Legal News

Milberg Close to Settlement Over Alleged Kickback Scheme

By Dan Slater

While we lounge around this morning, sipping coffee and awaiting the sentencing of Mel Weiss — which we expect at 10 a.m. (PDT) — we’ve got some Milberg-related news to mull. On the front-page of today’s WSJ, Nathan Koppel reports that Milberg is close to reaching a settlement with federal prosecutors over the the firm’s alleged kickback scheme.

While a deal could still fall apart, Koppel writes that the sides have made progress after weeks of talks that have centered on the payment Milberg will have to make as part of a settlement. Last summer, prosecutors had sought about $50 million in fines and penalties, but the demand mushroomed this year to about $100 million, say people familiar with the negotiations. Recently, Milberg and prosecutors have zeroed in on a payout in the neighborhood of $75 million, these people say.

Milberg asked Coughlin Stoia Geller Rudman & Robbins LLP, the powerful San Diego law firm that spun off from Milberg several years ago and formerly run by Bill Lerach, to chip in part of its payout in the settlement, but the Coughlin firm has refused, say two people familiar with the matter. The Coughlin firm hasn’t been charged in the case.

The government alleged that the firm paid more than $11 million in kickbacks to clients in exchange for their serving as lead plaintiffs in securities class actions. These payouts allowed the firm to quickly file suits and become lead counsel, prosecutors allege, entitling Milberg to a large share of the fees: some $250 million over more than two decades. The firm, which is scheduled to stand trial in August, has denied wrongdoing.

A spokesman for the U.S. attorney’s office in Los Angeles, which is leading the case, declined to comment. Michael Spencer, a partner at Milberg, declined to comment.

Separately, Mel Weiss, Milberg’s co-founder, is due to be sentenced today in L.A., after pleading guilty this year to participating in a criminal conspiracy. Weiss’s plea agreement calls for him to serve up to 33 months in prison and to pay $10 million in fines and penalties, but he has requested to be sentenced to no more than 18 months.

Full post as published by Law Blog - WSJ.com on June 02, 2008 (boomark / email).