influence how all plaintiffs' lawyers practice, as well as the potential civil penalties for corporate wrongdoing. As a result, the inquiry has reignited heated debates about the tort system, debates that have come to a head in recent years."

Continue reading this New York Times article.