Enron Corp. shareholders and investors will split about $7 billion from financial institutions accused of participating in the fraud that caused the once-mighty energy company to collapse.

The settlement amount was listed at $7.2 billion, a sum that has been accruing interest since 2002 and includes $688 million plus interest in attorneys fees.

The deal, approved late Monday by U.S. District Judge Melinda Harmon, and the attorneys fees are the largest in history in a U.S. securities fraud case.

"We're pleased that the court recognizes the tremendous amount of work, skill and determination required to overcome significant obstacles in this complicated case," said Patrick Coughlin, attorney for the regents of the University of California, the lead plaintiffs.

About 1.5 million individuals and entities will be eligible to share in the distribution under the settlement plan. The attorneys fees will go to San Diego-based Coughlin Stoia Geller Rudman & Robbins LLP, the law firm representing the university.

Besides the University of California, other plaintiffs who will share in the proceeds include pension plans from New York City and Hawaii, various investment firms and the Archdiocese of Milwaukee.

The distribution plan was part of a $40 billion lawsuit filed by shareholders and investors, who claim Bank of America, JPMorgan Chase & Co., Citigroup and others participated in the accounting fraud that led to Enron's downfall.

Calculating shares of the $7.2 billion will be determined by a formula that factors in such things as the stock's purchase price and the type of stock bought.

At its height, Enron's common stock sold for as much as $90 per share, before plummeting to as low as $1 right before the company declared bankruptcy.

Under the plan, investors will get an average of $6.79 per share of common stock and an average of $168.50 per share of preferred stock.

To be eligible for the settlement, investors and shareholders needed to have bought Enron or Enron-related securities between Sept. 9, 1997 and Dec. 2, 2001.

Attorneys for several investors objected to the distribution plan and the attorneys fees.

Texas Attorney General Greg Abbott, who had previously filed court briefs in support of plaintiffs' claims, also objected to the attorneys fees.

"General Abbott continues to object to giving millions of dollars to plaintiff lawyers when that money should go to the hardworking men and women who suffered from Enron's demise," said Jerry Strickland, a spokesman for Abbott's office.

"This court reiterates that there is no way to allocate these proceeds that would not in some way favor or disfavor to some degree some of the class members," Harmon wrote in her order. "On the whole, the court finds that ... the chosen method is fair, adequate and reasonable."

Harmon also said the attorneys fees, which are 9.5 percent of the settlement, are "fair and reasonable."

Several financial institutions have not settled and remain as defendants in the Enron case, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC. Several former Enron officers also remain as defendants, including former chief executive Jeffrey Skilling, now serving a criminal sentence of more than 24 years in federal prison in Minnesota.

But the lawsuit has been on hold since an appeals court last year ruled shareholders and investors could not sue as a class, which would have allowed them to sue as a group and have more leverage to settle the case out of court.

The U.S. Supreme Court in January refused to hear arguments in the lawsuit. The high court in a similar case gave a measure of protection from securities lawsuits to suppliers, banks, accountants and law firms that do business with corporations engaging in securities fraud.

Because of that ruling, Harmon is still deciding whether the financial institutions that remain as defendants will be dismissed from the lawsuit.

Enron, once the nation's seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Enron founder Kenneth Lay and Skilling were convicted in 2006 for their roles in the company's collapse. Lay's convictions for conspiracy, fraud and other charges were wiped out after he died of heart disease in 2006.

Carren B. Shulman and Russell L. Reid, Jr. have joined the New York officeof Sheppard Mullin Richter & Hampton LLP as partners in the firm's Financeand Bankruptcy practice group.  Shulmanand Reid most recently practiced with Heller Ehrman in New York, where sheco-chaired the office's Summer Associate program and he chaired the New YorkPro Bono committee and co-chaired the office's recruiting committee.

Shulman focuses her practiceon bankruptcy, commercial litigation, business reorganization and creditors'rights, with an emphasis on representing secured and unsecured creditors intransactions in and out of bankruptcy both domestically and internationally.  She has represented debtors, committees,chapter 11 trustees, trade creditors and secured and unsecured lenders inbankruptcy and has advised corporate trustees in default administration.  Shulman also has significant trial experiencein commercial and employment litigation.

Reid’s practice focuses onthe areas of creditors’ rights, bankruptcy, and corporate reorganization, withparticular emphasis on default administration for corporate trustees. On behalf of debtors, creditors, committees,indenture trustees and loan servicers, he has developed and negotiateddisclosure materials and plans of reorganization, and has prosecuted anddefended litigation involving the automatic stay, cash collateral, claimdetermination, debtor-in-possession financing and plan confirmation.

