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Melvyn Weiss gets 30-month sentence

Lawyer in kickback scheme also must forfeit millions in fees.

June 03, 2008|Tiffany Hsu and Thomas S. Mulligan | Times Staff Writers

Melvyn Weiss, once one of the country's most prominent and wealthy lawyers, will begin serving a 30-month prison term late this summer.

A federal judge in Los Angeles sentenced Weiss on Monday for his role in a kickback scheme that prosecutors said generated millions of dollars in fees for the New York law firm he co-founded.

U.S. District Judge John F. Walter also ordered Weiss to pay $250,000 in fines and forfeit $9.75 million in fees he earned while with the firm.

Reading from a prepared statement, Weiss apologized for his "wrongful conduct." The 72-year-old, who was indicted last September and agreed to a plea deal in March, was disbarred this year.

"I promise you my contrition is profound and genuine," he said. "My punishment has already been great."

Prosecutors said Weiss' firm made roughly $250 million over more than two decades by filing class-action lawsuits on behalf of plaintiffs who were paid a total of $11.3 million for their involvement. Companies targeted included AT&T, Xerox Corp. and United Airlines.

Indicted on charges of conspiracy, racketeering, obstruction of justice and making false statements, Weiss would have faced a maximum of 40 years in prison had he been convicted on all the counts. He pleaded guilty to a single racketeering charge as part of a deal that called for a sentence of 18 to 33 months.

Weiss' attorney, Benjamin Brafman, asked the judge to "temper justice with mercy" and consider Weiss' "breathtaking" 50-year record of pro bono and charity work. "He's a good man, and a good man can do a bad thing," Brafman said.

A 125-page memorandum written by Weiss' legal team and 275 letters from supporters detailed Weiss' philanthropic history, including $6.25 billion in settlements he helped win for Holocaust victims. Judge Walter and Assistant U.S. Atty. Douglas Axel said the support for Weiss appeared to be unprecedented.

Along with former partner William S. Lerach of San Diego -- who also pleaded guilty in the case and is serving a two-year term in the Federal Correctional Institution in Lompoc, Calif. -- Weiss helped pioneer the development of securities class-action litigation.

Axel sought in court to differentiate the two men. While Lerach distanced himself from the firm after the federal investigation began in 2001, Axel said, Weiss demonstrated "criminal arrogance" by continuing to negotiate kickbacks and hiding evidence.

"During that seven years, [Weiss] had opportunity after opportunity to come forward and take responsibility, and instead he hid behind the firm," Axel told the judge.

So successful was the firm originally known as Milberg Weiss Bershad Hynes & Lerach that it was the primary target of a 1995 law known as the Private Securities Litigation Reform Act. "It might as well have been called the Milberg Weiss bill," said University of Michigan law professor Adam C. Pritchard.

The law was meant to discourage frivolous lawsuits and an unseemly rush to the courthouse by giving judges greater authority over the designation of "lead plaintiff." Until then, the firm representing the first person to file suit usually controlled the litigation and garnered the biggest share of fees.

After 1995, savvy institutional investors such as pension funds tended to get greater consideration as lead plaintiffs. Milberg Weiss adjusted so well that "the upshot was that they actually increased their market share," said Stephen Bainbridge, a UCLA law professor.

"In the late 1990s, they had an 80% market share in this field," he said.

Lerach left Milberg Weiss in 2004 to found a firm in San Diego. It represented the University of California pension system, which was the lead plaintiff in a fraud lawsuit against Enron Corp., the Houston energy-trading firm that collapsed in 2001.

Two defendants remain in the case: Palm Springs real estate attorney Paul Selzer, accused of laundering the firm's kickbacks to a plaintiff, and the firm itself, which was renamed Milberg LLP after Weiss agreed to plead guilty. A trial is scheduled for August.

The Wall Street Journal reported Monday that the firm was negotiating to settle the charges by admitting misconduct and paying a $75-million fine, citing sources close to the talks. A Milberg spokeswoman declined to comment.

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tiffany.hsu@latimes.com

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thomas.mulligan@latimes .com

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