Mel Weiss and William Lerach, the nation's two best-known securities class-action lawyers, will probably escape criminal prosecution in a federal investigation into alleged payments to lawsuit plaintiffs, according to news reports.
But the law firm the two men started, Milberg Weiss Bershad & Schulman, could still face criminal indictment in the five-year-old investigation,
The Wall Street Journal
reported on Tuesday.
A report in
The New York Times
, meanwhile, said federal prosecutors are concentrating their probe on two lesser-known partners, David Bershad and Steven Schulman. The
, however, said "it appears increasingly unlikely'' the law firm itself will be indicted.
Weiss's lawyer was unavailable for comment. Lerach could not be reached for comment.
In 2004, Lerach left Milberg Weiss after a bitter dispute and formed his own firm, Lerach Coughlin Stoia Geller Rudman & Robbins. Many of the lawyers who joined Lerach had worked in the West Coast offices of Milberg Weiss.
For the past several months, the legal world and Wall Street have been abuzz with speculation that federal prosecutors in Los Angeles would move to indict Lerach and Weiss. Last summer, a federal grand jury indicted Seymour Lazar, charging the former lawyer with taking $2.4 million in kickbacks to serve as a lead plaintiff in 50 class actions filed by Milberg Weiss.
But the investigation appeared to lose momentum when Lazar vowed to fight the charges rather than cut a deal with prosecutors. The authorities had hoped Lazar would offer evidence to implicate Weiss and Lerach.
The criminal investigation, however, has thrown a spotlight on some of the sordid tactics securities lawyers employ to find individuals and companies that will serve as plaintiffs in class-action lawsuits.
Financial connections between lawyers and clients in class-action litigation are frowned upon and can violate a federal law designed to preserve the autonomy of plaintiffs in such suits, legal experts say. According to the legal theory, a lawyer should not be beholden to any single plaintiff when he is negotiating on behalf of a larger group.