NEW YORK (Legal Newsline)-One of the most well known securities law firms in the country has agreed to pay $75 million to settle claims it paid clients to file lawsuits.
By settling, the firm- Milberg LLP -avoids going to trial.
Already one of the firm's partners, William Lerach, is behind bars, and another partner, Melvyn Weiss, is headed to prison after pleading guilty to conspiracy charges.
The famed firm targeted such corporations as AT&T Inc., Lucent, WorldCom, Microsoft Corp. and Prudential Insurance through lawsuits claiming their clients suffered a loss because corporate executives misled them about a company's financial condition.
The deal was announced in a statement by Sanford Dumain, a member of the law firm's executive committee.
"This settlement enables us to move forward with our continuing representation of investors and consumers in class actions and other important lawsuits, and allows us to capitalize on the tremendous talents of the lawyers at the firm," Dumain said.
He said the settlement "specifically recognizes that none of the lawyers now at the firm was involved in any of the misconduct."
Under the terms of the agreement, Milberg will have five years to pay the federal government $75 million, which is one of the largest fines ever levied against a law firm.
Milberg is accused of paying kickbacks to plaintiffs in more than 165 lawsuits over 25 years. Those lawsuits brought the firm about $251 million in legal fees.
The kickback scheme "had a severely detrimental effect on the administration of justice across the nation as lies were routinely made to judges overseeing significant cases," U.S. Attorney Thomas O'Brien said announcing Weiss' plea agreement.
For his part in the scheme, Lerach was required to forfeit $7.75 million and was sentenced to two years in prison.
Weiss, meanwhile, was required to pay a penalty of $250,000 and forfeit $9.8 million.
U.S. District Judge John Walter ordered Weiss to report to federal prison Aug. 28, in Morgantown, W. Va.
In a recent research paper, Michael Perino of St. John's University School of Law found that the firm actually harmed its clients by paying them secret kickbacks.
For his report, Perino examined 730 of the firm's class action settlements.
Class members were injured by the secret payoffs because they appear to have received a "lower proportion of the settlement proceeds than class members in otherwise substantially similar non-indictment cases," the report said.
On average, for each 1 percent increase in the size of the settlement, attorneys' fees were 0.10 percent higher in the indictment cases than in the non-indictment cases, Perino found.
From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.