Lerach Sentenced to Two-Year Term

By JOSH GERSTEIN, Staff Reporter of the Sun
February 12, 2008

A legendary figure in the class-action bar, William Lerach, was sentenced yesterday to two years in prison for his role in a scheme to make secret payments to investors to serve as plaintiffs in securities lawsuits brought by the firm he helped run, Milberg Weiss.

"This whole conspiracy corrupted the law firm, and it corrupted it in the most evil way," Judge John Walter said as he imposed the sentence, according to the Associated Press.

Two years was the maximum sentence permitted under an agreement with prosecutors which led to Lerach's guilty plea last year. Lerach, 61, has already been suspended from the bar and will pay fines of about $8 million. Prosecutors contend that Lerach and colleagues at Milberg Weiss secretly gave a 10% cut of legal fees in securities cases to the plaintiffs, who sometimes certified in court that they had received no such payments. Two other partners at the firm, David Bershad and Steven Schulman, have also pleaded guilty. The firm itself and its longtime leader, Melvyn Weiss, are fighting the charges. The New York Sun reported yesterday that a letter filed in the case indicated that Lerach had told one of his children that the practice of paying investors to file cases was widespread. "Everybody was paying plaintiffs," he said, according to a family member. In an interview published last evening on the Web site of the Wall Street Journal, Lerach repeated that contention. "Believe me, it was industry practice. We kept it quiet because obviously if a judge knew about it you're not going to get appointed as lead counsel," he said.

Lerach called the payments "an ethical violation" trumped up into a criminal case by Bush administration officials with a pro-business tilt. "People who were our enemies who had power got in a position to use our own mistakes against us, and they did so with the same ruthlessness with which we prosecuted our cases. And that's the way it is in the big leagues," he told the Journal.