"What'd the government think would happen?"

So said Melvyn Weiss, Milberg Weiss' lead partner, in this article last week in The Recorder in response to the first round of what could be many lawyer departures following the firm's recent indictment.

The latest on the Milberg Weiss Watch:

• Boca Raton partner Maya Saxena is leaving to start her own firm.  Saxena was one of two Milberg partners permanently resident in Boca, the other being fellow blogger Christopher Jones of the PSLRA Nugget.
• According to this article in The Recorder, three Milberg partners--including at least one member of the firm’s executive committee and two members of the firm’s management committee--have confirmed their departures. 

And partners at competing class action plaintiff firms say they're being bombarded with phone calls and resumes of Milberg lawyers seeking jobs at firms without criminal exposure — and without the baggage that criminal charges create for plaintiff lawyers seeking large, institutional clients.

On Thursday, Joe Whatley Jr., head of the Alabama plaintiff firm Whatley Drake, got his New York bar card. And on Friday, he confirmed that in coming months he'll be opening a New York office with current Milberg Weiss partner Deborah Clark-Weintraub and the entirety of Milberg's health-care practice group — which is led by Whatley's wife, Edith Kallas.

"This is something that's not bitter with Milberg," Whatley said. "She's representing medical societies and people like that, and she wanted to make sure she could deal with them and continue to represent them."

In addition to Kallas, the health-care group — which comes with a handbag of high-profile cases, such as litigation against brokerage firm Marsh & McLennan — will bring another Milberg partner, Joseph Guglielmo, six current Milberg associates and one Milberg staff lawyer to Whatley Drake.

May 24, 2006

About That $216 Million...

I'm no criminal defense lawyer and I have no sense for whether this is a likely result or not, but an article yesterday by Pam Smith in The Recorder flagged an issue related to the Milberg Weiss indictment that I had not focused on before.  With respect to the $216.1 million in attorneys fees that Milberg Weiss was awarded in settlements involving allegedly improper kickbacks to plaintiffs, well, the DOJ wants this "tainted" money to be forfeited to the United States.  All of it. 

As stated in paragraph 83 of the indictment,

Pursuant to Title 28, United States Code, Section 2461(c), Title 18, United States Code, Section 981(a)(1)(C), and Title 21, United States Code, Section 853, each of defendants MILBERG WEISS, DAVID J. BERSHAD, STEVEN G. SCHULMAN, and SEYMOUR M. LAZAR convicted under Count One of this Indictment shall forfeit to the United States any and all property, real or personal, which constitutes or is derived from proceeds traceable to such offense, including the following:

a. with respect to MILBERG WEISS, the more than approximately $ 216.1 million in attorneys’ fees obtained by MILBERG WEISS in the Lawsuits and litigation resolving the Lawsuits (the “tainted attorneys’ fees”).

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 23, 2006

SEC Files First Enforcement Action Under Patriot Act

Did you know that the SEC's Division of Enforcement brings cases under the USA PATRIOT Act? 

Did you know that "USA PATRIOT" is actually an acronym for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism?

As of yesterday, the SEC does bring such cases and, as of today, you will be able to answer "yes" to both questions above.

The SEC announced yesterday that it had

sanctioned Los Angeles broker-dealer Crowell, Weedon & Co. for failing properly to document its customer identification program. The USA PATRIOT Act seeks to protect the U.S. financial system from money laundering and terrorist financing by, among other things, requiring broker-dealers to implement and document identity verification procedures for all new accounts.

The SEC stated that without admitting or denying any of the findings, Crowell, Weedon consented to a C&D order prohibiting future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder.  The SEC further alleged that Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 require a broker-dealer to comply with certain record-keeping requirements under the Bank Secrecy Act, as amended by the USA PATRIOT Act.

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 22, 2006

How the SEC Caught the Estonian Spider Hackers

Back in November I applauded the SEC for its ability to crack the unusual insider trading case allegedly perpetrated by the Estonian Spider Hackers.  I concluded that post by stating that I'd love to know the story behind how the SEC finally caught these guys.

Now, thanks to this detailed article by Sonja Sherwood of the Philadelphia Business Journal, the full story is available.  The article is a very flattering look at the efforts by Dan Hawke and others in the SEC's Philadelphia office to solve the mystery of an Estonian brokerage firm that made hundreds of perfectly-timed trades where they were able to buy on upcoming good news and sell on upcoming bad news.

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 19, 2006

Milberg Weiss, Two Partners Indicted

As expected, the law firm Milberg Weiss Bershad & Schulman and two of its partners were indicted yesterday.  The firm quickly shot back through a new website--Milberg Weiss Justice--and declared that the indictment was unjust, misguided, and misinformed.

The WSJ Law Blog reports that today, the State of Ohio became what appears to be the first Milberg client to defect following the indictment, firing Milberg Weiss in its securities litigation against Putnam American Government Income Fund related to alleged improper mutual-fund trading.  The Law Blog says that

In the letter to firm co-founder Melvyn Weiss, Attorney General Jim Petro writes: “Because the law firm of Milberg Weiss was criminally indicted yesterday by a federal grand jury in the Central District of California, the Ohio Attorney General’s office feels that your representation, as well as that of your firm, of our clients in this matter will be severely compromised.”

