Melvyn Weiss Co-Founder Indicted

 LOS ANGELES (AP) – The co-founder of a prestigious New York law firm that made an estimated $250 million by filing class-action lawsuits against some of America's largest corporations was indicted Thursday on charges that he conspired to pay kickbacks to people who agreed to be plaintiffs.

Melvyn Weiss is accused of two counts of conspiracy and one count each of obstruction of justice and making false statements in relation to documents that were the subject of a grand jury subpoena, the U.S. attorney's office said. If convicted of all counts, he could face up to 40 years in federal prison.

In addition, Steven G. Schulman, a former senior partner at the Milberg Weiss firm, agreed to plead guilty to a racketeering conspiracy charge, prosecutors said.

The seven-year investigation has led to indictments and guilty pleas by several former partners and lawyers at the firm previously known as Milberg Weiss Bershad & Schulman.

The firm itself has also been indicted in the case being tried in Los Angeles.

“The indictment outlines a decades-long kickback scheme that was deliberately concealed from courts across the nation that were overseeing significant class-action cases,” said George S. Cardona, acting U.S. attorney in Los Angeles.

“The scheme furthered personal greed at the expense of the integrity of the courts and the interests of absent class members,” he said.

Weiss' New York attorney, Benjamin Brafman, said in a prepared statement his client would be “fully exonerated.”

“Although this indictment is a bitter disappointment, Mr. Weiss intends to fight these charges with all of the energy and talent that has made him one of the most outstanding members of the Bar for more than 40 years,” Brafman said.

Schulman, 56, agreed in a plea deal Thursday to forfeit $1.85 million to the government and to pay a $250,000 fine, the U.S. attorney's office said.

A court appearance was scheduled next month. Schulman could not be immediately located for comment.

Schulman could have faced up to 20 years in prison if convicted, but the plea deal recommends the judge order a sentence of no more than 33 months.

Schulman also promised to cooperate with the government's ongoing investigation of the firm.

The law firm previously pleaded not guilty to fraud and conspiracy charges filed last year in the original indictment.

In a statement issued Thursday, the firm said it would not be deterred from its work by the latest developments.

“The firm's active partners, none of whom is alleged to have been involved in any wrongdoing, will maintain responsibility for the firm's management and litigation activities,” the statement said.

Prosecutors contend the firm secretly paid millions of dollars in kickbacks to get people to take part in more than 225 class-action and shareholder lawsuits, allowing its lawyers to be among the first to file litigation and secure the lucrative position as lead plaintiffs' counsel.

The firm targeted some of the nation's largest companies in litigation, including AT&T, Lucent, WorldCom, Sears, Roebuck, Microsoft, Prudential Insurance and Lincoln Savings & Loan.

With Weiss helping lead the way, the firm once dominated the industry in securities class-action lawsuits. The litigation involves shareholders who claim they suffered losses because executives misled them about a company's financial condition.

The firm netted $250 million in fees over the past 25 years on cases for which plaintiffs were paid, the new indictment contends.

“The indictment states three named plaintiffs received at least $11.3 million in illegal kickbacks, and several other paid plaintiffs received hundreds of thousands of dollars,” the U.S. attorney's statement said.

It contends that people were secretly paid to become plaintiffs or get their friends and relatives to do so in lawsuits filed by the law firm.

The kickbacks were made in cash or paid by the Milberg Weiss firm through intermediary law firms and attorneys, prosecutors claim.

People involved are also accused of lying in depositions and in court documents to conceal the scheme.

The new indictment also details charges against plaintiff Seymour M. Lazar and attorney Paul T. Selzer.

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

Selzer “is alleged to have been one of the intermediary lawyers who laundered illegal kickback payments for the benefit of Lazar,” the prosecutors' statement said.

A call to Selzer's office seeking comment was not immediately returned. Neither was a message left after business hours with Thomas Bienert, an attorney who authorities said represents Lazar.

Several other key players at Milberg Weiss already have cut deals with federal prosecutors.

On Tuesday, prosecutors said William S. Lerach, a former top attorney with Milberg Weiss, agreed to plead guilty to conspiring to obstruct justice and making false statements under oath.

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

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

In a statement, Lerach said he “regrettably crossed a line and pushed too far.”

In July, former Milberg Weiss partner David Bershad pleaded guilty to conspiracy and agreed to cooperate with the government. He will be sentenced early next year.