"With Carren and Russelljoining us, we continue to grow signature practice groups like Finance andBankruptcy and expand national capabilities to better serve client needs onboth coasts.  In the current businessclimate where restructurings and insolvencies are on the upswing, their bankruptcyand commercial litigation expertise is of even greater value to clients,"said Guy Halgren, chairman of the firm. 

Commented Shulman, "Sheppard Mullin has a top-notch Finance andBankruptcy group.  I am impressed by itsreputation as a 'go-to' firm for banking and restructuring clients, and amlooking forward to working with Ed Tillinghast in New York."

New York-based partner Edward H. Tillinghast III leads SheppardMullin's East Coast bankruptcy practice. Tillinghast specializes in corporatereorganizations and restructurings, cross-border insolvencies, creditors’rights litigation, and distressed mergers and acquisitions, advising distressedasset investors on high-yield investments and insolvency-related securitizationopinions.

"I am excited to grow the firm's New York bankruptcy practice withEd, and Carren and I are very pleased to rejoin our former colleague MargaretMann,” Reid said. “Sheppard Mullin offers a strong platform for my practice,which includes the support needed to handle sophisticated bankruptcy andcorporate trust matters." 

Two months ago Margaret M.Mann joined the San Diego office of Sheppard Mullin as partner in the firm'sFinance and Bankruptcy practice group. Mann previously led Heller Ehrman's Restructuring and Insolvencypractice and was the firm’s National Hiring Chair. 

For ten years, Shulman hasrepresented the interests of Goodrich Corporation in litigation and complexcontract negotiations in nearly every airline bankruptcy worldwide.  She represented the largest West Coast powercompany in a multi-billion dollar claim litigation against Enron Corp.  Shulman was special counsel to WorldCom, Inc.in In re WorldCom, U.S. Bankruptcy Court, S.D.N.Y., 2002.  She represented secured lenders indebtor-in-possession financings in In re Indesco, U.S. Bankruptcy Court,S.D.N.Y., 2001; In re Cannondale, U.S. Bankruptcy Court, Connecticut,2003; In re Henninger Media Services, U.S. Bankruptcy Court, Virginia,2002.

Reid's experience hasencompassed for a number of years the representation of varied deal parties inthe mortgage backed securities arena. His expertise includes the interpretation and enforcement of pooling andservicing agreements, swap agreements, trust indentures, and other relateddocuments, as well as associated out-of-court restructurings and litigation.  Reid has handled an array of businessdisputes before state and federal trial and appellate courts and regulatoryagencies, as well as before tribunals appointed by the American ArbitrationAssociation and the National Association of Securities Dealers. He has significant experience with other typesof alternative dispute resolution, including mediation and summary jury trials.

Shulman received a B.A., magnacum laude, from State University of New York, Albany in 1988 and a J.D. fromNew York University Law School in 1991.  Reidreceived a B.F.A., Journalism, magna cum laude, from Southern MethodistUniversity in 1983, a B.B.A., cum laude, in 1984 and a J.D. from Universityof Texas School of Law in 1989.

Sheppard Mullin has 40attorneys based in its New York office. The firm's Finance and Bankruptcy practice group includes more than 70attorneys firmwide.

About Sheppard Mullin Richter &Hampton LLP

Sheppard Mullin is a full service AmLaw 100 firm with more than 520attorneys in 10 offices located throughout California and in New York,Washington, D.C. and Shanghai.  Thefirm's California offices are located in Los Angeles, San Francisco, SantaBarbara, Century City, Orange County, Del Mar Heights and San Diego.  Founded in 1927 onthe principle that the firm would succeed only if its attorneys deliveredprompt, high quality and cost-effective legal services, Sheppard Mullinprovides legal counsel to U.S. and international clients.  Companies turn toSheppard Mullin to handle a full range of corporate and technology matters,high stakes litigation and complex real estate, land use and finance transactions.  In theU.S., the firm's clients include more than half of the Fortune 100companies.  For more information,please visit www.sheppardmullin.com.

KENNETH L. LAY

Birth date: April 15, 1942.

