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Law Firm Pays Big In Kickbacks Case

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The Associated Press

Published: June 17, 2008

LOS ANGELES - The Milberg law firm said Monday that it will pay $75 million to settle a federal kickback case involving class-action lawsuits against some of the nation's biggest corporations.

The New York firm said in a statement that the deal called for the government to dismiss all the charges against it.

The U.S. attorney's office in Los Angeles, which is handling the case, declined immediate comment.

The firm was accused of making $250 million over two decades by filing legal actions on behalf of professional plaintiffs, who got $11.3 million in kickbacks.

The firm was charged with aiding and abetting mail fraud and money-laundering conspiracy.

A trial had been expected to start in August.

Then known as Milberg Weiss, the firm dominated the industry in securities class-action lawsuits, which involve shareholders who claim they suffered losses because executives misled them about a company's financial condition.

The deal was disclosed in a statement by Sanford Dumain, a member of the firm's executive committee.

"This settlement enables us to move forward with our continuing representation of investors and consumers in class actions and other important lawsuits, and allows us to capitalize on the tremendous talents of the lawyers at the firm," he said.

The firm will make payments to the government totaling $75 million over the next five years, Dumain's statement said.

Dumain said the firm risked having to pay forfeitures and penalties of hundreds of millions of dollars if the criminal case had gone forward.

"We wanted to avoid that enormous risk, which we faced solely because of the misconduct of certain of our partners who are no longer with the firm," he said.

As part of the settlement, the firm said it retained a compliance monitor to ensure there are no problems with future class-action lawsuits.

A seven-year investigation has resulted in guilty pleas by three former partners.

The scheme allowed lawyers at the firm to be among the first to file litigation and to secure the lucrative position as lead plaintiffs' counsel, according to court documents.

The lawsuits targeted companies such as AT&T, Lucent, WorldCom, Microsoft Corp. and Prudential Insurance.

The settlement announced Monday came two weeks after lawyer Melvyn Weiss, the firm's co-founder, was sentenced to 30 months in prison for helping orchestrate the kickback scheme.

U.S. District Judge John F. Walter also ordered Weiss, 72, to pay $9.7 million in forfeitures and $250,000 more in fines.

Weiss had pleaded guilty to a charge of racketeering conspiracy in April. The plea was part of an agreement with prosecutors.

Former partner William Lerach recently began serving a two-year prison sentence after he had pleaded guilty to one count of conspiracy to obstruct justice and making false statements.

Former partner Steven Schulman has pleaded guilty to a racketeering conspiracy charge, and David Bershad has pleaded guilty to conspiracy.

Both are scheduled to be sentenced later this year.

The other remaining defendant is lawyer Paul T. Selzer. His trial is expected to begin in August.

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