A former senior partner of a pioneering law firm that won billions for clients in securities fraud cases pleaded guilty Monday to conspiracy, giving prosecutors ammunition to go after the lawyer widely regarded as the master of shareholder class actions.
The plea agreement by Milberg Weiss ex-partner David Bershad in what the government has described as a kickback scheme ratchets up the pressure on William S. Lerach, another former partner of the firm, as well as on firm co-founder Melvyn I. Weiss.
The New York-based firm made its name launching shareholder suits against major corporations and recovered more than $45 billion for investors in such cases.
Lerach left Milberg in 2004 to open a San Diego-based practice that quickly became one of the top securities class-action firms, recovering billions on behalf of shareholders at Enron Corp., WorldCom Inc., AT&T Corp., Apple Computer Inc. and many other companies. In the process, he won the admiration of shareholder groups and the enmity of corporate executives. He also became a generous Democratic Party contributor.
Bershad was indicted last year along with former Milberg partner Steven Schulman and the law firm itself. The 20-count indictment didn't name Weiss or Lerach, but they are widely believed to be the "Partner A" and "Partner B" referred to throughout the document.
The two reportedly have been in talks with prosecutors and rejected plea agreements that would have required them to serve as many as four years in prison.
Bershad's plea in Los Angeles federal court "makes it practically inevitable" that the prosecutors will indict Lerach and Weiss, said John C. Coffee, a Columbia Law School professor.
"This is playing out with the slow inevitability of a Greek tragedy," Coffee said.
Milberg's enormous success was attributable in part to the fact that the firm often was the first to file a lawsuit against a company and thus became the lead lawyers in a class action against it. Prosecutors have alleged that Milberg won the race to the courthouse and a larger share of legal fees because it kept a stable of plaintiffs on standby to whom it paid kickbacks, often through intermediaries.
