Melvyn Weiss, co-founder of a prestigious New York law firm that made an estimated $250 million by filing class-action lawsuits against some of America's largest corporations, was indicted Thursday on charges that he conspired to pay kickbacks to people who agreed to be plaintiffs.
Weiss was added to an existing indictment in the seven-year investigation involving his firm, Milberg Weiss, and other lawyers.
Weiss is accused of two counts of conspiracy and additional counts of obstruction of justice and making false statements in relation to documents that were the subject of a grand jury subpoena, according to a statement from the U.S. attorney's office.
"The indictment outlines a decades-long kickback scheme that was deliberately concealed from courts across the nation that were overseeing significant class-action cases," said George S. Cardona, acting U.S. attorney in Los Angeles.
"The scheme furthered personal greed at the expense of the integrity of the courts and the interests of absent class members," he said.
Weiss' New York attorney, Benjamin Brafman, did not immediately return a call for comment.
If convicted of all counts, Weiss could face up to 40 years in federal prison.
In a related development, a former senior partner at the firm, Steven G. Schulman, who had been indicted last year in the scheme, agreed to plead guilty to a racketeering charge.
He originally pleaded not guilty to fraud and conspiracy charges, and his trial had been scheduled for January.
The statement by prosecutors did not indicate whether Schulman agreed to serve prison time.
The firm once known as Milberg Weiss Bershad & Schulman also was indicted last year.
Prosecutors contend it secretly paid millions of dollars in kickbacks to get people to take part in more than 225 class-action and shareholder lawsuits, allowing its lawyers to be among the first to file litigation and secure the lucrative position as lead plaintiffs' counsel.
The firm targeted some of the nation's largest companies in litigation, including AT&T, Lucent, WorldCom, Sears, Roebuck, Microsoft, Prudential Insurance and Lincoln Savings & Loan.
The firm once dominated the industry in securities class-action suits, which Weiss helped pioneer. Those suits involve shareholders who claim they suffered losses because executives misled them about a company's financial condition.
Prosecutors believe the firm netted $250 million in fees over the past 25 years on cases for which plaintiffs were paid, the new indictment contends.
"The indictment states three named plaintiffs received at least $11.3 million in illegal kickbacks, and several other paid plaintiffs received hundreds of thousands of dollars," the prosecutors' statement said.
The indictment contends that people were secretly paid to become plaintiffs or get their friends and relatives to do so in suits filed by the law firm. The kickbacks were made in cash or paid by the Milberg Weiss firm through intermediary law firms and attorneys, prosecutors claim.
The people involved also lied in depositions and in court documents to conceal the scheme, according to the indictment.