New York class action powerhouse Milberg Weiss Bershad & Schulman last week found itself indicted by the US attorney in Los Angeles for allegedly paying referral fees to win clients.
But the firm hit back by launching the www.milberg weissjustice.com website, to defend itself against the charges, which it described as “absurd”.
Name partners David Bershad and Steven Schulman are listed as individual defendants in the indictment, alongside client Seymour Lazar and Palm Beach lawyer Paul Selzer.
As a result, Milberg has been fired from its position as special counsel to the Ohio Attorney General in a case for the Ohio Tuition Trust Authority.
In a letter to senior partner Melvyn Weiss, Attorney General Jim Petro wrote: “Because the law firm of Milberg Weiss was criminally indicted yesterday by a federal grand jury in the Central District of California, the Ohio Attorney General’s office feels that your representation, as well as that of your firm, of our clients in this matter will be severely compromised.”
The indictment comes after a five-year of investigation by federal prosecutors into allegations that Milberg was involved in fraud, conspiracy and kickbacks relating to dozens of securities class actions.
It claims that the firm earned $216.1m (£114.82m) in fees from class actions between 1984 and 2005, and in the same period paid $11.3m (£6m) in “secret and illegal kickbacks” to Lazar, Selzer and others.
The indictment also reveals that, between 1983 and 2005, Bershad’s profit share from Milberg varied between 10.11 and 17.72 per cent of the total and his drawings added up to $160.9m (£85.49m) – an average of more than $7m (£3.72m) per year. Between 1991 and 2005, when he was an equity partner, Schulman took home $67.1m (£35.65m).
Milberg said in a statement: “The government’s allegations of wrongdoing have been categorically denied by the indicted partners and the firm intends to join with them in vigorously defending against the charges.”