Career: Former chairman and CEO. Founded Enron in 1985 when his Houston Natural Gas merged with InterNorth in Omaha, Neb., and became chairman and CEO the next year. Stepped down as CEO in February 2001 when Jeffrey Skilling took over; resumed the role when Skilling abruptly resigned on Aug. 14, 2001. Resigned as chairman and CEO Jan. 23, 2002; resigned from board Feb. 4, 2002. Appeared before Congress in 2002 and invoked the Fifth Amendment. Alleged to have sold more than 4 million shares of stock for $184 million from 1996-2001. Received bonuses of $18.1 million in 1997-2000. Lives in a $7.4 million penthouse near downtown Houston.

JEFFREY K. SKILLING

Birth date: Nov. 25, 1953.

Career: Former CEO and director. Holds an MBA from Harvard and worked for McKinsey & Co. before joining Enron in 1990. Became president and chief operating officer in 1996, then succeeded Lay as CEO in February 2001. Resigned on Aug. 14, 2001, citing personal reasons. Testified twice before Congress in February 2002. Claimed no knowledge of intimate details of Enron's financial dealings. Sold 1.3 million shares of stock for $70.6 million and transferred 2 million shares back to Enron from June 1996 to November 2001. Received $13.2 million in bonuses 1997-2000. He remains a defendant in a lawsuit alleging he knowingly endorsed deceptive and misleading financial statements. An indictment was unsealed Feb. 19 charging him with 35 counts of fraud, conspiracy, filing false statements to auditors and insider trading. He has pleaded not guilty.

ANDREW S. FASTOW

Birth date: Dec. 22, 1961.

Career: Former chief financial officer who pleaded guilty Jan. 14, 2004, to conspiracy in a deal that called for a 10-year sentence and for him to help prosecutors in the investigation. Free on bond. One of Skilling's first hires in 1990. Indicted Oct. 31, 2002, on 78 counts of wire and securities fraud, money laundering, conspiracy and obstruction for running various financial schemes designed to enrich him, his family and friends. Counts later increased to 98. Earned at least $45 million from LJM partnerships, investment vehicles named after his wife and two children. Pushed out of Enron on Oct. 24, 2001, the day after Lay expressed confidence in him to analysts. Alleged to have sold more than 687,000 shares of Enron stock for $33.7 million from June 1996 to November 2001. Pleaded guilty in January 2004 to two counts of conspiracy; agrees to cooperate with prosecutors and serve 10 years in prison when his help is no longer needed.

RICHARD A. CAUSEY

Birth date: Jan. 9, 1960.

Career: Former chief accounting officer. Handled Enron audits for Arthur Andersen LLP before joining Enron. When the LJM investments were proposed to Enron's board of directors in 1999, he and chief risk officer Rick Buy were assigned to review all Enron transactions with LJM. Fired Feb. 14, 2002, after release of an in-house report noting his failure to review the deals. Mentioned repeatedly by title in Fastow indictment as having a secret agreement with Fastow that LJMs would never lose money on deals with Enron. Told David Duncan, the top Enron auditor at Arthur Andersen, that Enron didn't like another Andersen auditor's objections to grouping investment vehicles known as Raptors to hide that two of the four that were bleeding cash. Alleged to have sold about 209,000 Enron shares for $13.3 million. Also received bonus payments of more than $1.5 million from 1997-2000 when Enron was inflating profits and hiding debt based largely on the partnerships he was supposed to police. Indictment charging him with conspiracy and fraud unsealed Jan. 22, 2004. Expanded indictment unsealed Feb. 19 to include new charges against Skilling and increased charges against Causey; 35 counts for Skilling, 31 counts for Causey. Has pleaded not guilty.

OTHERS:

Michael Kopper: Former Fastow lieutenant who pleaded guilty Aug. 21, 2002 to federal conspiracy and money laundering charges related to Enron's fall and agreed to give up $12 million in illegal profits. Kopper admitted he ran or helped create several partnerships that earned him and others millions of dollars, including kickbacks he funneled to Fastow, while hiding debt and inflating profits at Enron. Has not yet been sentenced and is cooperating with prosecutors. Declined to testify before Congress.

Lea Fastow: Wife of Andrew Fastow and former assistant treasurer at Enron. Pleaded guilty May 6, 2004, to a federal misdemeanor tax crime for helping her husband hide ill-gotten income from the government. She originally pleaded guilty to a felony tax crime in January, but withdrew that plea in April. She was sentenced to the maximum of a year in prison and ordered to surrender there July 12.

