Melvyn Weiss, the long-reigning king of multibillion-dollar U.S. class action litigation, has agreed to plead guilty to a federal racketeering charge in a case accusing his firm of paying secret kickbacks to plaintiffs, his lawyer said Thursday.
The Bronx-born Weiss, 72, pioneered high-stakes shareholder litigation in U.S. courts and is best known for landing more than $1 billion in settlements for investors hurt by the Drexel Burnham Lambert junk bond scandal in the 1980s and an estimated $10 billion in damages from insurance companies accused of misleading sales methods in the late 1990s.
Under a plea deal, Weiss could receive a prison sentence ranging from 18 to 33 months and has agreed to pay $10 million in fines and forfeiture, his lawyer, Benjamin Brafman, said in a statement.
Milberg Weiss, the New York law firm he co-founded and turned into the top U.S. shareholder firm, dropped his name Thursday after the plea deal was announced.
Prosecutors said they would recommend that Weiss serve 33 months in prison.
The deal, filed Thursday in federal court in Los Angeles, proposes a sentence and fines that are more onerous than for the other six other Milberg Weiss defendants who have pleaded guilty. It must to be approved by U.S. District Judge John Walter.
“I deeply regret my conduct and apologize to all those who have been affected, including all of the wonderful and extremely talented lawyers and other employees of the firm, none of whom had any involvement in any wrongdoing,” Weiss said in a statement.
‘A SCHEME BASED IN GREED’
Weiss is the fourth attorney from Milberg Weiss to plead guilty to what U.S. Attorney Thomas O’Brien described Thursday as “a scheme based in greed (that) affected the integrity of the courts and the interests of an untold number of absent class members.”
Weiss’ plea follows that of his protege William Lerach, who pleaded guilty to a single count of conspiracy and was sentenced to two years in prison.
Milberg Weiss maintained a stable of clients with large stock portfolios who served or recruited family members or friends to serve as lead plaintiffs in its lawsuits in exchange for a share of the firm’s legal fees.
The arrangement allowed Milberg Weiss to be first to file lawsuits and, before class action reforms stripped away the first-to-file advantage, to obtain lead counsel status and a larger share of fees.
The illegal kickbacks were paid to clients in cash kept in a firm safe, or through intermediary law firms, prosecutors said.
Three former Milberg Weiss clients also have pleaded guilty in connection with the scheme, which prosecutors said stretched over 25 years and involved more than 225 class action and shareholder derivative action lawsuits and more than $200 million in legal fees.
Weiss’ former firm and outside attorney Paul Selzer, who is accused of funneling payments to clients, are the only remaining defendants in the case. Both have pleaded not guilty and are to go to trial in August.
The firm announced Thursday that it had changed its name to Milberg LLP, and was “seeking to find a fair and appropriate resolution of remaining issues,” Sanford Dumain, a member of the firm’s executive committee, said in a statement.
(Additional reporting by Martha Graybow, editing by Richard Chang)
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