Class action factory - often tied to heavily shorted and "bashed" stocks - in trouble over kickbacks and fee running.
Case Turns Toward Law Firm
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By JULIE CRESWELL
Published: April 29, 2006
A six-year investigation into whether lawyers at the influential securities class-action law firm of Milberg Weiss Bershad & Schulman used illegal tactics took a significant turn yesterday after a retired real estate mortgage broker agreed to plead guilty and cooperate in the investigation.
The broker, Howard J. Vogel of Englewood, N.J., and Florida, received nearly $2.5 million in kickbacks from lawyers inside Milberg Weiss for agreeing to be, or having a family member agree to be, the lead plaintiff in 40 cases, including lawsuits against Oxford Health Plans and Barnesandnoble.com, prosecutors contend.
According to papers filed yesterday in Federal District Court in Los Angeles, Mr. Vogel has agreed to plead guilty to a criminal charge that he provided false information about his role in dozens of securities lawsuits filed by a "New York law firm" from 1991 to as recently as May 2005.
A spokeswoman for Milberg Weiss confirmed that it was the firm referred to in the plea agreement.
Mr. Vogel's testimony could prove crucial in building a case against partners inside Milberg Weiss as well as the firm itself.
Federal prosecutors in Los Angeles have spent more than six years investigating practices inside the high-profile firm, which was Milberg Weiss Bershad Hynes & Lerach before a 2004 split. No charges have yet been brought against any lawyers or the firm.
Part of the challenge in building the case has been that witnesses have either been uncooperative or are viewed as having potential credibility problems, lawyers involved in the case said.
In February, two of the high-profile targets of the investigation — Melvyn I. Weiss and his former partner, William S. Lerach, who now heads Lerach Coughlin Stoia Geller Rudman & Robbins of San Diego — were told that no charges would be filed against them at this time.
Lawyers involved in the case, however, have said in recent weeks that two other partners, David J. Bershad and Steven G. Schulman, remain targets and could be indicted. Additionally, the firm itself could be indicted.
No partners are mentioned by name in the documents filed with Mr. Vogel's plea agreement. Calls to lawyers for Mr. Bershad and Mr. Schulman were not returned.
"The firm has not yet had an opportunity to review the filings concerning Howard J. Vogel," a spokeswoman for Milberg Weiss said in a statement. "We continue to cooperate fully with the investigation."
A call to Mr. Vogel's lawyer, Mark Rochon, was not returned.
Mr. Vogel first approached Milberg Weiss to explore filing a class-action lawsuit against the Valero Energy Corporation in 1991, according to the court filings. In exchange for bringing the case to the law firm and serving as the lead plaintiff, Mr. Vogel said he expected to share in the legal fees that would be paid.
According to the filings, Milberg Weiss agreed to pay Mr. Vogel 14 percent of any fees it received in the class-action lawsuit against Valero. But two lawyers who were not named in the documents told Mr. Vogel that since he was a plaintiff in the case, a possible conflict of interest would arise from any payment made directly to him by Milberg Weiss.
Therefore, Mr. Vogel needed to find a lawyer who would accept the money on his behalf, which the two lawyers said was an "established practice" of the firm, according to the court documents. Mr. Vogel then enlisted the assistance of a lawyer in Denver (identified in the court filings as "Vogel intermediary A") to receive payments from Milberg Weiss.
In a 1994 securities fraud class-action lawsuit against the Mercer Corporation, in which Mr. Vogel's wife was named as a plaintiff, Mr. Vogel met with a Milberg Weiss partner, identified in the documents as "Partner E," who handed him cash in an envelope, according to the documents. Mr. Vogel's share of the legal fees obtained in the Mercer case was less than his typical 14 percent, "Partner E" said, according to the documents, because he "would not have to report the cash on his tax returns."
When "Partner E" left the law firm in 1999, Mr. Vogel began working primarily with another partner identified in the court filings as "Partner D." This partner told Mr. Vogel that his share of lawyers' fees in future cases would be 12 percent. In all, prosecutors say that Mr. Vogel, his wife, or his stepson served as plaintiffs in about 40 lawsuits.
The investigation into the firm's practices began after an ophthalmologist, Dr. Steven G. Cooperman, was convicted on art fraud charges. A frequent plaintiff in shareholder lawsuits filed over the years by Milberg Weiss, Dr. Cooperman offered to provide evidence to prosecutors in hopes of receiving a reduced sentence.
Another shareholder plaintiff, Seymour M. Lazar, a lawyer and investor in Palm Springs, Calif., was indicted nearly a year ago on charges that he took $2.4 million in kickbacks from a law firm that Milberg Weiss later acknowledged was it. Mr. Lazar has indicated that he intends to fight the charges. |
