Securities Lawyer Weiss Sentenced for Kickbacks
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A lawyer who made a fortune suing companies on behalf of disgruntled investors is facing time behind bars. Today, Melvin Weiss was sentenced to two and a half years in prison. He was also ordered to forfeit $10 million for his role in a conspiracy to pay illegal kickbacks to clients. NPR's Scott Horsley explains.
SCOTT HORSLEY: Mel Weiss and his law firm - originally known as Milberg Weiss - could be an investor's best friend and a corporate executive's worst nightmare. The firm churned out hundreds of class action lawsuits accusing companies of wrongdoing when their stock price dropped. Such lawsuits could be seen as either a necessary check on corporate fraud or illegal extortion racket. Either way, Stanford law professor Joe Grundfest says Milberg Weiss was the king of the courthouse.
Professor JOE GRUNDFEST (Law, Stanford University): There was a time when it sort of the Microsoft, the Intel, the IBM, the Google and the Yahoo wrapped into one.
HORSLEY: But government prosecutors say Weiss' firm had an unfair advantage. Two years ago, the firm was indicted for allegedly paying illegal kickbacks to plaintiffs. Prosecutors said those payments gave Mel Weiss and his partners a ready stable of clients and a head start in the race for the courthouse door. They also say Weiss himself kept paying kickbacks even after the investigation was underway.
In a Los Angeles courtroom today, the 72-year-old Weiss apologized for what he called his wrongful conduct. His two-and-a-half-year prison sentence was slightly less than prosecutors were seeking, but a year longer than his defense lawyer had hoped for. The judge said Weiss' personal disgrace may hurt more than the time in prison. Three of Weiss' former partners have also pleaded guilty. Flamboyant attorney Bill Lerach is now serving two years behind bars and he agreed to forfeit $8 million.
Nationwide, the number of class action lawsuits bottomed out in 2006, the year the indictment was handed up. Some critics have blamed that on a chilling Milberg effect over the government's prosecution. But Professor Grundfest notes that since then the number of lawsuits has rebounded, including dozens of new suits related to the subprime mortgage mess.
Prof. GRUNDFEST: Business is up, and as far as we can tell, there's no shortage of class action plaintiff lawyers who know how to file a complaint against companies that have committed fraud.
HORSLEY: Weiss' old law firm still faces criminal charges and is due to stand trial in August. But the Wall Street Journal reports the Milberg firm is nearing a settlement with the government, which could involve a fine of around $75 million.
Scott Horsley, NPR News.