If possible, the cloud over Milberg Weiss Bershad & Schulman grew darker Wednesday afternoon. People familiar with the long-running investigation of whether the class action firm paid kickbacks to lead plaintiffs said the Milberg lawyers and L.A. federal prosecutors remained far apart on a deferred-prosecution agreement that’s been discussed for months. Such a deal would prevent an indictment — widely assumed to be a death sentence for the firm.
The deal that lawyers for Milberg Weiss were discussing with prosecutors seemed far out of reach Wednesday, said sources close to the case, with Milberg concerned that the government’s requirements for admitting wrongdoing and paying extremely large fines would be as damaging to the firm’s hopes of survival as an indictment would be — and would guarantee that partners are on the hook for more than $100 million.
If the government determines that it won’t soften its demands, these sources said, it will probably seek a grand jury indictment Thursday against the firm and two of its name partners, David Bershad and Steven Schulman. They have expected to be indicted for months, but charges were delayed due to the ongoing talks over a deal with the firm. Last week, the two partners took a leave of absence to help the firm avoid indictment.
While charges against the firm and the two partners would be by far the most significant developments in the six-year probe — which has so far secured indictments of two former clients (one of whom pleaded guilty) and one of those clients’ lawyers — sources familiar with the case say they wouldn’t be the end. Prosecutors are still gunning for partner Melvyn Weiss as well as William Lerach, Milberg’s former West Coast leader who now heads Lerach Coughlin Stoia Geller Rudman & Robbins, and hoping to use any upcoming indictments to further their case.
— Justin Scheck