The landmark fraud and conspiracy case against law firm Milberg Weiss Bershad & Schulman has run into unexpected delays because five federal judges in Los Angeles who had been assigned to it recused themselves from hearing the matter.
The recusals have caused arraignments to be postponed for two defendants who had agreed to plead guilty.
The withdrawals by the judges, who cited previous involvements with Milberg, its securities class-action cases or companies named in them, highlight the New York law firm's large footprint on the legal system.
It has also left legal experts wondering whether what should have been a plum judicial assignment has instead turned into a hot potato.
"This is a unique situation," said Stephen Gillers, a New York University law professor. "I've never heard of five judges taking themselves out."
Prosecutors brought a 20-count indictment against the firm last month, charging Milberg and two partners with paying at least $11.3 million in illegal kickbacks to clients over a 25-year period.
Milberg has denied any wrongdoing, and co-founder Melvyn I. Weiss predicted that "we will be vindicated."
The firm, which pioneered securities class-action suits in the 1980s, claims to have recovered more than $45 billion on behalf of defrauded investors, collecting billions in legal fees in the process.
Milberg's targets have been a who's who of corporate giants, including Raytheon Co., Enron Corp., Rite Aid Corp. and Prudential Insurance Co.
The government alleged that Milberg lawyers recruited "paid plaintiffs" to buy stocks in anticipation of a drop in value, positioning themselves and their firm to take the lead in securities class actions, which entitled them to extra fees. The firm concealed the kickbacks by paying plaintiffs in cash or through intermediary law firms, according to the indictment.
Two individuals have agreed to plead guilty as part of the wide-ranging investigation. Retired real estate investor Howard J. Vogel was scheduled to be arraigned Monday on a criminal charge that he took more than $2.4 million in kickbacks from the law firm. That hearing has been postponed until June 26, said Thom Mrozek, spokesman for the U.S. attorney's office in Los Angeles.
Arraignment and sentencing have also been postponed for Richard Purtich, a Century City lawyer who last month agreed to plead guilty to a felony tax charge related to allegations that he funneled money to a Milberg client.
