CNNMoney.com has published a recent article from Fortune Magazine about the fall of Milberg Weiss, dubbed the meanest law firm in America.
It’s a long article, but here are the high points.
The law firm of Milberg Weiss, along with Melvin Weiss and Bill Lerach, singlehandedly transformed securities class action litigation. The firm held itself out as helping the little people, and has claimed that they’ve collected $45 billion for cheated investors.
But Weiss and Lerach got rich at this work. In one of the better years, they each made more than $16 million. They split their operations in 2004, but they are back together again via federal prosecutors. In addition to Weiss and Lerach, prosecutors have also charged David Bersahd and Steven Schulman. Other people are expected to still be indicted.
Milberg Weiss has been indicted for alleged kickbacks totaling $11.4 million for 180 cases. The federal government says that the firm even continued paying the kickbacks after they knew they were under investigation.
An eye surgeon named Dr. Steven Cooperman first became known to authorities via a 1992 insurance fraud scam, but prior to that had been the “lead plaintiff” in dozens of Milberg Weiss securities class-action suits. Cooperman, as lead plaintiff, claimed to be a typical investor who was innocently defrauded. In 1993, he admitted to being a plaintiff in 38 securities class-action suits. Some described Cooperman as a “professional plaintiff.”
After being convicted in the insurance fraud case, and facing a possible sentence of 10 years prison, Cooperman offered to give up information about the alleged crimes of Milberg Weiss.
The class action lawsuit business was lucrative for Milberg Weiss, who typically took 30% of any settlement. Nine out of ten cases they worked on settled. It was cheaper for defendants to settle. Investors recovered only about 15 cents for each dollar they lost, but the law firm pocketed millions on these cases.
The secret to making the big money on the class action cases was being the law firm in charge. As lead counsel, Milberg Weiss took the biggest fees and controlled the cases. The key was having the lead plaintiff in your law office. Cooperman said that Milberg paid him about 10% of its fees in order to serve as lead plaintiff in the cases. This is illegal, as lead plaintiffs are to get only their share of any settlement and no special compensation.
Cooperman offered up evidence in order for a reduced sentencing recommendation in his own criminal case. He told the federal prosecutors that he and friends and relatives had served as lead plaintiffs in about 70 cases, and had been paid $6.5 million to do so. He also alleged that Lerach told him to by stock in different companies in order to position themselves as plaintiffs in future class action suits. Cooperman says he received his money from Milberg Weiss via third parties, in order to get around the laws.
The plot thickens. More players are exposed, the federal government starts investigating, and the law firm refuses to cooperate. Read the whole story at CNNMoney.com.