An ex-partner in the New York law firm Milberg Weiss pleaded guilty Tuesday in Los Angeles to a charge stemming from a scheme in which clients secretly were paid kickbacks for serving as named plaintiffs in more that 150 class action lawsuits, prosecutors said. Steven Gary Schulman pleaded guilty to a racketeering conspiracy count.
In a hearing before U.S. District Judge John Walter Friday morning, Schulman acknowledged his role in the scheme.
"Are you pleading guilty because you are in fact guilty?" Walter asked.
"I am," Schulman replied.
Schulman faces a maximum sentence of 20 years in federal prison and a $250,000 fine. He has already agreed to forfeit $1.85 million in proceeds he made from the conspiracy, Assistant U.S. Attorney Richard Robinson said.
Schulman's sentencing hearing is scheduled for 9 a.m. on June 23.
Schulman and his attorneys, Herbert Stern and Gordon Greenberg, had no comment after Tuesday's hearing.
According to an information filed last month by federal prosecutors, Schulman and other Milberg Weiss attorneys made a secret payment arrangement with Howard Vogel to "prepare and file numerous class actions in which Vogel, his relatives and entities that Vogel controlled served as named plaintiffs" for the law firm.
Vogel, who pleaded guilty last year to his role in the scheme, received about $2.5 million in illegal kickbacks from Milberg Weiss, prosecutors said.
The illegal kickbacks were secretly paid by Milberg Weiss to named plaintiffs through various intermediary law firms and lawyers selected by paid plaintiffs, including Howard Vogel of Florida, prosecutors said.
Milberg Weiss received "well over $200 million" in attorneys' fees from more than 150 class action lawsuits over the past 20 years, prosecutors said.
A May 2006 federal grand jury indictment stated that three named plaintiffs received at least $11.3 million in kickbacks, prosecutors said.
By 2003, Schulman knew the firm was secretly paying Vogel a portion of the attorneys' fees that Milberg Weiss obtained in class actions where Vogel served as the lead plaintiff, according to prosecutors.
Schulman, firm co-founder Melvyn Weiss and others concealed the illegal payments from state and federal authorities by making false or misleading statements in documents filed in class action lasuits, prosecutors said.
The scheme's objective was "to provide Milberg Weiss and its partners, including Schulman, with a stable of persons who were ready, willing and able to serve ... as named plaintiffs representing absent class members in class actions," prosecutors said.
Another objective was to ensure that Schulman and other Milberg Weiss lawyers would be named lead counsel in class action lawsuits, prosecutors said.
Schulman also may be disbarred from practicing law in New York, where he is licensed.
Speaking to reporters after today's hearing, Robinson said Schulman may have decided to plead guilty after Walter had denied his numerous motions to dismiss the case.
In May 2006, Schulman was indicted by federal prosecutors for his alleged involvement in the kickback scheme. He resigned from Milberg Weiss in December 2006.
Two other Milberg Weiss partners, David Bershad and William Lerach, have already pleaded guilty to similar charges.
Melvyn Weiss is still facing federal charges for his alleged participation in the kickback arrangements.