Milberg LLP partners David Bershad and Steven Schulman were sentenced in federal court yesterday afternoon, each receiving 6 months in prison. Along with two other partners, they had been convicted for offenses arising our of the payment of kickbacks to lead plaintiffs in securities and shareholder class actions, which netted the firm more than a quarter of a Billion dollars in attorney fees.
These 6-month sentences were far less than what the other two partners were given earlier this year: William Lerach got 24 months, and Melvyn Weiss got 30.
At Bershad’s sentencing hearing, U.S. District Judge John Walter intitially indicated that he thought Bershad ought to get the same sentence as Lerach, as they had pled to the same conduct. Bershad’s lawyers sought probation, and the prosecution asked for 3 months in prison plus 3 months of community confinement. Apparently swayed by Bershad’s statement of remorse, letters of support, and the fact that Bershad’s plea was the first domino that led to the other pleas, the judge came down to the six-month jail term.
At Schulman’s sentencing hearing, the prosecution asked for a year in prison, as Schulman had taken longer to plea than Bershad, and so had provided less assistance. Schulman’s lawyer argued that the sentence should be no longer than Bershad’s, and that the delay in pleading guilty was due to attempts to work out a plea that would let Schulman keep his law license — notwithstanding the fact that there was no way he could conceivably keep that license given what had happened. Judge Walter wasn’t impressed with those arguments, but ultimately gave him the same 6-month sentence, taking into consideration the letters in support and the fact that Schulman had three young children who would be affected by a longer sentence.
Bershad had pled to conspiracy to obstruct justice, and to making false statements under oath. Schulman had pled to a racketeering charge. In addition to jail terms, each was sentenced to pay a $250,000 fine, on top of forfeitures of $7.75 million and $1.85 million, respectively.
Milberg LLP was formerly known as Milberg Weiss LLC, and as Milberg Weiss Bershad & Schulman LLP. At one time, it accounted for half of all securities class action settlements. The firm engaged in “strike suits,” wherein a corporation whose share price had fallen would be sued in a shareholder class action, with an individual shareholder identified as the class representative. The suits were brought for the purpose of settlement for nuisance value. Individual shareholders did not approach the firm, but rather the firm monitored the stock market and manufactured its own cases. To get individuals to to take the role of lead plaintiff, the firm would share its fees with them. The firm also paid kickbacks to stockbrokers who referred clients. At least one expert witness, specializing in estimating damages, was paid on a contingency-fee basis. Bershad and Schulman were indicted, along with the firm, in 2006 on various counts, including racketeering, mail fraud and bribery.
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