Class action king Weiss to plead guilty

By Gina Keating

LOS ANGELES (Reuters) - Melvyn Weiss, the long-reigning king of multibillion-dollar U.S. class action litigation, has agreed to plead guilty to a federal racketeering charge in a case accusing his firm of paying secret kickbacks to plaintiffs, his lawyer said on Thursday.

The Bronx-born Weiss, 72, pioneered high-stakes shareholder litigation in U.S. courts and is best known for landing more than $1 billion in settlements for investors hurt by the Drexel Burnham Lambert junk bond scandal in the 1980s and an estimated $10 billion in damages from insurance companies accused of misleading sales methods in the late 1990s.

Under a plea deal, Weiss could receive a prison sentence ranging from 18 to 33 months and has agreed to pay $10 million in fines and forfeiture, his lawyer, Benjamin Brafman, said in a statement.

Milberg Weiss, the New York law firm he co-founded and turned into the top U.S. shareholder firm, dropped his name on Thursday after the plea deal was announced.

Prosecutors said they would recommend that Weiss serve 33 months in prison.

The deal, filed on Thursday in federal court in Los Angeles, proposes a sentence and fines that are more onerous than for the other six other Milberg Weiss defendants who have pleaded guilty. It must to be approved by U.S. District Judge John Walter.

Weiss apologized to colleagues at the firm and said in a statement that he deeply regretted his conduct.

'A SCHEME BASED IN GREED'

Weiss is the fourth attorney from Milberg Weiss to plead guilty to what U.S. Attorney Thomas O'Brien described on Thursday as "a scheme based in greed (that) affected the integrity of the courts and the interests of an untold number of absent class members."

Weiss' plea follows that of his protege William Lerach, who pleaded guilty to a single count of conspiracy and was sentenced to two years in prison.

Lisa Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform said the kickbacks scheme shows the need for more "transparency and accountability" of lawyers in securities litigation.

Weiss and Lerach "practically invented the securities class action lawsuit and used it ... to cause major harm to our judicial system," Rickard said.

But plaintiffs' attorney Steven Williams, whose firm worked with Milberg Weiss on one of the first subprime mortgage class actions, settled in 2002, said consumers have lost a champion.

"This is one battle in the ongoing fight that corporate America has waged against consumers and consumer attorneys," Williams, of Cotchett Pitre & McCarthy, said. "It's a shame ... when you think that Bill Lerach and Mel Weiss accomplished more on behalf of consumers than the SEC over the past 20 years."

Milberg Weiss maintained a stable of clients with large stock portfolios who served or recruited family members or friends to serve as lead plaintiffs in its lawsuits in exchange for a share of the firm's legal fees.