MINNEAPOLIS (CN) – The law firm Milberg LLP and three of its attorneys conspired to extort an $18 million settlement from Stratosphere Corp. and Grand Casinos by hiring a “damage expert” to assert that two baseless securities class actions against the companies had cost shareholders more than $165 million, a developer of Indian-owned casinos claims in Federal Court.
Lakes Entertainment is the legal successor to Grand Casinos, which faced two class actions brought by Milberg’s predecessor firm, Milberg Weiss Bershad Hynes & Lerach. The lawsuits, filed by lead attorney William Lerach, accused Grand Casino of violating federal securities laws. Plaintiff counsel included Lerach’s partners Kevin Roddy and Spencer Burkholz. Lakes notes that Lerach has since been disbarred for criminal misconduct.
During deposition, Milberg Weiss produced an expert report prepared by John Torkelsen, in which Torkelsen allegedly stated that his firm, Princeton Venture Research, received $90 to $400 per hour and that he personally made $390 an hour analyzing how much the lawsuits had cost Stratosphere and Grand Casino shareholders.
When he estimated the damages at more than $165 million, the Stratosphere defendants agreed to an $18 million settlement in 2000, according to Lakes.
The plaintiff says it later learned that Torkelsen had been hired on a contingency fee basis, giving him a lucrative incentive to inflate the damage report. Lakes claims Torkelsen and his firm earned more than $145,000 for their services – far more than previously reported.
Lakes accuses the defendants of fraud, conspiracy, negligent supervision and racketeering. It demands triple the $18 million settlement amount.
George Eck with Dorsey & Whitney is representing the plaintiff.