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June 25, 2005
Class-Action Fraud Alleged At Legal Firm

The rapid growth of class-action lawsuits has created a booming industry for the legal profession, one which promises big payouts for relatively little work as defendants tend get intimidated into settlements rather than go to court. Such lucrative opportunities eventually attracts those with lower ethical bars to cut corners and create shortcuts to greater amounts of money, and the feds believe they have found just that problem at one of the most prominent class-action legal firms in the country:

Federal prosecutors here have charged a retired Palm Springs, Calif., lawyer with taking kickbacks from a prominent New York law firm in exchange for serving as plaintiff in dozens of class-action and shareholder lawsuits that earned the firm $44 million over 20 years.

The indictment against 78-year-old Seymour M. Lazar, unsealed Thursday, stems from a years-long investigation by the U.S. attorney's office into the practices of Milberg Weiss Bershad Hynes & Lerach, which before splitting into two firms last year had led the largest of the investor suits against bankrupt energy trader Enron Corp. ...

Reports of the grand jury investigation of Milberg Weiss, some of whose partners have close ties to the Democratic Party, were aired in the news media in early 2002 just as one of its top lawyers, William Lerach, was taking the lead in the Enron litigation.

The charges against Lazar do not involve the Enron suits, however, but suits against Standard Oil, United Airlines, Denny's and other corporations in which Lazar or his relatives acted as plaintiffs.

The specifics of Lazar's involvement appear to be that he falsified information that made him or his family members a primary plaintiff in these well-known lawsuits that allowed the law firm to raise them to class-action status. Either that, or Lazar's family must be the most unlucky consumers in American legal history. They may also be the most lucky plaintiffs, at least in recent American legal practice.

Until all of the indictments are unsealed, the specifics will remain somewhat murky. What remains clear is that our class-action processes still exist as slot machines for legal firms, gambles that pay off more often than not and undermine the financial security of millions of investors whose retirements depend on stability in the marketplace. We need a system that protects consumers but quits providing such wildly lucrative incentives for shakedown rackets and fraud. Perhaps this three-year grand jury investigation will at least press Congress to continue working on tort reform to strike a better balance between consumers and shareholders.

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Posted by Ed Morrissey at June 25, 2005 7:41 AM

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» Lawyers, Lawyers....How the Times Change! from pekin prattles
Now, a major story on law firms utilizing "fake" witnesses in class action suits over the past 20 years! Abraham Lincoln spoke: "Discourage litigation. Persuade your neighbors to compromise whenever you can. [Read More]

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