May 19, 2006
Milberg Weiss: Corporations v. Partnerships as Criminal Defendants
Posted by Christine Hurt

Milberg Weiss and two individual partners have been indicted for conspiracy, racketeering, wire fraud, etc. on the grounds that the firm paid "kickbacks" to lead plaintiffs disguised as referral fees and other legitimate payments.  Though the indictment is interesting in itself, Milberg's response is even more interesting.  The law firm, a limited liability partnership, was given the opportunity to avoid an indictment against the entity if the firm waived attorney-client privilege and turned over otherwise privileged documents.  Apparently the firm said no.

Last month, I participated in the Maryland Roundtable on Criminalizing Corporate Law.  The keynote speaker was David Anders, formerly an AUSA who prosecuted Frank Quattrone and WorldCom.  (Larry Ribstein's take on his speech is here).  As Anders told us, corporations are "happy" to waive privilege and produce documents in order to avoid a corporation-level indictment.  I'm not sure how happy they are, but the decision-makers (outside directors on board of directors) see it in the best interest of the shareholders to avoid the indictment.  In the case of Milberg, Weiss, the decisionmakers have very different incentives. 

According to the website, MW has 46 partners, so decision-making is probably handled by a smaller committee of partners.  In any event, the people making the decision to "cooperate" are not only managers but undiversified investors with both a monetary and reputational stake in the outcome of the individual indictments.  What is at stake here is the future of the MW model and class-action lawyering in general.  MW cannot afford to cut and run.  A firm like Arthur Andersen would fall somewhere in the middle, as it is run basically like a corporation with partners who do not know each other or work in the same country.

The White-Collar Crime blog has more here.  Law Blog has more here and everywhere.

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Comments (3)

1. Posted by Robert Schwartz on May 19, 2006 @ 10:29 | Permalink

"What is at stake here is the future of the MW model and class-action lawyering in general."

Another reason to hope that they lose.


2. Posted by Steve on May 20, 2006 @ 12:23 | Permalink

I don't see how "class-action lawyering in general" is on the line. A great many firms survive and prosper in this field without paying illegal kickbacks.


3. Posted by wavemaker on May 20, 2006 @ 21:21 | Permalink

"The law firm...was given the opportunity to avoid an indictment against the entity if the firm waived attorney-client privilege and turned over otherwise privileged documents.Apparently the firm said no."

It is not the firm's priviledge, it is the client's. The firm has no say if the client waives.

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