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Milberg Enters Not Guilty Plea

Prosecutors say more indictments could come in the case alleging that the law firm paid illegal kickbacks to plaintiffs.

July 18, 2006|Molly Selvin | Times Staff Writer

Milberg Weiss Bershad & Schulman, the class-action lawsuit firm indicted along with two former partners for allegedly paying illegal kickbacks to plaintiffs, pleaded not guilty Monday as prosecutors raised the possibility of more indictments in the case.

Also Monday, a federal judge in New York named the firm as lead counsel in a class-action lawsuit against a bankrupt oil company. The appointment -- one of several since its indictment -- is another sign that the New York-based firm might survive its current legal troubles, legal experts said.

The government claims that Milberg, along with partners David Bershad and Steven Schulman, paid at least $11.3 million in illegal fees over a 25-year period to clients who agreed to act as plaintiffs. The firm then concealed the payments by paying them in cash or through intermediary law firms, the indictment said.

Bershad and Schulman also pleaded not guilty Monday in Los Angeles federal court.

Prosecutors said the "paid plaintiffs" were recruited to buy stocks in anticipation that they would fall in value, positioning themselves and Milberg Weiss to take the lead in securities-fraud cases and collect extra fees.

In a statement released after Monday's arraignment, the firm -- which claims to have helped recover over $45 billion for swindled investors -- called the indictment "unprecedented and unfair" and vowed to "vigorously defend itself."

At a status conference Monday afternoon before U.S. District Judge John F. Walter, Assistant U.S. Atty. Douglas Axel said there was "a significant possibility" of more indictments. Some observers say William S. Lerach, a former Milberg partner who departed in 2004 to form his own firm, also is a government target.

Laurie Levenson, a former federal prosecutor who teaches at Loyola Law School, called Axel's statement "an indication that people are continuing to cooperate" with the government.

Two other individuals indicted as part of the Milberg probe had earlier agreed to cooperate. Century City attorney Richard R. Purtich and retired real estate investor Howard Vogel await sentencing. Purtich faces charges of tax evasion and Vogel of providing false information in federal court.

Palm Springs attorney Seymour M. Lazar also was charged last year with receiving $2.4 million in illegal kickbacks in exchange for serving or recruiting his family members to serve as lead plaintiff in more than 50 class actions, most of them in the 1980s and 1990s. Prosecutors also named another lawyer, Paul T. Selzer as a defendant and co-conspirator, accusing him of funneling the funds to Lazar.

Both men have pleaded not guilty.

The firm's indictment has prompted the departure of several partners as well as the loss of potential clients.

But Monday's decision by U.S. District Judge John Keenan to appoint Milberg as lead law firm in a securities class action against WRT Energy Corp., an oil and gas exploration company, "should give confidence to clients that the firm can continue to render the same service even as it's fighting the charges in Los Angeles," said Stephen Gillers of New York University Law School.

Walter said he expected to set a late-2007 trial date.

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