Attorneys Sued for Illegal Lawsuit Payment Arrangements

The San Diego Union-Tribune reports that a federal indictment charged that 78-year-old retired attorney, Seymour Lazar, agreed to serve as lead plaintiff in class-action suits, including shareholder cases, for a share of the legal fees.   One of the criteria for a suit to qualify for class status is that there is a lead plaintiff who represents the group fairly and does not have an interest in or conflict of interest with any other member of the class.   Lazar allegedly received about $2.4 million in illegal payments, according to the charges.

Also charged is Lazar’s attorney, Paul Selzer, who the indictment said handled the payments, improperly called referral fees and professional fees, from the law firm that sued companies on behalf of Lazar or members of his family.   Lazar’s wife, mother-in-law, son, and daughter have been plaintiffs in some cases, according to the report.   The suit alleges that Lazar directed Selzer to use the money to pay for Selzer’s legal fees, pay expenses related to Lazar’s real estate business, and to make political donations on Lazar’s behalf, said the news report.

For three years, federal prosecutors have been investigating cases represented by New York’s Milberg, Weiss, Bershad & Schulman law firm.   The indictment does not mention the firm, but refers to a law firm with principal offices in New York and California.   The Union-Tribune notes that other court documents show the Milberg, Weiss law firm has represented Lazar and family members in a dozen cases referred to in the current charges, including cases against Xerox Corp. and General Electric Co.   The firm issued a statement saying that the lawsuit, “unfairly implicates the firm in the wrongdoing alleged against Lazar. We are outraged that these allegations have been made against the firm and reject them as baseless.”

Attorney William Lerach headed the California office for Milberg, Weiss from 1976 to 2004, the time period covered by the lawsuit.   In 2004, Lerach split with Mel Weiss and the San Diego office is now Lerach, Coughlin, Stoia, & Robbins.  

Lerach has created a high volume business out of class-action shareholder suits, according to the Union-Tribune.   He has recently reached settlements of about $2 billion each with JPMorgan Chase & Co., for its role in the Enron Corp controversy, and with Citigroup (See Pension Funds Ordered to Take WorldCom Case to Federal Court ).  

The news report also pointed out that a relationship between Lerach and former client Steven Cooperman was included in the three year investigation.   Forbes magazine reported last year that Cooperman, an eye surgeon who went to jail in 2001 for art insurance fraud, was a plaintiff in around 55 class-action suits by the Milberg Weiss firm from 1988 to the late 1990’s, according to the Union-Tribune.   Forbes also previously reported that John Torkelson, who was the law firm’s expert in determining monetary damages, was receiving payments on a contingency-fee basis, which is prohibited by the California Bar Association.   Lerach denied any wrongdoing to both accusations by Forbes, the Union-Tribune said.

-Rebecca Moore