Pioneering class-action attorney William S. Lerach has agreed to plead guilty to a federal conspiracy charge involving a kickback scheme, prosecutors said Tuesday.
The deal came after a seven-year federal investigation into allegations that Lerach’s former law firm paid people to sign on as plaintiffs in more than 150 lawsuits against major corporations.
Prosecutors said the firm netted more than $200 million in fees during a 20-year period.
Lerach agreed to plead guilty to conspiring to obstruct justice and making false statements under oath, according to a statement by the U.S. attorney’s office in Los Angeles.
He will forfeit $7.75 million to the government, pay a $250,000 fine and accept a sentence ranging from one year to two years in federal prison, the prosecutors’ statement said.
An arraignment will be held at a later date.
“I have always fought for my clients aggressively and vigorously in order to hold powerful corporations responsible when their actions harmed people; however, I regrettably crossed a line and pushed too far,” Lerach said in a statement. “For my actions, I apologize and accept full responsibility for my conduct.”
Details of accusations
The case against Lerach is part of an ongoing federal probe that led to last year’s indictment against New York law firm Milberg Weiss Bershad & Schulman and two of its partners.
Prosecutors accuse the firm of secretly paying more than $11 million in kickbacks to get people to take part in shareholder lawsuits, allowing its lawyers to be among the first to file litigation on behalf of shareholders and secure the lucrative position as lead plaintiffs’ counsel.
“These client-buying guilty pleas in the securities litigation area pull back the curtain and give the public a good view of a system that’s become of, by, and for the lawyers,” said John Sullivan, president of the Civil Justice Association of California, a group that advocates legal reforms.
“Mr. Lerach’s tactics epitomize today’s class action legal system where the lawyers, not their clients, control the cases,” Sullivan added.
Lerach and the firm’s co-founder Melvyn Weiss weren’t named in the 20-count indictment, which alleged the firm paid clients kickbacks so it could become the leaders in class-action litigation and therefore win a larger share of legal fees.
Weiss has not been charged.
The firm now known as Milberg Weiss and a former partner, Stephen Schulman, pleaded not guilty to fraud and conspiracy charges. Trial is scheduled for January.
Others in alleged scheme plead guilty
Another former partner, David Bershad, pleaded guilty to conspiracy in July and will be sentenced early next year. Former physician Steven G. Cooperman also pleaded to a federal conspiracy charge for his role as a plaintiff in the alleged kickback scheme.
Unlike Bershad’s plea agreement, there is no cooperation provision listed in Lerach’s deal with prosecutors.
Lerach, 61, and Weiss targeted some of the nation’s largest companies in litigation, including AT&T, Lucent, WorldCom, Sears, Roebuck, Microsoft, Prudential Insurance and Lincoln Savings & Loan.
Lerach acknowledged making secret payments to Cooperman, and that other plaintiffs received payments — generally 10 percent of the attorneys’ fees — from other Milberg Weiss partners, according to the plea agreement.
“By entering into such payment arrangements, Lerach and other conspiring partners were able to secure a reliable source of individuals who were ready, willing, and able to serve as named plaintiffs in class actions that Milberg Weiss wanted to bring,” the agreement said.
When he formed his own firm in San Diego, Lerach took much of the Milberg Weiss securities litigation with him, including shareholder suits against Enron Corp.
Lerach resigned last month from the firm now known as Coughlin Stoia Geller Rudman & Robbins. The plea agreement shields that firm from being charged in the Milberg Weiss case.