Disbarred class-action king, after jail stint, wants his good name back. Will society give it to him?
Melvyn Weiss is a busy man these days. He’s active with the Israel Policy Forum and regularly attends the pro-peace process group’s meetings. He’s trying to help kids in earthquake-plagued Haiti express themselves artistically. And he hosted a benefit just last Sunday at his Oyster Bay, L.I., home for the Aleph Institute, which provides Jewish and social services for prisoners and military personnel.
Weiss has made philanthropy his priority these days, having been involuntarily retired from his lucrative law practice following his 2008 guilty plea on conspiracy charges of giving kickbacks of legal fees to a cadre of hired plaintiffs for some consumer and securities class-action lawsuits.
The U.S. attorney in Los Angeles charged that in suits against corporations like Drexel Burnham and Tyco International, alleging that investors were misled, or against major insurers like Metropolitan Life or New York Life, alleging fraudulent marketing, Weiss and three partners of the firm Milberg Weiss either gave out the kickbacks or knew that referring lawyers were doing so from their fees to increase incentives for plaintiffs and give Milberg Weiss an edge over other firms.
The suits extracted $45 billion in awards and settlements for Milberg Weiss clients. Weiss himself earned $210 million between 1983 and 2005, according to prosecutors.
The three other partners, William Lerach, David Bershad and Steven Schulman, pleaded guilty in the scheme and all have left the firm. They have each completed prison terms as well.
Weiss served just under a year of his sentence of 30 months in the minimum-security federal prison in Morgantown, W.Va. He walked out of prison last November, then did a stint of four and a half months in a halfway house in West Palm Beach, Fla., and spent another six weeks confined to his home.
“There are some benefits to what I’ve been through,” says a tanned and relaxed Weiss in a recent interview, wearing a crisp suit, monogrammed shirt and scrolling through messages on his BlackBerry as he spoke. “For every year you’re in you add two or three to your life because of all the health issues, all the exercise.”
Weiss also had to forfeit $9.75 million in fees and pay a $250,000 fine. He still has enough to live on, he says, despite taking a big hit in the Bernard Madoff Ponzi scheme last year. He declined to specify how bad his loss was.
With his law license suspended for at least three years, he’s currently looking into work as a neutral arbitrator for out-of-court settlements. He took a course in contemporary mediation last month at Pepperdine University Law School and has reached out to judges and other contacts to lay the groundwork.
The Bronx-born Weiss, 75, grew up in Hollis Hills, Queens, the grandson of Russian immigrants, and he worked for his CPA father while getting his undergraduate degree from Baruch College and law degree from New York University. He served twice in the U.S. Army, in 1960 and 1962 having been reactivated during the Berlin Crisis when the Soviets tried to block Allied access to the city.
He’s still under restrictions set by the sentencing judge from California but is allowed to travel to his home in Boca Raton, Fla., (with permission from his parole officer), and visit his 100-year-old mother, Jean, in New Jersey at will. He got a pass in April to speak to students at the Ohio State University Chabad about his role in securing reparations for Holocaust survivors from Swiss banks and the German government. He got another pass to go to Israel with IPF in June on an extensive mission to meet with Israeli and Palestinian leaders.
At his August 2008, sentencing, Weiss said “I deeply regret my conduct and apologize to all those who have been affected. … I believe it is very important to preserve this unique legal resource [class action] for the benefit of victims effecting the masses, who historically have been underserved in so many ways.”
But in an interview between Rosh HaShanah and Yom Kippur, arranged by a publicist working for his son, Stephen, Weiss declined to say much about his crimes or how he feels about them.
“I’m not going to talk about that,” he said, preferring instead to talk about the Middle East or, another pet cause, the ability of ex-convicts to rehabilitate themselves. Asked what he’d be thinking about on Yom Kippur, Weiss said he planned to pray for peace between Israel and the Palestinians.
“I did a lot of great things in my life so, you know, would I do it again the same way?” he asked. “I don’t want to answer that question. Eventually I may write a book and answer all those questions. Because, you know, I have a very unique crime.”
Weiss seemed indignant about the stigma that he and others endure after they have paid their debt to society. “What I will say is this: when I got out I conferred with a number of people in my life I consider to have good judgment and I said, ‘I spent a year and a half in an environment that very few people like me experience. There are a lot of things I would like to do to help improve that environment.’”
The response from his confidantes, he said, was to emphasize the good he has done in his life, such as the Holocaust restitution work (he helped win $5 billion from the Germans and $1.25 billion from the Swiss banks) and his advisory role to the Jewish community of Buenos Aires during the investigation of two bombing attacks that killed hundreds there in 1992 and 1994. “I said to myself, I’m not built that way. If I learn something important needs to be changed or fixed, I’m not the kind to just sit back.”
Weiss laments that, “Once you’re a felon you’re a felon for life — even though you did your time and you paid for your crime. Society has to understand that [this view of justice] doesn’t help anybody improve their lives and become a productive citizen. It’s a stigma you can’t erase.”
He added, “I am worried that too many of my Jewish friends are losing their empathy and forget that the biggest threat to any individual in any society is the state. We have to protect individual’s rights when the state comes after them. I see too much support for an erosion of that principle.”
Weiss wants to see more programs that allow nonviolent criminals to perform community service as an alternative to jail, and more programs to help ex-cons be productive.
“These kids come out, people come out of serving terms that sometimes I think are way too long … they haven’t kept up with technology … they continue to be the money earner in the family. But there is too little in the system to educate them to be effective.”
