U.S. Class Action King Weiss Sentenced to 30 Months in Jail

By | June 3, 2008

Melvyn Weiss, who built the New York law firm that turned class action litigation into a multibillion-dollar business, was sentenced Monday to 30 months in federal prison after admitting to paying secret kickbacks to clients.

Weiss’s plea bargain and sentencing cap a seven-year federal investigation of America’s top class action firm and the lawyers who built it. They were considered heroes by many investors and extortionists by the U.S. companies they sued.

In a brief, somber statement to the court, Weiss, 72, apologized to his family, his former colleagues and his former firm “for my wrongful conduct.”

“My remorse and contrition are beyond my ability to express,” Weiss told the judge. “I promise that my contrition is honest.”

The sentence was less than the 33 months requested by prosecutors and more than the 24-month maximum sought by Weiss.

Assistant U.S. Attorney Doug Axel urged the judge to hand down the maximum under the plea deal, saying Weiss could have saved his law firm from the losses of cases and lawyers it suffered as the investigation dragged on.

“He could have done the right thing and stepped forward and deflected (harm) from the firm,” Axel said.

Weiss also agreed to pay $10 million in fines and forfeiture under a plea agreement with federal prosecutors in Los Angeles.

The co-founder of the law firm now known as Milberg LLP pleaded guilty to a single racketeering charge in March. His law firm is set for an Aug. 12 trial in the kickbacks scheme, but a plea agreement is in the works, a source has said.

The Bronx-born Weiss made his reputation by winning $1 billion for investors hurt by the 1980s Drexel Burnham Lambert junk bond scandal and an estimated $10 billion from insurance companies accused of misleading sale practices in the 1990s.

In a hearing Monday, Weiss’s lawyer Benjamin Brafman asked U.S. District Judge John Walter to “temper justice with mercy” in sentencing Weiss because of his age and his record of good works. Weiss turns 73 in August.

“If you impose a two-year sentence on a 73-year-old man, it is much more severe a sentence than on a 60-year-old man,” Brafman said, referring to the sentence given to Weiss’s partner and protege, William Lerach, in February. “I’m on my hands and knees begging for months.”

But while admiringly describing Weiss as “a fighter,” Walter said he had “serious reservations” about the plea deal reached by prosecutors and Weiss’s lawyers, which called for prison time of 18 to 33 months.

The judge said Weiss deserved a prison term because he continued to engage in criminal conduct as much as three years after he learned of the probe and because he tried to hide a document essential to government’s case.

Weiss is the fourth attorney from Milberg, which dropped his name from its title earlier this year, to plead guilty to the conspiracy, which prosecutors said involved more than 225 lawsuits that produced $200 million in fees for the firm.

Three ex-Milberg clients also have pleaded guilty in connection with the scheme and an outside attorney is set to go on trial along with the firm on charges of funneling kickbacks to Milberg clients.

For more than two decades, the firm maintained a stable of clients with large stock portfolios, who served or recruited family members to serve as lead plaintiffs in its lawsuits in exchange for a share of legal fees.

The arrangement allowed Milberg to be the first to file lawsuits and before class action reforms stripped away the first-to file advantage, to win lead counsel status and a larger share of fees.

Weiss’s lawyer Benjamin Brafman said after the hearing that he was pleased the sentence was less than the maximum requested by prosecutors.

“Mr. Weiss will do his sentence and survive… and will go on to do great things with his life,” he said.

Weiss also will face three years of supervised release following his departure from prison. Weiss is set to report to prison on Aug. 28.

(Reporting by Gina Keating; Editing by Brian Moss with additional reporting by Syantani Chaterjee in Los Angeles.)

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