Federal prosecutors here have charged a retired Palm Springs, Calif., lawyer with taking kickbacks from a prominent New York law firm in exchange for serving as plaintiff in dozens of class-action and shareholder lawsuits that earned the firm $44 million over 20 years.
The indictment against 78-year-old Seymour M. Lazar, unsealed Thursday, stems from a years-long investigation by the U.S. attorney's office into the practices of Milberg Weiss Bershad Hynes & Lerach, which before splitting into two firms last year had led the largest of the investor suits against bankrupt energy trader Enron Corp.
Lazar's attorney condemned the indictment Friday as an attempt to get his ailing client to turn on the law firm. No employees of Milberg Weiss have been charged, and the firm is cited in the 70-page indictment only as an unnamed "New York Law Firm." But a spokeswoman for Milberg Weiss acknowledged that it is the law firm involved.
Reports of the grand jury investigation of Milberg Weiss, some of whose partners have close ties to the Democratic Party, were aired in the news media in early 2002 just as one of its top lawyers, William Lerach, was taking the lead in the Enron litigation.
The charges against Lazar do not involve the Enron suits, however, but suits against Standard Oil, United Airlines, Denny's and other corporations in which Lazar or his relatives acted as plaintiffs.
According to the indictment, Lazar received about $2.4 million from the firm for his involvement in the suits. He was charged with seven counts of mail fraud; six counts of money laundering; one count of conspiring to obstruct justice, commit mail and wire fraud and make illegal payments to a witness; one count of conspiring to commit money laundering, one count of obstructing the grand jury investigation; and one count of criminal forfeiture.
Another Palm Springs lawyer, Paul T. Selzer, 64, was also named as a defendant for allegedly helping launder the illegal kickback payments for Lazar. Selzer was traveling Friday, according to an employee in his office, and did not return a message for comment.
Lazar surrendered to authorities Thursday, though a judge refused to have him detained, his attorney Tom Bienert said.
Bienert called Lazar "a champion for consumer rights" whose involvement in a variety of suits had helped to stop discrimination by restaurants and overcharging by car companies and financial institutions, among other unfair corporate practices. Any of Lazar's actions in these cases, Bienert said, had been approved by reputable lawyers.
And Bienert characterized any payments to Lazar as routine fee-splitting or referral fees, which he described as "a time-honored practice with few, if any, limitations."
"The manner in which the government has proceeded here, including charging only Mr. Lazar and seeking the extraordinary measure of detention, suggests that it's an effort to get Mr. Lazar to say negative things" about the law firm, Bienert said.
The U.S. attorney's office, though, declined to comment on whether its investigation into Milberg Weiss is still continuing.
In a statement from Milberg Weiss, the firm said it was "saddened" by the indictment of Lazar. But it also blasted the government for implying that the firm was involved in wrongdoing "in circumstances where the firm cannot defend itself."
"We are outraged that these allegations have been made against the firm and reject them as baseless," the statement said.
Milberg Weiss made its name as the nation's leading law firm representing investors in securities fraud cases, winning multimillion settlements against such companies as Metropolitan Life, Philip Morris, Adelphia and Lucent Technologies.
A federal grand jury began investigating the firm more than three years ago, according to reports at the time in the Los Angeles Times, focusing in particular on whether the firm had made improper payments to its plaintiffs. Lerach was a major contributor to former president Bill Clinton, leading to some speculation that the U.S. attorney's investigation and the leaks to the media about it were politically motivated.
In May 2004, the firm officially split in two. The New York firm is now known as Milberg Weiss Bershad & Schulman, while Lerach became the head of San Diego-based Lerach, Coughlin Stoia Geller Rudman & Robbins, which has kept the Enron cases.