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Law firm defends fees paid to indicted man

June 28, 2005

By Gina Keating

LOS ANGELES (Reuters) – Charges against a wealthyCalifornia investor accused of taking kickbacks to fileshareholder lawsuits show that federal prosecutors really wantto go after securities law firm Milberg Weiss and itsprincipals, the investor’s lawyer said on Monday.

In a statement on Monday, the firm said that the fees ithad paid were part of a “common and accepted practice inclass-action cases.”

The firm, which dominated U.S. securities law in recentyears, said the payments it made had been disclosed in taxforms and that firm lawyers had testified before the U.S.Congress over such fees.

An indictment unsealed on Thursday in Los Angeles accusedretired lawyer Seymour Lazar of taking $2.4 million in illegalpayments for acting as a plaintiff or recruiting family membersto serve as plaintiffs in 50 securities cases for the firm over20 years.

The indictment against Lazar and his longtime attorney,Paul Selzer, accused “a New York law firm” of hiding thepayments to Lazar by “laundering” them through other law firms,including Selzer’s firm.

Milberg Weiss, which has acknowledged that it is the firmdescribed in the indictment, has challenged the charges as”baseless.”

“It is clear to me they are attempting to put pressure onMr. Lazar that goes beyond the charges,” said Lazar’s attorney,Thomas Bienert, adding that the case was “clearly about”Milberg Weiss. “It is kind of transparent that they want to goafter the main players at the firm.”

Although it is not illegal for the lead plaintiff in aclass action to receive bonuses, the indictment, which stemsfrom a three-year probe, says Lazar and the firm broke the lawby failing to disclose the arrangement to the judge and otherplaintiffs.

Lazar’s attorney denied his client had taken kickbacks, anddescribed the payments to the third-party firms as legalreferral fees.

Bienert said the government brought the charges tointimidate 78-year-old Lazar into testifying against MilbergWeiss by forcing him to appear in court in handcuffs and legirons, then trying to have him jailed as a flight risk.

Lazar was freed on $1.5 million bond. His trial on chargesof conspiracy, money laundering, obstruction of justice andmail fraud, is set for August, Bienert said.

The firm has won more than $30 billion for shareholders andclients — and billions in fees for itself — through prolificand aggressive litigation against major corporations, includingEnron, Halliburton Co. and Global Crossing.

Last year, Milberg Weiss split into two firms, with WilliamLerach heading the firm’s former West Coast operations and hisformer partner Melvyn Weiss taking over the New York offices.

John Keker, a criminal defense lawyer who representsLerach, said he did not expect his client to be indicted. Hewould not comment on whether Lerach had been told he was atarget of the investigation.

A spokesman for Milberg Weiss also had no comment onwhether the firm or Weiss had been notified that they aretargets of the investigation.

Ira Spiro, a plaintiffs securities lawyer and former memberof the California bar association’s ethics committee, said itwas unlikely courts would invalidate tainted cases if Lazar isconvicted or Milberg Weiss is indicted.

“It’s bad for the public in general because class actionare really important,” Spiro said. “There are lots of lawsbeing broken every day by big companies.”

Meanwhile, the prospect of charges against Milberg Weiss orthe ex-partners who once headed the firm, Lerach and Weiss,prompted the University of California system, a majorinstitutional client, to weigh its options.

Earlier this month, the UC system, lead plaintiff in anationwide class action against bankrupt Enron Corp. withLerach as lead counsel, announced that it had reached a $2billion settlement.

“We’ve communicated with members of the Lerach firm aboutthe matter,” said Trey Davis, director of special projects forthe 10-campus University of California system. “We continue tomonitor the circumstances.”




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