Federal prosecutors are expected to announce an indictment of influential class-action lawyer Melvyn Weiss on Thursday as part of a long-running case charging his law firm paid plaintiffs in its multibillion-dollar lawsuits against corporations, the law firm said.
Prosecutors reached a plea deal earlier this week with Weiss's former partner, William Lerach, who along with Weiss helped shape the class-action legal industry and its pursuit of corporations for alleged wrongdoing.
Weiss, 72, who made millions suing U.S. corporations on behalf of shareholders, is no longer working in the firm's management but concentrating on defending himself, Milberg Weiss said in a statement posted on its Web site.
The firm's other partners, none of whom is alleged to have been involved in any wrongdoing, will be responsible for managing the firm, Milberg Weiss said. The New York-based firm itself was indicted last year and pleaded not guilty.
"Milberg Weiss understands that a second superseding indictment will be issued tomorrow that will include new charges against the firm and also Melvyn Weiss," the firm's statement said.
Milberg Weiss said it remained proud of its and Weiss's accomplishments and did not anticipate the indictment would interrupt its work. Weiss will be available to counsel lawyers and clients, the firm added.
Weiss's lawyer, Benjamin Brafman, was not immediately available for comment, although on Monday he said that if Weiss was indicted he would fight the charges.
"There are a lot of corporate executives who are smiling quietly at the news," said Lynn Stout, a securities and corporate law professor at the University of California at Los Angeles.
"At the same time, the evidence suggests this problem is a pretty confined problem that is arguably confined to this firm," she added.
Lerach, who once headed the West Coast operations for Milberg and left to form a San Diego-based firm in 2004, agreed to plead guilty to criminal conspiracy and go to prison. Last month, he retired from the San Diego firm, which dropped his name and is now called Coughlin Stoia Geller Rudman & Robbins.
Another Potential Plea Deal
On its Web site, the Wall Street Journal said another former partner at Milberg Weiss, Steven Schulman, is on the verge of reaching a plea deal with the government that will likely be clinched this week.
The report cited two people familiar with the situation, who said Schulman's deal may include jail time. Schulman, who was indicted along with the law firm, has pleaded not guilty to participating in a scheme in which several individuals were secretly paid to serve as plaintiffs in more than 150 lawsuits.
Another former partner, David Bershad, has pleaded guilty and is cooperating with prosecutors. A spokesman for the U.S. Attorney's office in Los Angeles declined to comment on media reports regarding Schulman and the statement issued by Milberg Weiss. Weiss is best known for landing more than $1 billion in settlements for investors hurt by the Drexel Burnham Lambert junk bond scandal in the 1980s and an estimated $10 billion in damages from insurance companies accused of misleading sales methods in the late 1990s.
Coughlin Stoia, meanwhile, was the top U.S. class-action practice in 2006 in terms of value of settlements, collecting more than $7.3 billion, mostly from Enron-related pacts, according to Institutional Shareholder Services.