NEW YORK (Reuters) - William Lerach, a lawyer who won billions of dollars for shareholders suing corporations, will plead guilty to criminal conspiracy and go to prison for his involvement in a kickbacks scheme at his former law firm, Milberg Weiss LLP, federal prosecutors said on Tuesday.
The plea agreement with the U.S. Attorney’s Office in Los Angeles, which requires Lerach to serve 1 to 2 years in prison, marks a stunning turn for the hard-charging lawyer who has spent decades sparring with big corporations over alleged financial wrongdoing.
Best known for winning more than $7 billion in legal settlements for Enron investors, Lerach, 61, has made a career bringing securities fraud lawsuits on behalf of investors. He has amassed a huge personal fortune along the way.
”I have always fought for my clients aggressively and vigorously in order to hold powerful corporations responsible when their actions harmed people,“ Lerach said in a statement. ”However, I regrettably crossed a line and pushed too far. For my actions, I apologize and accept full responsibility for my conduct.
The criminal case against Lerach is part of a long-running government probe that led to the indictment last year of New York-based Milberg Weiss and two of its name partners for allegedly participating in a scheme in which several individuals were secretly paid to serve as plaintiffs in more than 150 lawsuits.
The firm and former partner Steven Schulman have pleaded not guilty to the charges, with their trial set for next year in Los Angeles. Another former partner, David Bershad, has pleaded guilty and is cooperating with prosecutors.
Lerach and his long-time mentor, Milberg Weiss senior partner Melvyn Weiss, were not named in the 2006 indictment but had been widely believed to be focal points of the government investigation. Weiss has not been charged in the case.
Weiss’ lawyer, Benjamin Brafman, told Reuters on Monday night that if his client is indicted, “He intends to enter a plea of not guilty, and will vigorously defend against these charges at trial.”
In his plea agreement, Lerach acknowledged making secret payments to a plaintiff. He also has acknowledged that other plaintiffs received payments from other partners of Milberg Weiss, according to the U.S. Attorney.
The individuals were generally promised 10 percent of the attorneys’ fees received by the law firm, prosecutors said.
Lerach has agreed to forfeit $7.75 million to the government and pay a $250,000 fine as part of the plea deal.
He is expected to appear in court for an arraignment in the coming weeks, prosecutors said. The plea arrangement must be approved by a judge overseeing the case.
Lerach once headed West Coast operations for Milberg. He left to form a San Diego-based practice in 2004.
Last month, he retired from that firm, which dropped his name and is now called Coughlin Stoia Geller Rudman & Robbins
Lerach’s plea deal “categorically, definitively and unequivocally confirms that this firm has no exposure or liability in the matter,” Coughlin Stoia said in a statement.
In 2006, Coughlin Stoia was the top U.S. class-action practice in terms of the total value of settlements, collecting more than $7.3 billion, mostly from Enron-related pacts that were finalized during the year, according to shareholder advisory firm Institutional Shareholder Services.
The type of shareholder lawsuit pioneered by Lerach has long been a thorn in the side of corporate America, which argues that many of the cases were meritless and costly for companies to defend.
A 1995 federal law designed to rein in frivolous lawsuits was dubbed the “Get Lerach Act,” but it hardly put him out of business.
Lerach’s biggest case was the Enron lawsuit in which he negotiated billions in settlements with investment banks and other defendants accused of helping the energy trader cover up accounting misdeeds.
Richard Segal, a partner at law firm Pillsbury Winthrop Shaw Pittman LLP who defends companies in class-action cases, said those types of lawsuits are not likely to slow down just because Lerach is no longer bringing them.
“There are other firms still around pursuing this area of practice,” he said. “Companies can’t afford to let their guard down just because Bill Lerach is exiting the scene.”
Reporting by Martha Graybow; additional reporting by Alexandria Sage in Los Angeles