By Gina Keating
LOS ANGELES (Reuters) - Two former Milberg Weiss partners were sentenced on Monday to six months in federal prison for their roles in a scheme to pay clients to serve as plaintiffs in class-action lawsuits against U.S. corporations.
In sentencing David Bershad, 68, and Steven Schulman, 57, in separate hearings on Monday, U.S. District Judge John Walter rejected calls for leniency from their lawyers and prosecutors, citing the "breathtaking" scope of the conspiracy.
In addition to a prison sentence, Walter ordered Bershad to submit to three years of supervised release. He will begin serving his sentence on January 5 at a federal prison camp in Otisville, New York.
As part of plea agreements, Bershad paid $8 million and Schulman paid about $2 million in fines and forfeiture of gains from the tainted cases.
His attorneys argued that Bershad should not serve prison time because his cooperation with the government probe had already taken a considerable personal toll, resulting in his divorce and lawsuits filed against him by his former firm.
Prosecutors also asked the judge to let Bershad serve half of a recommended six-month prison term in a community detention facility "in recognition of (his) substantial assistance in this case."
Walter said, however, that he considered Bershad's involvement in the conspiracy to be on par with that of Milberg partners Melvyn Weiss and William Lerach, who are now serving 30-month and 24-month prison terms, respectively.
Bershad told the court on Monday that he took "personal responsibility for what I did."
"It was wrong," he said.
The parties also requested a light sentence for the now-disbarred Schulman, who has health issues and a daughter to care for and has been financially ruined by the case.
"My error was to take the wrong route," Schulman told the judge. "And from that, all else followed. Everything."
In 2007, Bershad became the first of four Milberg partners to plead guilty in their seven-year probe of a wide-ranging kickbacks scheme that helped the firm, now known as Milberg LLP, become one of the top U.S. class-action firms.
Schulman's plea to a racketeering charge came several months later, when he admitted to negotiating secret kickbacks with a paid plaintiff in several Milberg class actions.
Bershad admitted to conspiring to hide the secret kickbacks from judges who presided over the firm's class-action and shareholder lawsuits, and of coaching plaintiffs to lie about the arrangement in sworn statements.
The arrangement allowed Milberg to be first to file its lawsuits and gave the firm a better shot at winning lead counsel status and the larger fees awarded to lead lawyers.
Bershad initially collected cash for the kickbacks, usually about 10 percent of the firm's fees, from fellow partners and kept it in a safe in his office, prosecutors said.
When the amount of kickbacks became too large to conceal, Milberg funneled the funds through other law firms, disguised as referral fees, and in one case held a phony art auction to compensate a client, prosecutors said.
In all, Milberg admitted to paying millions in secret kickbacks in more than 165 lawsuits filed from the 1970s through 2005. Those lawsuits brought Milberg about $240 million in fees.
Bershad's plea and cooperation helped prosecutors indict Weiss and obtain plea agreements from Lerach, the law firm, and Schulman, prosecutors and Bershad's attorneys said on Monday.
The law firm agreed to pay $75 million to settle the case and to employ a compliance monitor and enact a "best practices" program for two years.
Sentencing for the last of the Milberg defendants, a former client and an outside attorney, are scheduled for next week.
(Reporting by Gina Keating, editing by Matthew Lewis)
