Lerach Says Payoffs Were Widespread
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

A prominent class-action lawyer facing sentencing today for secretly paying plaintiffs to file securities lawsuits, William Lerach, is suggesting that the under-the-table practice was widespread and was not isolated to the firm he helped run for decades, Milberg Weiss.
Lerach’s claim that the payments were commonplace came in a letter one of his family members filed with Judge John Walter, who is scheduled to impose the sentence during a hearing this morning at federal court in Los Angeles.
“I did something wrong and I have to pay the price. Everybody was paying plaintiffs so they could bring their cases. I thought I had to do it, too,” Lerach recently told one of his children, according to the letter. “After they changed the law, I stopped doing it, but other people at my firm kept doing it. I didn’t know they were … I made the wrong decision and I have to go to jail.”
Lerach’s reference to a change in the law seemed to refer to the passage in 1995 of the Private Securities Litigation Reform Act, which limited the benefits of being first to the courthouse in a particular case and made it less lucrative for law firms to have a stable of plaintiffs ready to file a lawsuit within hours or days of a decline in a company’s stock price.
Prosecutors have had their sights set on Lerach and Milberg Weiss for more than a decade, after clients with other legal troubles blew the whistle on the secret payments. In 2006, Milberg Weiss and two of its named partners, David Bershad and Steven Schulman, were indicted. The two men later pled guilty. Eventually, Lerach also agreed to a guilty plea. Within days, prosecutors indicted the firm’s other famous leader, Melvyn Weiss. He and the firm are still fighting the case.
Despite the highly publicized travails of what was once America’s leading class-action law firm, there has been little public discussion of whether other firms may have emulated the secret payment scheme Lerach and other Milberg lawyers devised.
“I had heard a rumor that some other firm might be under investigation a year ago, at least a year ago,” a Philadelphia lawyer who headed an American Bar Association committee on legal ethics, Lawrence Fox, said. “I would have thought, after this long investigation, somebody would have looked at the firms that were competing with Milberg Weiss and seen the repeat plaintiffs.”
Mr. Fox said he doubted other firms would have paid plaintiffs, but he said he wasn’t confident anymore in his judgment on the issue. “I’m still in a state of shock that Milberg Weiss did it,” he said.
A spokesman for federal prosecutors in Los Angeles, Thomas Mrozek, said yesterday he could not comment on the scope of the probe or on Lerach’s statement.
Under a plea deal with prosecutors, Lerach agreed to pay about $8 million and to be sentenced to between one and two years. Prosecutors have proposed a two-year prison term, while Lerach’s lead defense lawyer, John Keker, is urging that the former class-action litigator spend six months in jail and six months in home confinement.
Lerach did not respond to a phone message yesterday seeking comment for this article. Mr. Keker could not be reached at his office yesterday and did not respond to an inquiry sent via e-mail.
Lerach’s attorneys initially filed their arguments on sentencing, and about 169 letters asking for leniency, under seal, meaning that they were unavailable to the public. After prosecutors objected, the two sides agreed that 25 letters should be sealed because they contained sensitive medical information, “personal and private thoughts and reflections of Lerach’s family members and friends,” and details of a past criminal conviction of one of Lerach’s friends.
The public letters ran the gamut, coming from former judges, clerical employees, and a man who once cleaned Lerach’s home and office aquariums. The consumer advocate and presidential candidate, Ralph Nader, said Lerach played a “singularly significant” role in protecting shareholders and improving corporate governance. Mr. Nader suggested Lerach’s crime paled when compared to “the trillion dollars looted or drained from millions of workers, investors and pension holders by the corporate crime wave of the past ten years.” The consumer activist urged the judge to spare Lerach prison and send him to lecture law students on ethical issues.
A speechwriter for President Nixon who writes a business column for the New York Times, Benjamin Stein, also sprung to Lerach’s aid. “If not for Bill Lerach, I would not have been able to figure out how the Milken/Drexel world looted about fifty S&L’s,” Mr. Stein wrote. “If I were president, I would have given him the Presidential Medal of Freedom long since.”
The letter containing Lerach’s comments on the scope of the secret payments was among those filed under seal, but an excerpt from it appeared in a defense pleading that was not properly redacted.