MANHATTAN (CN) – A former partner in Milberg Weiss has sued four of its founding partners – Melvyn Weiss, David Bershad, Steven Schulman, and William Lerach – claiming they lied to him and other attorneys about their secret kickbacks to plaintiffs in shareholder class actions. Michael Buchman sued his former partners in Federal Court on Tuesday, as the firm, now known as Milberg, agreed to pay $75 million to the United States to settle criminal complaints in the scheme.
Buchman says he joined Milberg Weiss Bershad Hynes & Lerach in January 1997 and was made a partner in December 2000. He worked in the antitrust division until he left the firm in February 2007. When Lerach left to set up his own office in 2004, the firm changed its name to Milberg Weiss Bershad & Schulman.
Buchman says the defendants lied to him, and to other attorneys, after federal prosecutors unsealed an indictment in which Seymour Lazar and Paul Selzer alleged that “certain partners of Milberg Weiss” had secretly paid them kickbacks to serve as plaintiffs in securities class actions.
Buchman’s complaint states: “In various meetings that occurred at Milberg Weiss after the Lazar Indictment, Defendants Weiss, Bershad and Schulman, who were united in interest, repeatedly represented to plaintiff and to other partners in Milberg Weiss hat the accusations contained in the Lazar Indictment were untrue, politically motivated, and that the government’s case rested on mischaracterization of legitimate referral fees paid to other law firms, which assertedly had been duly reported to the government of Forms 1099. Weiss, for example, vigorously denied that the alleged payments had been made to Lazar, and represented that Lazar’s sold motivation for pursuing multiple class actions had been to recover for his own injuries and to serve as ‘a crusader.’
“Believing these representations of fact by defendants, plaintiff continued to serve as a partner in Milberg Weiss. Similarly, most other Milberg Weiss partners who had no prior knowledge of defendants’ unlawful and unethical acts also continued throughout the rest of 2005 to serve as Milberg Weiss partners.
“Defendants had a fiduciary duty to plaintiff and to other Milberg Weiss partners to be honest and forthcoming with government authorities. Were the allegations made in the Lazar Indictment true, defendants had a duty truthfully to reveal their unethical and unlawful conduct to the authorities and to take personal responsibility for such conduct. Instead, defendants refused to acknowledge the truth and continued to misrepresent the facts to government authorities, thereby putting Milberg Weiss as a firm, and the financial and professional interests of plaintiff and other innocent Milberg Weiss partners, in grave jeopardy.”
Buchman says that Weiss “hid behind the firm” and, as prosecutors alleged, “demonstrated ‘criminal arrogance’ by continuing to negotiate kickbacks and hiding evidence.” The complaint continues: “For the duration of their time as Milberg Weiss partners, defendants Bershad and Schulman, acting in concert with Weiss, likewise demonstrated ‘criminal arrogance’ in their dealing with the United States government and likewise ‘hid behind the firm.’ Weiss, Bershad and Schulman had legal control over Milberg Weiss. In showing such ‘criminal arrogance’ and in ‘hiding behind the firm,’ Weiss, Bershad and Schulman put their own interests above those of their partners and the firm, in violation of their fiduciary duties to plaintiff and other Milberg Weiss partners.”
The complaint claims the defendants secretly collected “a horde of cash in a credenza in Bershad’s office” and describes “taking a briefcase loaded with hundreds of $100 bills to a Howard Johnson’s restaurant of Holiday Inn in Newburgh, New York, to be given to someone involved in the scheme, and dispensing cash to representative plaintiffs in casinos.
“These appalling allegations caused distress and professional embarrassment to plaintiff, who came from a public service background, and many other Milberg Weiss partners, who had had no prior of defendants’ unethical and unlawful conduct.”
Buchman demands punitive damages for fraud, fraudulent concealment, breach of fiduciary duties, unjust enrichment, and aiding and abetting breach of fiduciary duties. He filed the case pro se.