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THE WALL STREET JOURNAL: Milberg Dealt Blow as Indictment Fallout Grows

Milberg Dealt Blow as Indictment Fallout Grows

Firm Is Fired as Counsel
In Ohio Class-Action Case;
Other Challenges Expected
May 20, 2006; Page A3

Milberg Weiss Bershad & Schulman LLP suffered a serious setback as a result of its indictment, with the Ohio attorney general firing the powerhouse law firm as counsel in a class-action case.

The New York law firm, indicted Thursday in an alleged conspiracy to pay kickbacks to plaintiffs, had been representing Ohio's public college-savings fund in class-action litigation in a mutual-fund case. In a letter to the firm, Ohio Attorney General Jim Petro, a Republican, said he was taking Milberg off the case because the indictment meant its representation of clients “will be severely compromised.”

[Melvyn Weiss]

Many legal experts say a torrent of challenges to the firm's role as counsel in class-action cases could threaten the firm's existence. Earlier this past week, before the indictment was handed down but had been publicized, Vice Chancellor Stephen Lamb of Delaware's Court of Chancery voiced doubts about Milberg's fitness to serve as lead counsel in a shareholder class-action case challenging Russia's largest oil producer, OAO Lukoil Holdings, over its proposed takeover of Chaparral Resources Inc., a Kazakhstan subsidiary.

In a statement, the firm said it regretted the Ohio attorney general's decision and “will seek the Court's guidance with respect to what duties, if any, the firm should continue to have in the case.”

Milberg, a 125-lawyer firm, files as many securities class actions as any firm in the nation, say lawyers. It currently represents thousands of investors who claim losses from corporate fraud, and it is handling at least 500 cases, though not all are class actions.

Milberg was charged with allegedly paying clients to serve as a lead plaintiff in class actions. It is illegal for lead plaintiffs to receive more in compensation than other members of a class. Milberg, which said it will fight the charges, made the alleged kickbacks to gain a strategic edge in the pitched competition to be lead counsel in class actions, according to prosecutors.

Two Milberg senior partners, David Bershad and Steven Schulman, were also indicted and have taken a leave of absence from the firm. “Mr. Schulman will plead not guilty because he is not guilty, and we look forward to his ultimate vindication,” said his lawyer, Herbert Stern.

“David Bershad categorically denies the allegations of the indictment,” said his lawyer, Andrew Lawler.



• Read excerpts from the indictment or the full text, the statement from U.S. attorney's office in Los Angeles, and Milberg Weiss's statement.
 • Milberg Faces Calls to Act to Avoid Indictment
 • Two Top Lawyers Leave Milberg

The firm's indictment means judges will be forced to decide whether Milberg can still provide “adequate representation” — the standard for lead counsel in class actions. Judges could force the firm to step down in cases, say industry experts, reasoning that the indictment has sapped Milberg's resources and morale.

One major test will be a massive class action alleging that investment banks conspired with hundreds of technology companies to artificially inflate stock prices in public offerings in the late 1990s and 2000. As co-lead counsel in the case, Milberg has negotiated $1.4 billion in proposed settlements, and many more defendants are still potentially on the hook.

Lawyers in the case say that U.S. District Judge Shira Scheindlin of New York, who is presiding over the matter, will have to hold a hearing about Milberg's fitness to serve as class counsel. Hundreds of individual plaintiffs in the case sent letters to the court objecting to the proposed IPO class-action settlement. Many of the letters echo a criticism that has long been leveled against Milberg Weiss and the plaintiffs' bar: Class-action lawsuits primarily benefit the lawyers, while shareholders receive pennies on the dollar. “This entire suit is about making money for lawyers at the expense of those who are truly productive in our economy,” said Christian McTurk, a shareholder from Bloomfield Hills, Mich.

Milberg and other class counsel have invested five years in the public-offering litigation. They have rented a floor of a New York City building, where more than 100 lawyers and paralegals — from Milberg and other firms — work around the clock on discovery matters, said Howard Sirota, a member of the plaintiffs' executive committee. “We have spent tens of millions of dollars developing the case, not including the value of our time, which is in the hundreds of millions,” adds Mr. Sirota.

New York attorney Fred Isquith, who is also on the plaintiffs committee, said class counsel in the case are now wrestling with how to notify their thousand-plus clients about the indictment. Benjamin Brafman, who is representing Milberg founder Melvyn Weiss, who hasn't been charged, said the indictment has no effect on the firm's ability to handle class actions. “The fact is that there are 125 lawyers at Milberg who have nothing whatsoever to do with the charges made against the firm,” he said.

William Taylor, a partner at Zuckerman Spaeder who represents Milberg in the probe, said that judges should be mindful of the fact that rival plaintiffs firms have an economic incentive to challenge Milberg's standing in cases.

Write to Nathan Koppel at [email protected] and Peter Lattman at [email protected]


THE WALL STREET JOURNAL: Shell to Settle Lawsuit in U.S. Over Pensions: Wednesday 13 July 2005




July 13, 2005 2:55 a.m.; Page B2


LONDON — Royal Dutch/Shell Group said it agreed to pay $90 million to settle a U.S. lawsuit brought by pension holders following the company's oil-and-gas-reserves write-down scandal last year.


The proposed pact comes two weeks after U.S. federal prosecutors decided not to file a criminal charge against the Anglo-Dutch company. Prosecutors had investigated the reserves overstatements and cited good cooperation by the oil giant.


In 2004, Shell acknowledged it had misstated oil reserves, a widely followed indicator of future profits, for 2002 and other years. The scandal cost Shell almost $150 million in fines imposed by U.S. and British regulators, and led to the ousting of three senior executives.


As part of the U.S. pensions-related lawsuit, Shell said yesterday it had entered a preliminary agreement with the plaintiffs for a $90 million settlement, which still requires court approval. About $25 million of the settlement will be covered by insurance, Shell said in a statement.


Shell also said it agreed to pay as much as $1 million toward the cost of the expenses of the plaintiffs' counsel, Milberg Weiss Bershad & Schulman, one of the U.S.'s most aggressive class-action law firms. The expenses also include the costs of providing notice of the settlement to class members.


The lawsuit seeking class-action status was filed by current and former employees who claimed the value of their pension benefits had been hurt by a drop in the share price, which fell as much as 15% in the two months that followed the restatements in January 2004.


As part of the settlement agreement, Shell said it agreed to adopt new procedures for monitoring and training individuals appointed to fiduciary positions in savings plans that are subject to the U.S. Employee Retirement Income Security Act of 1974, or Erisa.


Write to Benoît Faucon at [email protected] 


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