Ben Glisan Jr.: Added to an expanded Fastow indictment unsealed in May 2003. Glisan became Enron treasurer in March 2000, and earned $1 million in May of that year on a March investment of $5,826 in Fastow's Southampton Place partnership. Also negotiated for Enron in some of its transactions with Raptor. Worked with Fastow and Kopper in creating and running LJM2. Fired from Enron in November 2001. Indicted in April 2003 on charges of wire fraud, money laundering and conspiracy to commit wire fraud, falsify books and commit securities and wire fraud. He tried to cut a deal with prosecutors, but ended up pleading guilty to one count of conspiracy in September 2003. He was immediately sentenced to prison for five years and became the first former Enron executive to serve time. He later began cooperating with prosecutors.

Dan Boyle: Also added to an expanded Fastow indictment. Charged with conspiracy to falsify books and commit wire fraud related to Enron's deal to have Merrill Lynch buy three electricity-generating power barges. Boyle's lawyer says he had no authority to sign off on anything. Fastow promised Merrill that Enron would buy back the barges in 2000, which it did, booking a $12 million profit that was really a loan. Trial set to begin Aug. 18.

Enron Corp. shareholders and investors hoping to get their cut of more than $7.2 billion recovered as part of a lawsuit they filed in connection with the company's collapse are going to have to wait a little longer.

A federal judge on Friday delayed a decision on whether to approve a plan to distribute the money, part of a $40 billion lawsuit alleging that financial institutions that worked with Enron participated in the accounting fraud that led to the company's downfall.

U.S. District Judge Melinda Harmon also held off on whether to approve $688 million in attorneys' fees being requested by San Diego-based Coughlin Stoia Geller Rudman & Robbins LLP, the law firm for the lead plaintiffs in the case. If approved, the attorneys' fees would be the largest in a securities fraud case.

After a 4 1/2 hour hearing during which attorneys, Enron investors and former Enron employees argued both for and against the distribution plan and the attorney fees, Harmon said she would make decisions on both issues as soon as possible.

Patrick Coughlin, attorney for the regents of the University of California, who are the lead plantiffs, called the plan to distribute the $7.2 billion "fair and reasonable."

"The plan is doing whatever it can to help employees get whatever they can," he said.

In general, the plan is calculating shares of the settlement fund using a formula that factors in such things as when a security was bought or sold, the purchase price paid and the type of stock that was bought.

Enron stock sold for as much as $90 per share before plummeting to as low as $1 right before the company declared bankruptcy. But under the plan, shareholders and investors are set to get only a fraction of what they lost after the once mighty energy giant spiraled into bankruptcy.

To be eligible for the settlement, investors and shareholders needed to have bought Enron or Enron-related securities between Sept. 9, 1997, and Dec. 2, 2001.

About 1.5 million individuals are eligible to receive money from the settlement fund.

Coughlin also asked Harmon to approve the $688 million in attorneys' fees, saying the amount is part of an agreement his law firm signed with the regents when it first took the case six years ago to be given 9.5 percent of any settlement.

In justifying the fees, he cited several reasons, including that the 9.5 percent was far lower than the standard 33 percent most lawyers get in similar cases; the complexity of the lawsuit; and the risk involved in taking on a case that offered no guarantee of any settlements.

"This is the largest class (action) settlement ever. There is no case comparable to this result," he said.

But attorneys for several investors objected to the distribution plan and the attorneys' fees.

Avi Garbow, an attorney for former Enron workers who lost money through the company's savings plan and employee stock ownership plan, said the distribution plan was unfair because it doesn't treat all investors and shareholders equally and some will be compensated more than they should be at the expense of others.

Lawrence Schonbrun, who represents another investor, called the attorney fees being requested exorbitant and "an affront to every working person in this country."

The $7.2 billion comes mostly from settlements made with such financial institutions as Bank of America, JPMorgan Chase & Co. and Citigroup.

There are still several financial institutions that remain as defendants in the Enron case, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC. Several former Enron officers also remain, including former chief executive Jeffrey Skilling.

But the lawsuit has been on hold since an appeals court last year ruled shareholders and investors could not sue as a class, which would have allowed them to pool their resources to sue as a group and have more leverage to settle the case out of court.

The U.S. Supreme Court in January refused to hear arguments in the lawsuit. The high court in a similar case gave a measure of protection from securities lawsuits to suppliers, banks, accountants and law firms that do business with corporations engaging in securities fraud.

