Law firm founder indicted

Melvyn I. Weiss, a co-founder of a law firm that was among the nation’s most successful and respected, was indicted Thursday on charges that he participated in a kickback scheme that allegedly netted millions of dollars in illicit legal fees.

The indictment handed down in Los Angeles added to the criminal charges that were leveled against the firm, Milberg Weiss, in an indictment last year.

The superseding indictment expands the scope of the firm’s alleged criminal conduct to include charges that it paid kickbacks in 225 shareholder cases rather than 150, and that it illegally earned $250 million in attorney fees rather than $200 million.

The government contends that by maintaining a stable of ready-made plaintiffs to whom it made cash payments, Milberg Weiss positioned itself to be the first to file lawsuits against corporations that allegedly defrauded investors. The first-to-the-courthouse filings gave Milberg Weiss a leadership role in class actions, according to government lawyers, and so entitled the firm to the largest share of legal fees.

Weiss was charged with conspiracy, racketeering, obstruction of justice and making false statements. If convicted of all four counts, the 72-year-old could be sentenced to 40 years in prison.

Weiss declined to be interviewed. His lawyer, Benjamin Brafman of New York, issued a written statement saying that his client would be “fully exonerated.”

On Thursday, former Milberg Weiss partner Steven Schulman agreed to plead guilty to a federal racketeering charge and admitted that he conspired to conceal Milberg Weiss’ secret payments to plaintiffs. Under the terms of the deal, the 56-year-old New York resident will forfeit $1.85 million and pay a $250,000 fine.

The racketeering charge carries a maximum penalty of 20 years in prison but government lawyers agreed to cut that sentence to between 27 and 33 months, depending on the extent of Schulman’s cooperation. His lawyer declined to comment.

Schulman is the sixth person connected with the investigation to make a deal. William S. Lerach, a Weiss protege whose reputation as ruthless class-action lawyer was greater than his mentor’s, agreed this week to plead guilty to one count of conspiracy in the case.

Milberg Weiss said in a statement that none of the “active partners” was “alleged to have been involved in wrongdoing” and added that “we will continue to fight for our clients and class members and to achieve the record recoveries for which our firm has long been known.”

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molly.selvin@latimes.com