Basically no good news right now for Milberg Weiss.  Wait, I take that back--according to this article in the NY Sun, NY Attorney General Elliot Spitzer is hastily returning tens of thousands of dollars in campaign contributions received from Milberg Weiss and the indicted partners.

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 18, 2006

Day of Reckoning for Milberg Weiss

According to numerous reports, an indictment of securities class action powerhouse Milberg Weiss Bershad & Schulman LLP is expected later today.  A press conference by the U.S. attorney's office in Los Angeles to announce "an indictment expected to be returned today by a federal grand jury" that was originally scheduled for 3:15 pm today (EDT) has been pushed back to sometime after 5 p.m. today. 

Stay tuned....

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

"Two Unidentified Men in a Bar"

This is what happens when you tell the SEC that your impeccably-timed options trading--which  netted you over $300,000 days later when a merger involving the company in question was announced--was based on information you received from "two unidentified men in a bar."

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 12, 2006

Insider Trading, Inc.

The Plotkin/Pajcin insider trading ring discussed here and here, and which continues to unravel, is the most audacious insider trading case ever, in my opinion.  And it took me about 5 minutes to figure out the proper adjective to use in the prior sentence before settling on "audacious." 

To me, the case is paradigm shift in insider trading--Plotkin and Pajcin were not your standard insider trading defendants working at a company who learned in the course of business that a material transaction was about to occur.  Far from it. 

If the SEC and DOJ's allegations are true, these guys actually sat down together and mapped out a detailed business plan to make money through insider trading.  You can almost imagine them brainstorming and making a list of all of the ways that inside information could possibly be obtained.  According to the SEC/DOJ, they allegedly followed through on many of them. 

Indeed, "Insider Trading, Incorporated" would have been an appropriate name for this "business."   After all, Insider Trading, Inc. allegedly had employees--the DOJ's criminal complaint alleges that the defendants actually recruited people via Craigslist to go out and get jobs at the plant that printed Business Week so that they could obtain advance copies of the magazine.  Insider Trading, Inc. also allegedly had distinct product lines:

• the Investment Banker Information product line;
• the Business Week Information product line; and
• the Grand Jury Information product line. 

There were also new product lines in the pipeline that apparently never got off the ground, such as the Exotic Dancer Information product line.   Who knows what other product lines were on the drawing board?  I bet we learn about others as this case unfolds.

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top

May 11, 2006

The SCAS 50 for 2005

For the third year, my company (ISS' Securities Class Action Services) has issued its "SCAS 50" report.  Based on data from the SCAS database, the SCAS 50 lists the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2005 in which the law firm served as lead or co-lead counsel.  The full report is available here.

2005's Top 10:

RANK	LAW FIRM	SETTLEMENT TOTAL	# OF SETTLEMENTS	AVERAGE
1	Bernstein Litowitz Berger & Grossmann	$3,745,600,714	9	$416,177,857
2	Barrack, Rodos & Bacine	$3,671,825,714	5	$734,365,143
3	Lerach Coughlin Stoia Geller Rudman & Robbins	$1,797,130,893	47	$38,236,828
4	Milberg Weiss Bershad & Schulman LLP	$637,460,000	34	$18,748,824
5	Grant & Eisenhofer	$322,372,420	6	$53,728,737
6	Schiffrin & Barroway	$265,995,000	14	$18,999,643
7	Berger & Montague, P.C.	$229,300,000	10	$22,930,000
8	Pomerantz Haudek Block Grossman & Gross	$226,250,000	3	$75,416,667
9	Bernstein Liebhard & Lifshitz LLP	$161,900,000	7	$23,128,571
10	Labaton Sucharow & Rudoff LLP	$152,850,000	9	$16,983,333

Permalink | Comments (0) | TrackBacks (1) | Print Article

Back To Top

May 10, 2006

Thanks for Nothing

In the "egregious, flat-out betrayal" category for insider trading cases we have previously seen:

1.  Wife betraying husband;
2.  Husband betraying wife; and
3.  Boyfriend betraying girlfriend (and then dumping her, to boot)

What's left?  Well, as of May 2 we now have divorced woman betraying divorced man.  The SEC alleges that Marnie Sharpe learned from her "close friend" about a biopharmaceutical company's favorable and confidential clinical trial results.  The close friend ("Among other things, Sharpe and the executive, both divorced, met socially and exchanged email, phone calls and text messages") was a senior executive at the company, and although he shared the information with Sharpe he allegedly

emphasized that the information was extremely sensitive and that she could not repeat it to anybody. Sharpe confirmed that she knew the information was confidential. Sharpe then asked if she or her parents could buy Renovis stock and he answered "of course not."

Immediately after these conversations, Sharpe spoke to her father, Leclerc, and shared the information she had just learned about the Renovis trial results. Right after his phone call with his daughter, Leclerc called his broker to discuss raising $50,000 in one day for an investment.

Another lowlight of this case is that the allegedly insider-trading father, Leclerc, "asked his broker whether a company could identify him as a purchaser of its stock, and was told that the company could not."

Permalink | Comments (0) | TrackBacks (0) | Print Article

Back To Top