Attorneys for Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC have said they will again ask Harmon to drop their clients from the lawsuit in light of the Supreme Court's ruling in the similar case.

Enron, once the nation's seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable. The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Enron founder Kenneth Lay and Skilling were convicted in 2006 for their roles in the company's collapse. Skilling is serving a sentence of more than 24 years. Lay's convictions for conspiracy, fraud and other charges were wiped out after he died of heart disease in 2006.

The Supreme Court ruled Wednesday that individual participants in the most common type of retirement plan can sue under a pension protection law to recover their losses. The unanimous decision has implications for 50 million workers with $2.7 trillion invested in 401(k) retirement plans. James LaRue of Southlake, Texas, said the value of his stock market holdings plunged $150,000 when administrators at his retirement plan failed to follow his instructions to switch to safer investments.

The issue in the LaRue case was whether the Employee Retirement Income Security Act permits an individual account holder to sue plan administrators for breaching their fiduciary duties.

The language of the law refers to recovering money for the "plan" rather than for an individual, raising the question of whether a participant can sue solely for himself.

Justice John Paul Stevens, in his opinion for the court, said that such lawsuits are allowed. "Fiduciary misconduct need not threaten the solvency of the entire plan to reduce benefits below the amount that participants would otherwise receive," Stevens said.

The decision overturned a ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Va.

Unlike people enrolled in traditional pension plans, employees in 401(k) plans, which have exploded in number in the past two decades, choose from a menu of options on where to invest their money. That puts workers squarely in the middle of decision-making about their pensions and inevitably leads to the kind of disputes LaRue has with his plan's administrators.

"Defined contribution plans dominate the retirement plan scene today," unlike when ERISA was enacted in the mid-1970s, Stevens said.

Many traditional pension plans guaranteeing a fixed monthly benefit have either been frozen or terminated, and 401(k) plans are the main source of retirement income, said the Air Line Pilots Association, which represents 60,000 pilots at 41 air carriers.

The Bush administration argued in support of workers. The government said the appeals court ruling barring LaRue's lawsuit would leave 401(k) participants without a meaningful remedy from any federal, state or local court when plan administrators fail to live up to their duties.

Business groups supported LaRue's employer. They argued that ERISA is aimed at encouraging employers to set up pension plans, while guarding against administrative abuses involving the plan as a whole. The law doesn't permit individual lawsuits like LaRue's, the business groups said.

Congress enacted ERISA after some widely publicized failures by companies and labor unions to pay promised pensions. Workers in class-action lawsuits have long relied on the law, most recently in the scandal-ridden collapses of companies like Enron and its 401(k) plan for workers.

The term 401(k) refers to a section of the Internal Revenue Code.

Participants in 401(k) plans do not know how much money they will receive in retirement. Employees invest a certain amount each month and how much they get back depends on how well their chosen investments have performed.

The soaring and incendiary career of San Diego class-action lawyer Bill Lerach came to an ignominious end yesterday, as a judge sentenced the onetime “King of the Shareholder Suit” to two years in federal prison. Following a 2½-hour hearing, U.S. District Judge John Walter sentenced Lerach to the maximum prison term under a plea agreement Lerach reached with prosecutors for his role in a client kickback scheme.

Walter rejected Lerach's request to spend part of his sentence in home detention and rebuked Lerach for his criminal conduct, saying he had “corrupted the law firm and corrupted it in the most evil way.”

Walter said he would have imposed a stiffer sentence on his own and considered rejecting the plea arrangement because of the gravity of Lerach's offense.

The secret kickbacks paid by Lerach's former firm, Milberg Weiss, made it easier for the firm to be named lead counsel and to command a bigger share of settlement fees in its lawsuits against major corporations.

Lerach pleaded guilty last year to a single count of conspiracy and admitted to participating in the scheme, which sought clients with large stock portfolios and asked them to serve as ready plaintiffs when negative information surfaced about a company. In return, Milberg Weiss paid these clients a percentage of the firm's legal fees.

Under law, the lead plaintiff in a class-action shareholder suit must serve as a representative of the class and cannot have a special interest or hidden inducement beyond other shareholders in the case.
“In the court's view, Mr. Lerach's conduct is one of the most serious crimes to come before this court,” Walter said. “The scope and duration of this conspiracy was breathtaking.”

Lerach, 61, who wore a dark suit, sat quietly with his fingers interlaced on the table in front of him. As the judge delivered his sentence, Lerach kept his eyes fixed on the table, his face flushed with color.

