NEW YORK (Reuters) - William Lerach, a prominent U.S. class-action lawyer, reported to a low-security prison in California on Monday to begin serving a two-year term after admitting he participated in an illegal kickbacks scheme at his former law firm.
Lerach is best known for winning more than $7 billion in legal settlements for Enron investors after the energy trader’s collapse. He pleaded guilty last October to one count of conspiracy related to his activities at his former law firm, Milberg LLP.
Lerach, 62, reported to a federal prison camp in Lompoc, California, about 175 miles northwest of Los Angeles, said Mike Truman, a spokesman for the Federal Bureau of Prisons. The all-male, minimum-security prison camp has more than 500 inmates, he said.
Lerach was ordered to serve two years in prison by a federal judge in Los Angeles in February. He also agreed to forfeit $7.75 million and pay a $250,000 fine as part of a plea agreement.
Lerach admitted he played a role in a scheme to seek out clients with big stock portfolios, ask them to be plaintiffs when negative information surfaced about a company and then secretly pay them a portion of the legal fees the firm received.
Lerach left Milberg in 2004 to form his own San Diego-based law practice. He has retired from that firm, which was not charged in the case. A spokesman for the firm, now known as Coughlin Stoia Geller Rudman & Robbins LLP, declined comment on Monday.
Milberg co-founder Melvyn Weiss and several other individual defendants in the kickbacks case also have pleaded guilty. The Milberg firm itself has pleaded not guilty to criminal charges and is scheduled to go on trial in August.
Federal prosecutors say the kickbacks arrangement allowed New York-based Milberg, once the dominant U.S. shareholder litigation firm, to get lead counsel status in class-action securities fraud lawsuits against companies and to collect lucrative fees when cases were settled.
Claiming that businesses are beset by frivolous litigation, some Republican lawmakers say the Milberg scandal may be a sign of wider abuses by lawyers who bring securities fraud class-actions.
On Monday, U.S. Sen. John Cornyn, Republican of Texas, introduced a bill to require plaintiffs and their lawyers in these lawsuits to provide disclosures about any direct or indirect payments between them or other conflicts of interest.
The bill also calls for courts to include a competitive bidding process as one of the factors in picking a lead counsel for a class of plaintiffs, Cornyn said.
“As recent events have shown, current securities litigation laws have been subject to abuse, and there is reason to believe this criminal activity may not be limited to just a few bad actors,” Cornyn, a member of the Senate Judiciary Committee, said in a statement.
Editing by Andre Grenon/Jeffrey Benkoe