Federal Judge Hopeful Young Lawyers Heed Disgraced Partner's Words

Two Ex-Partners Get Jail Time for Dirty Tricks in Litigation
The New York Law Journal by Amanda Bronstad - October 28, 2008

LOS ANGELES – A federal judge has sentenced David Bershad, a former senior partner at Milberg, and Steven Schulman, another former Milberg partner, each to six months in prison. The two are the last of the four former partners at Milberg, previously called Milberg Weiss, who were charged in the government's kickback case, which alleged the firm and seven of its partners obtained $251 million in attorney fees by making secret and illegal payments to lead plaintiffs in shareholder and class action securities cases. Earlier this year, William Lerach, who left Milberg in 2004 to form his own firm, now called Coughlin Stoia Geller Rudman & Robbins, was sentenced to 24 months, and Melvyn Weiss, co-founding partner of Milberg, was sentenced to 30 months.

On Monday, U.S. District Judge John Walter, of the Central District of California, who has been overseeing the Milberg case, drew several distinctions between Bershad and Schulman and their senior counterparts, Lerach and Weiss. Most specifically, he criticized several lawsuits that Milberg has filed against Schulman and Bershad in an attempt to recover funds for a $75 million payment the firm is obligated to pay under a non-prosecution agreement reached several months ago with prosecutors. In contrast, Lerach and Weiss, who are now in prison, received significant payments from the firm. "I'm truly saddened by the fact that obviously some great lawyers who have come before me," Walter said on Monday, are "standing at the lectern for the last time." Bershad pleaded guilty last year to conspiring to obstruct justice and making false statements under oath. As part of the deal, Bershad has paid $7.75 million in forfeitures. On Monday morning, before a full courtroom, Walter sentenced Bershad to six months in prison and imposed a $250,000 fine. He ordered Bershad to begin serving his sentence on Jan. 5. Bershad has requested serving his sentence in a men's minimum security facility in Otisville, N.Y. Bershad's lawyers initially had sought a sentence of probation – a move that his lawyer, Cristina Arguedas, a partner at Arguedas, Cassman & Headley in Berkeley, Calif., admitted was an "uphill battle" given Walter's reluctance to grant leniency in his sentencing of other defendants in the case. "He was hoping for probation," Arguedas said after the hearing. "We thought he had legitimate arguments for probation." But she admitted that Bershad had anticipated Walter to impose incarceration.

In fact, at the hearing, Walter said he was inclined to sentence Bershad to a sentence not unlike that imposed on Lerach, who pleaded guilty to the same conspiracy charge. In doing so, Walter noted that Bershad was responsible for the daily operations of the law firm. But in court, Bershad's lawyers argued that their client's participation and early plea deal with federal prosecutors significantly helped the government obtain later plea deals with Lerach and Weiss. "When David announced he was pleading guilty, everything changed," Arguedas said. "David Bershad is responsible for the pleas of all the people who followed him." Arguedas also argued that Bershad lost much more than Lerach did when he decided to plead guilty in the case. Specifically, he lost his marriage and much of his wealth, as well as his professional relationships and bar license. In the end, Walter appeared persuaded by Bershad's remorse and the letters of support. He also acknowledged Bershad's assistance in the case, although he didn't grant a request by federal prosecutors for a sentence of three months in prison, plus three months of community confinement.

Assistant U.S. Attorney Richard Robinson had argued that Bershad corroborated the testimony of another former Milberg partner regarding bonuses that were given to partners who paid the kickbacks. He also confirmed information revealed in documents about a kickback Weiss had agreed to pay to Steve Cooperman, a paid plaintiff, which was disguised as a phony art option. And he provided new information, such as the existence of paid plaintiffs in Florida and Weiss's efforts to obstruct justice during the investigation by refusing to turn over certain documents. In court, Bershad said: "I personally take responsibility for what I did. It was wrong." Monday afternoon, in a less crowded courtroom, Walter sentenced Schulman to six months in prison, plus a $250,000 fine. Schulman has paid $1.85 million in forfeitures, as well. Schulman, who pleaded guilty last year to a federal racketeering charge, is scheduled to begin his sentence on Jan. 13 and has requested that he serve his time in a minimum security prison in Schuylkill County in Pennsylvania. At the hearing, Assistant U.S. Attorney Douglas Axel said Schulman's plea deal provided substantial information relating to the firm's payments to Howard Vogel, one of the lead plaintiffs. Vogel was sentenced earlier this month to three months in prison. But he also said that Schulman provided less information than did Bershad because he waited so long to plead guilty. As a result, prosecutors were seeking up to 12 months in prison.

Schulman's attorney, Herbert Stern, of Stern & Kilcullen, in Roseland, N.J., said his client waited to plead guilty in an attempt to salvage his law license as part of a potential deal with prosecutors. He said Schulman, who had requested six months in prison, should not be sentenced to more months than Bershad. "Unlike some of the other folks who have come before you, he's wiped out financially," Stern said. In court, Schulman said he hoped that young lawyers would learn a lesson from his mistake when faced with similar ethical choices. "My error was to take the wrong route when that occurred," he said. "Today, I pay already a high price. I really don't know exactly how I will get out of this problem." Initially, Walter criticized Schulman for having attempted to minimize his role in the Milberg conspiracy. But in concluding his sentencing decision, Walter acknowledged the numerous letters written on Schulman's behalf and the impact that prison time would have on his three young children. "To have a career such as yours end in such a fashion is a true tragedy," Walter said. "I hope young lawyers across the country will listen to your words."