Media Inquiries: Sara Huneke
sara.huneke@aei.org; 202.862.4870

FOR IMMEDIATE RELEASE: May 30, 2008

Yesterday, the AEI Legal Center for the Public Interest released an important new empirical study with implications for the Milberg Weiss indictment and the recent Congressional debate over securities litigation reform and trial lawyer corruption.

Milberg Weiss Bershad & Schulman and a spinoff firm led by William Lerach dominated securities class actions over the last twenty years. But in 2006 and 2007, prosecutors indicted the Milberg firm, Lerach, Mel Weiss, David Bershad, and Steven Schulman for paying kickbacks to "class representative" plaintiffs, who were supposed to protect the interests of the class over those of the attorneys. The attorneys have since pleaded guilty. On May 19, Lerach reported to prison in Lompoc, California; on June 2, Mel Weiss will be sentenced. As the indictment against the law firm is pending, some argue that the crimes in the indictments were victimless.

In his new paper, "The Milberg Weiss Prosecution: No Harm, No Foul?"--published as part of the AEI Legal Center's Briefly series--law professor Michael Perino examines the Milberg Weiss indictment in detail and analyzes whether these kickback payments harmed class members. Using a database of approximately 730 class action settlements and fee awards, Perino found:

• In cases where Milberg Weiss attorneys are alleged to have paid kickbacks, Milberg Weiss received statistically significantly higher attorneys' fees
• Milberg Weiss's claim that kickbacks created an incentive for plaintiffs to seek better settlements is not supported by the evidence
• The data supports the government's theory that investors were ultimately hurt by the illegal kickbacks

Perino presented this paper at an AEI conference on Wednesday, May 28. Materials, video, audio, and a transcript can be found at www.aei.org/event1735, along with a PDF of the paper. AEI's Arthur F. Burns Fellow in Financial Policy Studies, Peter J. Wallison, who has proposed comprehensive reform of civil securities litigation, discussed the paper and its implications for securities litigation.

AEI Legal Center director Ted Frank, who moderated the discussion, testified before Congress about the Milberg Weiss indictments and securities litigation reform in 2006.

Perino, Wallison, and Frank are available for comment. Perino can be reached at 718.990.1928 (Perinom@stjohns.edu). Wallison can be reached 202.862.5864 (PWallison@aei.org) or through his assistant, Karen Dubas, at 202.862.5212. Frank can be reached at 202.862.5857 (TFrank@aei.org) or through his assistant, Sara Wexler, at 202.862.5820.

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