Defense lawyers in the case involving a major class action law firm, Milberg Weiss, are accusing prosecutors of trumping up an alleged breach of legal ethics into a criminal indictment.

“This is not an ethics hearing,” attorneys for a former Milberg Weiss partner charged in the alleged conspiracy, Steven Schulman, said in filings yesterday with a federal court in Los Angeles.

The indictment returned last year alleges that Milberg Weiss paid investors to serve as plaintiffs in dozens of securities lawsuits and that the payments were often disguised as legal fees paid to other firms and lawyers. The allegations gained some weight earlier this month when another former Milberg Weiss partner, David Bershad, pleaded guilty to one count of conspiracy stemming from the probe. Standing before Judge John Walter, Bershad admitted that the general scheme described in the indictment took place, and he agreed to cooperate with prosecutors pursuing the firm, Mr. Schulman and others charged in the case.

In the latest legal filings, Mr. Schulman’s legal team, headed by a former federal judge, Herbert Stern, argued that the government is overreaching by charging that undisclosed payments to clients are criminal. “The question on the table in this case is not whether it is a good or a bad thing for a plaintiff to share in his lawyer’s court-awarded legal fees, but whether, having done so, that plaintiff and his lawyer have committed a federal crime,” the defense wrote.

The lawyers for Mr. Schulman are asking Judge Walter to dismiss some or all of the case because of the alleged legal flaws. The defense also asked the judge to strike as “inflammatory” the claim in the indictment that Mr. Schulman made $67 million at Milberg Weiss between 1991 and 2005.

In addition, Mr. Stern quibbled with the use of the term “kickback” throughout the indictment. The alleged plan to make secret payments “lacks the fundamental hallmarks of a ‘kickback’ because the plaintiffs had no control over the ultimate outcome of the cases or the legal fee awards,” the defense argued. “Piling on the term ‘kickback’ does nothing to the asserted distinction that the Government is asserting except prejudice the defendants.”

Judge Walter is scheduled to hear arguments on the defense motions August 6. The trial is set for January 2008. However, a new indictment naming additional defendants is expected soon and could set back the trial schedule.