Guilty Plea Puts Pressure On Firm

Ex-Milberg Weiss Official to Pay Fine, Help Government

A former official at the Milberg Weiss law firm pleaded guilty yesterday to a conspiracy charge, significantly advancing a criminal investigation against one of the nation's largest class-action firms and its top partners.

David J. Bershad, who oversaw financial operations at the New York-based firm, agreed to forfeit $7.75 million, pay a $250,000 fine and tell the government about how he and others allegedly obstructed justice and misled judges about secret payments to plaintiffs in scores of securities lawsuits.

His cooperation intensifies the pressure on Milberg Weiss to reach its own deal with the U.S. Attorney's Office for the Central District of California before a scheduled court hearing Aug. 6. It also could foreshadow criminal charges against the firm's key partners, Melvyn I. Weiss and William S. Lerach, who have been under federal investigation for seven years.

Weiss and Lerach are referred to only as "Partner A" and "Partner B" in court papers filed yesterday in Los Angeles, according to lawyers involved in the probe. The documents allege that Milberg Weiss offered kickbacks to plaintiffs in more than 150 cases that brought the firm more than $200 million over the past two decades.

Sometimes the partners "pooled their personal cash" into a fund Bershad kept in his office, a system that Bershad tracked closely during the scheme's early years, court filings said. Later, the partners developed a system to award themselves bonuses to recover out-of-pocket payments they had made to plaintiffs, according to court papers.

The secret deals generally offered plaintiffs about 10 percent of the net attorneys' fees, allowing Milberg Weiss and its partners to "secure a reliable source of individuals who were ready, willing and able to serve as named plaintiffs in Class Actions" the firm wanted to file, according to a statement of facts presented to U.S. District Judge John F. Walter yesterday.

The agreements helped the firm and its partners become "lead counsel" in many cases, guaranteeing them more control over the cases and greater fees in the event of settlements or court victories, according to documents filed by Assistant U.S. Attorneys Richard E. Robinson, Robert J. McGahan and Douglas A. Axel.

Under federal sentencing guidelines, Bershad, 67, could spend two to three years in prison. But as a reward from the government for his help, Bershad could avoid prison time altogether, a powerful incentive for a man who faced more than a decade in prison when he was indicted last year. As early as today, frequent Milberg Weiss plaintiff Steven G. Cooperman is scheduled to plead guilty to related criminal charges in Los Angeles, according to a news release issued by U.S. Attorney George S. Cardona.

"David Bershad is committed to making amends for what he has done," said Robert D. Luskin, a defense lawyer for Bershad in Washington. "His efforts to right these wrongs, together with his many good works throughout his career, should be remembered along with the offense he admitted today. "

William Taylor, a District-based defense lawyer for Milberg, and a small group of Milberg partners have been negotiating with prosecutors for weeks to resolve charges against the 76-lawyer firm. Among the sensitive items under discussion is a multimillion-dollar cash payment. Reaching an agreement is all the more important after Bershad's guilty plea because, under a legal principle known as vicarious liability, the law firm can be considered guilty if even a single high-level official, acting in the course of his employment, admits to committing a crime.

In a statement, Milberg said it remained "confident that [Bershad's] actions will have no effect on the firm's commitment to its clients and its ongoing work to protect public shareholders and consumers."

Last month, the Los Angeles Daily Journal reported that Weiss and Lerach had rejected government overtures to plead guilty and spend as many as four years in prison.

Benjamin Brafman, a lawyer for Weiss, did not return calls. Nor did a lawyer for Lerach, who two sources said has been engaged in discussions with prosecutors over the past several weeks.

Lerach is a prolific Democratic Party donor and a vocal advocate for expanding investors' rights to sue corporate executives at Enron and other fraud-ridden companies. He announced this summer that he was considering retirement to spare his San Diego law firm, Lerach Coughlin, from distractions related to the investigation.

Dan Newman, a spokesman for Lerach Coughlin, said yesterday that the firm would "continue to do a better job than any other firm in the country at holding powerful corporations accountable."