Earlier in the hearing, Lerach addressed the judge and a courtroom packed with his supporters, apologizing for “embarrassing” his family and law firm for conduct that was “completely unacceptable in a lawyer.”

“I pleaded guilty in this case because I was guilty,” Lerach said, his voice quavering. “I knew what I was doing was wrong, I just did not have the strength of will or the strength of character to not join in on what was going on in our bar.”

Lerach is likely to be disbarred as a result of the conviction.

After joining the Milberg Weiss law firm and moving to San Diego in 1976, Lerach became a nationwide pioneer in developing new legal strategies for shareholder litigation. His smashmouth tactics made him a pariah in corporate boardrooms, but a force to be reckoned with nonetheless.

He may be known most recently as the lawyer who helped recover $7.2 billion for investors in Enron Corp.

Yet Lerach also devised the strategy used to recover $240 million for investors who were bilked in the 1989 collapse of the Lincoln Savings & Loan in Irvine.

He became a key strategist in similar battles waged over public bond meltdowns throughout California and Washington state, and in the sprawling case against junk bond king Michael Milken and the defunct investment firm Drexel, Burnham and Lambert.

Some 160 people wrote letters of support for Lerach, including U.S. Sen. Carl Levin, D-Mich., and consumer advocate Ralph Nader.

“Some of the things he did were brilliant and really advanced the cause of shareholders,” said Sean Coffey, a lawyer with New York-based Bernstein Litowitz Berger & Grossman, who often battled Lerach for the lead position in lawsuits. “On the other hand, he's a confessed criminal who really bruised, rightly or wrongly, the rest of the bar.”

Lerach's attorney, John Keker, argued during yesterday's hearing that his client had stopped participating in the conspiracy in 1999. Keker said Lerach was “shocked” to learn that colleagues in New York had secretly paid a client as late as 2003 – at least two years after the government began investigating the firm.

The judge rejoined that Lerach had benefited for years after he stopped actively recruiting clients to the conspiracy by collecting millions of dollars in fees from tainted cases.

Walter also berated prosecutors for agreeing to a sentencing range that he felt was not severe enough, saying he had considered rejecting Lerach's plea deal and forcing the case to go to trial.

“The conduct to me just goes to the core of the judicial system,” Walter said. “This whole conspiracy corrupted the law firm and corrupted it in the most evil way. He has to be punished for what he did. It comes down to retribution.”

Walter noted that Lerach had not sought to lighten his sentence by agreeing to cooperate in the government's ongoing investigation of Milberg Weiss and co-founder Melvyn Weiss.

Amid mounting pressure from the federal investigation, Lerach led a breakaway from Milberg Weiss and founded the San Diego law firm now known as Coughlin Stoia Geller Rudman & Robbins. He resigned from that firm in August.

In addition to the prison term, Lerach agreed to forfeit $7.75 million in unlawful gains, pay a $250,000 fine and serve two years of probation. He is set to report to federal prison in California on April 21.

Lerach, who somberly shook hands with supporters outside the courtroom, had no comment on the sentence.

New York-based Milberg Weiss and Melvyn Weiss have been indicted as part of the same conspiracy, and have pleaded not guilty. Trial is set for August. Two former Milberg attorneys and three clients have pleaded guilty in the case.

As famed class-action lawyer William S. Lerach steps before a federal judge in Los Angeles today to learn his sentence in a wide-ranging fraud and conspiracy probe, his misdeeds and those of former colleagues may be helping to alter the way securities law is practiced.

The number of class actions filed on behalf of disgruntled investors has been dropping, and legal experts say that is partly because practitioners are distancing themselves from the aggressive tactics that made Lerach, 61, and his former partners courtroom legends and lightning rods for critics of the civil justice system.

In some instances, judges have balked at certifying class actions they have deemed frivolous and in others have rejected settlements for paying attorneys at the expense of plaintiffs, sometimes citing the ongoing prosecution of Lerach's former firm, once known as Milberg Weiss Bershad & Schulman.

Lerach left in 2004 to found a San Diego class-action practice now called Coughlin Stoia Geller Rudman & Robbins. Lerach resigned from that firm in October, days before he pleaded guilty to one count of conspiracy.

"What you're watching is a bit of a transition from a world in which class-action practice did have some disreputable aspects to a different model that's much more responsible, publicly oriented and closely regulated," said Stephen Bundy, who teaches law at Boalt Hall, at UC Berkeley.

