Kickback conspiracy ends with two disbarments

Two key figures in the high-profile scheme to pay kickbacks in order to gain an advantage in lucrative class action lawsuits have been summarily disbarred. One-time class action king WILLIAM LERACH [#68581], of San Diego, who in 2007 pleaded guilty to conspiracy to obstruct justice, was summarily disbarred March 12. SEYMOUR M. LAZAR [#22846], 81, of Palm Springs lost his license Jan. 3 after pleading guilty to subscribing to a false tax return, obstructing justice and making a false declaration to the court. The convictions meet the requirements for summary disbarment: each is a felony that involves moral turpitude.

Lerach, 63, admitted to a role in an arrangement under which his former law firm, Milberg Weiss, filed class action lawsuits against companies when their stock prices dropped. Federal prosecutors said by having individuals on call to act as plaintiffs, the firm gained an unfair advantage over other firms filing similar suits. As the first to sue, the firm was able to get a sizeable share of any fees the case might generate.

Lerach admitted making illegal payments to a retired eye surgeon who acted as a plaintiff.

Prosecutors said Lazar also was a professional plaintiff, receiving $2.6 million in a series of class action lawsuits filed by Milberg Weiss.

A 20-count indictment of the firm charged that it paid $11 million in kickbacks to plaintiffs in more than 150 cases, earning more than $216 million. The scheme lasted from the mid-1970s to 2005. Milberg grew into a securities lawsuit powerhouse that for a time filed more class actions — and won more settlements — than any other firm.

In perhaps his most famous case, Lerach negotiated settlements of more than $7 billion with several large investment banks for Enron investors. Milberg Weiss targeted Silicon Valley companies in particular (3Com, Seagate, Apple Computer) as well as big corporations like Memorex, Gap Inc. and United Airlines.

A 1995 federal law designed to rein in frivolous lawsuits was dubbed the “Get Lerach Act.”

New York attorney Melvyn Weiss pleaded guilty to conspiracy last year and was sentenced to 30 months in prison. Another former senior partner in the firm, David J. Bershad, also pleaded guilty to a charge related to the kickback scheme, and Palm Springs attorney Paul T. Selzer, who was Lazar’s lawyer, tried to resign from the California bar after pleading guilty to filing false documents with the IRS. He was accused of laundering kickbacks to another plaintiff. The Supreme Court refused to accept the resignation; he currently is on interim suspension.

Lerach was sentenced to two years in prison and was ordered to forfeit $7.75 million. He also was ordered to pay a $250,000 fine and was sentenced to two years of probation and 1,000 hours of community service. When he appeared before federal Judge John F. Walter last October, he called his conduct “felony stupid,” adding, “I knew what I did was wrong.”

Although the judge called Lerach “an extremely hard-working attorney,” he said, “This whole conspiracy corrupted the law firm and it corrupted it in the most evil way.”

Had the case gone to trial, Lerach faced up to 50 years in prison.

Lerach and Weiss dissolved their partnership in 2004 and Lerach formed a practice in San Diego.

Lazar faced up to 18 years in prison but he was sentenced to six months of home detention and two years of probation because of his age and declining health. He was fined $600,000 and agreed to forfeit $1.5 million.