A federal grand jury returned an indictment alleging fraud, corruption, and kickbacks at one of the most prominent legal firms in the class-action lawsuit industry. Milberg Weiss also has two of its partners under personal indictment for a criminal racketeering conspiracy, and the feds want over $200 million in restitution:

The future of one of the country's leading class-action law firms, Milberg Weiss, is in grave doubt after a federal grand jury returned a criminal indictment yesterday accusing the firm of engaging in a secret, 25-year-long conspiracy to kick back attorneys fees to investors who served as named plaintiffs in more than 150 lawsuits brought against publicly-traded American companies.

Two top Milberg Weiss Bershad & Schlman LLP partners, David Bershad and Steven Schulman, were charged personally with criminal racketeering conspiracy. In addition, prosecutors are demanding that the firm forfeit $216.1 million, the sum Milberg Weiss earned in cases allegedly tainted by illegal kickbacks. ...

Ms. Yang said the secret payments to plaintiffs in Milberg Weiss securities cases totaled at least $11.3 million. "Because of the secret kickback arrangement, Milberg Weiss had a stable of individuals ready and willing to serve as paid plaintiffs," she said. The prosecutor said the scheme gave the firm an unfair advantage over its competitors, at least until 1995, when a change in the law reduced the importance of being among the first to file a specific case.

CQ first posted about this case eleven months ago, when word first started to appear that Milberg Weiss had attracted the attention of federal prosecutors. At the time, I noted that the murkiness of the charges but also that the big money found in the abuse of the class-action process invites corruption and scandal. The emergence of trial attorneys as a political force equal to that of labor underscores the fortunes that these legal mechanisms have created for the lawyers, fortunes transferred from capital enterprises in enormous chunks of cash.

And it does have its benefits. I also noted two months later that Barbara Boxer received some of the profits from Milberg Weiss' activities, something first noted by the Independent Sources law blog. Boxer took over $74,000 in her two campaigns for the US Senate from the same firm now under RICO indictments. In the last three election cycles (including 2006), Milberg Weiss and its associates have donated $728,000 in 562 installments, almost all going to Democrats or Democratic PACs. Topping the list of the most generous donors at Milberg Weiss are its three top partners -- the two currently under indictment and Melvyn Weiss himself. Before that, as the Sun notes, it gave over a million dollars to the Democrats until they could no longer do so under the BCRA.

The explosion of Milberg Weiss may portend darker days for the ambulance chasers. Milberg Weiss conducted its lawsuits by knowingly filing fraudulent claims using plaintiffs that they kept on retainer in order to get suits filed quickly enough to occupy the primary position in the case. It's unlikely that other firms kept their hands entirely clean when they had to compete with Milberg Weiss for the big-money business of class-action suits. When prosecutors find the first and most egregious violators, the others usually follow as defendants attempt to trade information for leniency.

Perhaps this might convince people that we need to consider tort reform in order to take the lure of the monster paydays out of the legal process. The tort system exists to ensure that the wronged are made whole to the best extent possible, not to make attorneys richer than rock stars. Too often we see plaintiffs in these suits wind up with next to nothing even when the verdict goes their way, their reimbursement spread out over many people, while the attorneys take home millions of dollars paid by defendants with deep pockets. It's time to return our system of justice to the pursuit of justice, and not a slot machine exploited by shady lawyers.

Trackback Pings

TrackBack URL for this entry is

Listed below are links to weblogs that reference The Hammer Drops On Big Legal:

» Lawyers Facing Indictment Were Bigger Political Contributors Than Lay, Skilling, Scrushy, Rigas from Independent Sources
Securities class action firm Milberg Weiss is in the news again (as in, the law firm that might be indicted for conspiracy — that Milberg Weiss). And this Milberg Weiss: Fraud-Tainted Law Firm Is #1 Source of Law Biz Contributions To Barbara B... [Read More]

Tracked on May 19, 2006 9:55 AM

» Why we distrust lawyers from The Florida Masochist
I'm no fan out of class action suits, the little I've seen of them has brought little if any awards to the defendants but large windfalls to the attorneys. Sooner or later it had to come to where some would abuse the system. With millions to be gaine... [Read More]

Tracked on May 19, 2006 10:10 AM

» Lots of hot news today from Gulf Coast Pundit
Captain’s Quarters hot today with dynamite news. The Hammer Drops On Big Legal A federal grand jury returned an indictment alleging fraud, corruption, and kickbacks at one of the most prominent legal firms in the class-action lawsuit industry. M... [Read More]

Tracked on May 19, 2006 11:56 AM

» Good News on the Legal Front from TacJammer
Almost three years ago, I suggested that the Racketeering, Influence and Corrupt Organizations (RICO) statutes be used against the Association of Trial Lawyers of America, who line their pockets at our expense, for very little actual return. Today at C... [Read More]

Tracked on May 19, 2006 1:18 PM

» Good News on the Legal Front from TacJammer
Almost three years ago, I suggested that the Racketeering, Influence and Corrupt Organizations (RICO) statutes be used against the Association of Trial Lawyers of America [Read More]

Tracked on May 19, 2006 1:20 PM

» The Milberg Weiss Indictment from ProfessorBainbridge.com
Famed plaintiffs' law firm Milberg Weiss and two senior partners, David J. Bershad and Steven G. Schulman, have been indicted for conspiracy to obstruct justice, and commit perjury, bribery and fraud. They are accused of a scheme in which several [Read More]

Tracked on May 19, 2006 2:56 PM

» STOP BIG LAW! from Word Around the Net
The law firm Milberg Weiss has been one of the most prominent and successful legal firms in history, a firm that has been involved in many giant class-action lawsuits from Amazon.com to Vermont Teddy Bear and all points in between. Milberg Weiss sued o... [Read More]

Tracked on May 19, 2006 3:22 PM

» Milberg Weiss: At Long Last, Two Partners, and the Firm Itself, Are Indicted from BizzyBlog.com
It’s a story I’ve been following for almost a year. Thursday, the government came down hard in what I believe will be seen, if the prosecution is victorious, as a very significant legal case: Milberg Weiss, two partners charged with fra... [Read More]

Tracked on May 19, 2006 9:02 PM

» It's About Time! Milberg Weiss Indicted from American Phoenix
According to a press release from the U.S. Attorney, Central District of Calfornia:The New York-based law firm of Milberg Weiss Bershad Schulman and two of its name partners were indicted today by a federal grand jury for allegedly participating in [Read More]

Tracked on May 20, 2006 1:19 AM

» It's About Time! Milberg Weiss Indicted from American Phoenix
According to a press release from the U.S. Attorney, Central District of Calfornia:The New York-based law firm of Milberg Weiss Bershad Schulman and two of its name partners were indicted today by a federal grand jury for allegedly participating in [Read More]

Tracked on May 20, 2006 1:20 AM

» It's About Time! Milberg Weiss Indicted from American Phoenix
According to a press release from the U.S. Attorney, Central District of Calfornia:The New York-based law firm of Milberg Weiss Bershad Schulman and two of its name partners were indicted today by a federal grand jury for allegedly participating in [Read More]

Tracked on May 20, 2006 1:21 AM