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Column: Investors pay the price for Milberg Weiss' greed

The law firm name of Milberg Weiss once generated hope for individual shareholders who, convinced they were cheated by companies as notorious as Enron, demanded restitution.

The same name caused fear and indigestion for hundreds if not thousands of other corporations facing seemingly indiscriminate lawsuits for the slightest drop in their stock prices. So quick was the law firm to sue — claiming fraud — that it used pre-printed legal documents leaving blank only the name of the targeted company and the amount of the stock decline in question.

Now the Milberg Weiss name is mud. The law firm this month agreed to hand over $75-million rather than fight federal charges it made $250-million over two decades by filing legal actions on behalf of professional plaintiffs who received $11.3-million in kickbacks. A trial had been expected to start in August.

The settlement ends a long inquiry that resulted in Milberg's two top securities class-action trial lawyers — Melvyn Weiss and Bill Lerach — facing prison sentences and millions in fines and forfeitures.

In the heyday of class-action lawsuits spanning roughly the 1995-2005 era, Milberg Weiss was the industry's Mother Ship. And the law firm spared few Tampa Bay firms whose dipping stocks prompted swift charges of fraud on behalf of investors who had lost money when share prices fell.

The local targets of Milberg Weiss in those years were a Who's Who of area corporations — those well established and powerful as well as those entrepreneurial and young.

They ranged from Florida Progress, TECO Energy, SRI Surgical, Catalina Marketing, Sykes Enterprises and Cryo-Cell to Anchor Glass, Tropical Sportswear, Z-Tel, Danka Business Systems, Uniroyal Technology, Pinnacle Holdings and Insurance Management Solutions.

There were others. It might be shorter to list those local companies spared a Milberg Weiss class-action lawsuit. This was the firm, after all, that successfully won billions of dollars against some of the most corrupt corporations in modern history, including Houston's Enron Corp. and New Jersey's Tyco International (home of the CEO's $6,000 shower curtain).

We'll never know for sure if the expense, time and frustration brought by so many Milberg Weiss lawsuits contributed to the demise or eventual takeover of so many of Tampa Bay's once-local companies. But class-action strains probably played a part. Among the few survivors are TECO, SRI, Sykes and Cryo-Cell. Most of the other companies were bought out by others or faded away.

The principal Milberg Weiss scam was to make sure it was the first law firm to sue. The scheme — to pay illegal kickbacks to people willing to be ready-named plaintiffs in lawsuits — enabled the firm to secure the lucrative position as lead plaintiffs' counsel, according to court documents.

The aftermath of the Milberg Weiss meltdown is a major credibility blow to plaintiff-side trial lawyers, but it's not the only one. On Friday, Richard "Dickie" Scruggs, who took on tobacco, asbestos and insurance companies to become one of the wealthiest civil lawsuit attorneys in the country, was sentenced to five years in prison for conspiring to bribe a Mississippi judge.

These tales of greed and excess — how twisted of Milberg Weiss to employ fraud while suing companies for fraud — are sad enough. But the real damage falls on those individual investors who really are the victims of corporate wrongdoing and will now have a tougher time trying to press for some justice.

Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

Column: Investors pay the price for Milberg Weiss' greed 06/28/08 [Last modified: Saturday, June 28, 2008 4:34am]
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