A Law Firm Under Pressure

"Mel Weiss is a well-respected, highly regarded Democratic fundraiser. I would hope that this isn't motivated by politics," said Weiss's personal attorney, Benjamin Brafman. "Milberg Weiss is the preeminent class-action law firm in the country. Many of the defendants they have successfully sued are among the most powerful corporate giants in America. Is this payback time? I don't know."

But Rep. Barney Frank (D-Mass.), a prominent defender of class-action lawsuits, said he saw "no evidence" that the case was political. While he said he was "skeptical that [indicting the firm] is a good idea," he added, "the Justice Department does not seem to have followed an excessively political course."

Justice Department officials said they think seriously before charging a corporate entity. "We understand that a corporate indictment can have impacts for employees, shareholders and customers. We try to be sensitive to that," said Associate Deputy Attorney General Ronald Tenpas. "But you can't have a rule that you're never going to charge corporations. On occasion it's an institutional problem, and we're going to indict the institution."

Other legal analysts noted that the Justice Department took its time with this case and made several efforts to reach a deal with the law firm. The first cooperating witness began working with prosecutors in 1999, and the first subpoena went out to the law firm in 2002.

Since 2003, federal prosecutors considering corporate charges have followed guidelines known as the Thompson Memo that lay out factors including the nature of the alleged wrongdoing, the role and knowledge of management, any history of prior misbehavior, how much the company cooperated with the probe, and the remedial measures the company took.

Milberg Weiss faced trouble on several fronts. Both Bershad and Schulman sat on the firm's executive committee, and between them they owned more than 32 percent of the firm by 2005.

"It's not just lawyers in a big law firm. It's not your employees-run-amok problem," said Daniel Richman, a Fordham University law professor.

The firm also created issues for itself by refusing to agree to two key concessions the Justice Department had wrung out of other cooperating companies. The law firm would not agree to waive attorney-client privilege and tell the Justice Department about its employees' conversations with the lawyers defending the firm in this case. Milberg Weiss also refused to help the Justice Department build its case against Bershad and Schulman.

"We're not going to turn on our partners just because you ask us to," said Taylor, the firm's lawyer.

The firm's refusal to waive privilege drew cheers from lawyers across the political spectrum who have argued that the government should not be asking companies to give up their right to seek legal advice in private. "It's government overreaching and deeply troubling," said Larry J. Fox, a plaintiff's lawyer with Drinker Biddle & Reath LLP of Philadelphia. "That invades the lawyer-client privilege."

But outside lawyers pointed out that Milberg Weiss's stand made it seem as if the firm was asking for special treatment. "Look at all the other firms that have agreed to cooperate and have helped the government build their case against individuals," said Stanford University law professor Joseph Grundvest. "If the government is going to be operating on a level playing field, it almost has no choice but to indict them."