Micah Morrison, The Examiner
2007-01-02 08:00:00.0
Current rank: Not ranked

WASHINGTON -

In some legal and government circles the case of Milberg Weiss Bershad & Schulman is shaping up as the trial of the century.

In May, a federal grand jury in Los Angeles indicted the king of class-action law firms in an alleged conspiracy scheme of staggering proportions. The 20-count indictment included charges of obstruction of justice, perjury, bribery and fraud. The government claims that the firm itself, as well as senior partners David Bershad and Steven Schulman, participated in a decades-long conspiracy that distributed more than $11 million in “secret kickback payments” to people to serve as plaintiffs in more than 150 class-action suits. The take for Milberg Weiss? “Over $200 million,” prosecutors said.

Bershad, Schulman and the firm have all pleaded not guilty. Earlier this month, Schulman resigned from the firm. Bershad is on leave. A trial has been set for January 2008.

By all appearances, the defendants — tough litigators with decades of experience in contentious lawsuits with corporate America, including the ultimate owner of this newspaper ­— are not going down without a fight.

In statements on a Milberg Web site (www.milbergweissjustice.com), the firm excoriated the Justice Department, calling the indictment “unprecedented and unfair.”

And Milberg Weiss is not without friends in high places. Shortly after the indictment, a half-page advertisement appeared in the New York Times under the letterhead “Congress of the United States” and the headline “Statement on the Indictment of Milberg Weiss Bershad & Schulman.” Signed by four Democratic members of the House of Representatives — Charles Rangel, Gary Ackerman and Carol McCarthy of New York and Robert Wexler of Florida — the statement sharply attacked the Bush administration.

“The Justice Department’s crusade against trial lawyers, the first line in the average citizen’s protection against corporate greed, has taken a new low in the indictment of an entire leading law firm in the plaintiffs’ bar,” the ad said. “The unprecedented recent indictment of Milberg Weiss Bershad & Schulman is a very thinly veiled attempt by the Bush Administration to accomplish by bullying and intimidation what it has not been able to do by law — to end class-action lawsuits, one of the few tools remaining to safeguard the American consumer,” it says.

Campaign Donations

To the cognoscenti, Milberg Weiss is the tip of the spear of the mighty trial lawyers’ bar. It pioneered class-action warfare against corporate America, by its account recovering more than $45 billion due to “corporate wrongdoing.” Other law firms followed Milberg’s lead. Along the way, the trial lawyer lobby became one of the Democratic Party’s most generous supporters.

For example, the three New Yorkers who signed The New York Times ad received more than $29,000 in direct contributions from Milberg Weiss and individuals associated with the firm since 1996, according to the nonpartisan Center for Responsive Politics. In terms of campaign donations, that’s pretty small beans — until overall party contributions are thrown into the pot. From 1999 through May 2006, Milberg Weiss and individuals associated with the firm gave more than $3.9 million in federal contributions to Democratic candidates, party committees, PACs and “527” donation vehicles, according to CRP data. The Republicans received about $23,000.

The numbers get much bigger when donations from the influential trial lawyer lobby group, the Association of Trial Lawyers of America, are included. According to CRP data, since 1990 the ATLA has donated more than $23 million to Democrats; Republicans received about $2.7 million. ATLA did not respond to interview requests from The Examiner.

Rep. Rangel, who will take over leadership of the powerful House Ways and Means Committee in January, received $66,000 in direct donations from the ATLA since 1989, according to CRP data. Rep. Ackerman received $41,000 from the ATLA; Rep. McCarthy, $52,000 from the ATLA; Rep. Wexler, $51,000.

According to spokesmen for Wexler and McCarthy, the idea for a statement in support of Milberg started with Ackerman, who appeared on the floor of the House asking members to sign it. Milberg Weiss paid for publication of the statement in the Times. A typical Times ad of that size costs about $79,000. A Milberg Weiss spokesperson says the firm did not solicit the statement from Ackerman, calling it a “spontaneous effort” by Congress.

Ackerman did not respond to questions from The Examiner. But the other three other members of Congress whose names appeared in the Times ad rejected any connection between campaign donations and their defense of Milberg.

“Donations?” said Rangel. “I have no clue what that law firms thinks politically, no clue!”

State politics

While no political figures are named in the Milberg indictment, a high-profile trial could spell trouble for some Democratic Party stalwarts by casting light on the at-times ethically murky relationship between powerful law firms, state pension funds and state officials. Recipients of Milberg donations include such prominent Democrats as New York State Attorney General and Gov.-elect Eliot Spitzer and former California gubernatorial contender Philip Angelides, the state treasurer.

According to campaign finance records, Angelides received more than $200,000 from Milberg and related entities. The firm has been a generous donor to the California Democratic Party as well. According to the nonpartisan Institute on Money in State Politics, Milberg donated $350,000 to the party from 1999 to 2004.

Angelides, along with other Democratic Party and union officials, sits on the boards of two gigantic pension funds of abiding interest to Milberg Weiss and the class-action bar. Calpers, the California Public Employees Retirement System, controls about $217 billion in assets. CalSTRS, the California State Teachers Retirement System, holds assets worth about $144 billion. The funds often take leading roles in the class-action securities litigations.

Critics say that having political figures influencing the decisions of public pension funds is a bad idea. “Politicians have a corrupting influence on pension funds,” said Peter Schweizer, a research fellow at California’s conservative Hoover Institution. “The desire to feather their own nests is overwhelming.”

In 2002, Calpers and CalSTRS hired Milberg Weiss, (then known as Milberg Weiss Bershad Hynes & Lerach,) to lead a class-action suit against investment banks in the WorldCom scandal. In 2004, the law firm dissolved in a bitter split between legendary tort lawyers Melvyn Weiss and William Lerach. In New York, Weiss formed Milberg Weiss Bershad & Schulman. In California, Lerach created Lerach Coughlin.

Lerach got the WorldCom case in the divorce. In 2005, he settled for $651 million for pension funds nationally. Calpers and CalSTRS collected about $238 million. WorldCom also paid Lerach’s legal bill: $94 million.

In 2003, Angelides and Calpers tapped Milberg Weiss to lead a $150 million class-action suit against the New York Stock Exchange. The suit charged that the NYSE and several trading firms cheated investors. In 2005, a federal court dismissed the claim against the NYSE. Lerach is appealing.