Lerach's trademark vitriol -- he famously threatened to "destroy" companies that balked at settling -- and his fondness for television cameras may belong to the past. Lawyers who now dominate the field are far less confrontational, Bundy said, and their resumes resemble those of their big-firm opponents.

Several factors may explain the drop in securities class-action filings from the peak years of 2000 to 2004, including, until recently, rising stock prices.

Bundy said, though, that the decline also reflects an evolution from "smaller, informal and slightly shady firms" to more mainstream law practitioners.

Federal rules helped push the change.

Until 1995, the first law firm to file suit could direct the class action and reap the largest legal fees. The rules favored firms with a stable of ready-made plaintiffs: people with a few shares in many companies who were willing to immediately lend their name to litigation. That year, Congress changed the law so the lead law firm should be one that represents the plaintiff with the most significant holdings at risk.

These days, state pension funds and other institutional investors are the major plaintiffs in shareholder suits. Such big-money investors are reluctant to discuss their legal strategies, but litigation watchers contend that they are choosing their lawyers more carefully -- examining a firm's ethical record, for example, and even its campaign contributions.

"There's heightened concern," said San Francisco lawyer Richard Heimann, who represents plaintiffs in securities class actions. Fund managers who have approached him want reassurance "that there weren't any skeletons in our closet," he said, often asking for written declarations from prospective lawyers that they have not been indicted or disciplined by the bar.

The Milberg Weiss prosecutions also are likely to make lawyers more careful, said Stephen Gillers, who teaches legal ethics at the New York University School of Law.

"It has to worry them even if they're doing nothing wrong because the Justice Department has shown its willingness to look into how they do business," he said.

Some institutional investors have opted out of class actions in recent years, believing they would do better on their own, Heimann said.

His firm represented Merrill Lynch in a securities class action against McKesson HBOC a couple of years ago. Class members ultimately recovered 15% of their losses in that case, he said, but Merrill Lynch recouped $150 million -- more than its monetary loss -- by opting out of the class and settling with McKesson separately.

Heimann also helped settle a case last year in which two Alaska public funds recovered 90% of their economic losses by bowing out of the class. It was many times more than they would have gotten if they'd remained in, he said.

Some legal experts say the Milberg Weiss probe also has prompted judges to more closely monitor these cases, particularly those involving that firm or Coughlin Stoia.

Federal rules require judges to ensure that class-action settlements are fair and adequate for individual plaintiffs.

Noting those rules, several companies targeted by Milberg Weiss or Lerach's former firm have asked judges within the last year to refuse class-action status, citing the firm's indictment or Lerach's guilty plea. The motions have met with mixed results.

Lawyers split on whether the case is casting a shadow beyond the two law firms.

New York plaintiffs' lawyer Sean Coffey sees no evidence that judges are scrutinizing settlements or fee requests from other firms more closely. But a Los Angeles defense attorney said that since the prosecution, he has been called into the judge's chambers to justify the legal fees in the case and how much money class members will get.

Those settlement agreements "used to be accepted more readily," said the lawyer, who requested anonymity out of concern that pending settlements might be jeopardized. "Now they make you really explain."

Until his guilty plea in October, the pugnacious, Brillo-haired Lerach was one of the most feared lawyers in the nation, boasting of having wrung billions over the years for investors from Enron Corp., WorldCom and Intel Corp. and a roster of blue-chip corporations.

Many clients and consumer groups credit Lerach with defending them against what he called the "dishonorable and despicable greed" of corporate America. Corporate executives denounced the lawsuits as extortion but usually chose to settle rather than roll the dice at trial, paying out millions to plaintiffs.

Two former partners at Milberg Weiss -- David Bershad and Steven Schulman -- also have pleaded guilty to fraud charges as part of an alleged scheme to pay $11.4 million in illegal kickbacks to clients who agreed to serve as ready-made plaintiffs in class actions. The two men await sentencing for their roles in the conspiracy which, prosecutors allege, earned the firm $250 million in fees from dozens of cases stretching back more than 20 years.

The law firm and co-founder Melvyn Weiss have pleaded not guilty, but the probe has triggered an exodus of lawyers and clients. A trial is scheduled for August.

John Beisner, a Washington lawyer who faced Lerach in a number of fraud suits, said the case marked a milestone. The guilty pleas, he said, have sidelined "some of the great lions of the plaintiffs bar."