During his halfway house experience, Weiss said he saw men who had arranged job interviews, but didn’t have the bus fare in their pocket to get to them.
“Somebody has to look at what it is costing us in this system to not prepare so many people for what they have to confront when they get out,” he said.
In their defense, the Milberg Weiss lawyers argued that no harm came from their trespasses because each case was decided on the merits. Weiss notes that he was never charged with taking on a fraudulent case.
Asked if his was a victimless crime, Weiss said, “I’m not going to answer that.”
His reluctance to discuss his feelings seems to be a combination of wanting to move on to the next chapter and concern about possible civil action he might face.
Michael Perino, a professor of law at St. John’s University who specializes in securities class action, has written a comprehensive analysis of the government’s case against Milberg Weiss and analyzed 700 cases taken on by the firm to examine the defense claim that plaintiff class members were not harmed by the kickback scheme.
Perino found that representative plaintiffs (those who initiated the suits) in the cases examined by the government did not receive any higher settlement sums than those who didn’t receive kickbacks, indicating that the kickbacks were not an incentive to hold out for more cash.
The government had contended that Milberg Weiss jacked up fee requests to compensate for their loss of the kickback. Perino found that in cases where settlements were increased in negotiation, for every 1 percent of the increase there was a .08 percent fee request increase in the cases that led to the indictment. This seems to bolster the government’s argument that Milberg increased fees to compensate for the loss of the kickback amount, to the detriment of members of the class action that didn’t get a kickback and were later notified of the settlement.
In Perino’s hypothetical example regarding a $10 million settlement, after a 25 percent attorney’s fee, an average class member would receive $3,750, while the representative plaintiff, with a 10 percent kickback, would be paid $253,750. Under the same settlement, if the attorney’s fee grows to 30 percent, the average class member’s share drops to $3,500, while the representative plaintiff’s share climbs to $303,500.
Perino also found that judges on average awarded the firm close to the legal fees they sought, countering the claim by Milberg Weiss that any excessive fee would be reined in by the court.
“Virtually all of these cases were settled” rather than tried, said Perino in an interview. “So I don’t think there is any difference in the outcome of the case. The question is whether [plaintiffs] would have settled for the same amount” had they not also counted on the legal fee kickbacks.
As to whether the case might have been simply an ethics matter for the bar association, rather than a criminal case, as some argue, Perino said, “False statements were made to the courts. That is a criminal offense. We have an expectation of a level of honesty and candor when it comes to making representations, and the judges didn’t have it here.”
Still, Weiss, who was an active contributor to Democrat politicians before his indictment, had some supporters in high places that argued that the prosecution was a calculated government attempt to put the kibosh on ballooning class-action payments on behalf of corporations.
In June 2006, New York Reps. Charles Rangel, Gary Ackerman and Carolyn McCarthy as well as Florida’s Robert Wexler released a letter calling the Bush administration Justice Department’s indictment a “new low” in efforts to protect the profits of big corporations. (After Weiss was indicted, Rangel returned a $4,600 donation from him.)
There were backers in the legal community, too. A group of prominent lawyers, including Larry E. Ribstein of George Mason University Law School and Mildred Van Voorhis Jones of University of Illinois College of Law argued that “absent any clear guidelines on payment for cooperation in litigation, the indictment was hypocrisy,” noting that the prosecutors from California’s Central District paid one witness, Howard Vogel, for his testimony in the case. Vogel, of Engelwood, N.J., ran an investment firm that was used as a plaintiff in some Milberg Weiss litigation against securities brokers.
‘A Role To Play’
Seymour Reich, a lawyer who has served as leader or board member of several major Jewish organizations, including the Israel Policy Forum, says he wrote a letter to the sentencing judge asking for clemency for Weiss, and kept in touch with him during his prison sentence.
“He was and is a good guy and deserves to be rehabilitated,” said Reich. “He should be welcomed back into leadership positions. His voice is important for people who understand he has a role to play, and he wants to play that role.”
Before his indictment, Weiss was well known in Jewish organization circles, honored for his philanthropy by the Anti-Defamation League, UJA-Federation of New York and others.
Weiss said the fact that the firm is still in business, now simply called Milberg, is a testament to the good work it did.
“Studies that were done by impartial organizations always put us at the top of the list in terms of our success,” said Weiss. “There has never been a criticism of the quality of work that was performed by the firm.”
Despite his attitude about rehabilitation, one felon that Weiss won’t spare much compassion for is Madoff, whose victims include “at least 100 of my dearest friends and acquaintances.” Weiss came to the interview with a prepared statement about the Ponzi schemer.
“Until Madoff I never thought a commercial wrongdoing could be judged as evil, as a crime against humanity. In my mind he has uniquely achieved that status. … People made every economic decision they encountered in their lives based on what was in that account, made philanthropic commitments, paid taxes based on that. He’s a mass murderer in every sense of the word because he killed people’s spirits.”
In the only statement he made in the interview about his own wrongdoing, Weiss, when asked what message he would send to others who might be tempted to bend the law or commit white-collar crime, said:
“I did an injustice to the system which I treasure, and I think that anyone who veers off the straight and narrow ethically or legally should pay the price. I loved being a lawyer and doing all the things lawyers are capable of doing, helping people who never had the ability to have lawyers, such as the ones we trained.”
At the end of the interview, when his photo was taken, Weiss asked to review the photo, then asked for a second shot to be taken.
“I want them to see me smiling,” he said.
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