Plea to tax count ends lawsuit kickback charges

LOS ANGELES—The last defendant in a major federal kickback case involving class-action lawsuits against some of the nation's biggest corporations pleaded guilty Monday to a tax-related felony.

Under an agreement with prosecutors, Paul T. Selzer entered his plea to a charge that he tried to obstruct the Internal Revenue Service code.

Prosecutors said Selzer, 67, accepted nearly $50,000 from the New York-based Milberg Weiss law firm but failed to tell the IRS he transferred nearly $19,000 to Seymour Lazar, a plaintiff in class-action lawsuits brought by Milberg Weiss.

"I plead guilty," the gray-haired Selzer told U.S. District Judge John Walter.

Selzer was the last of six defendants in the long-running case that also led to guilty pleas by a co-founder and three former partners at Milberg Weiss.

The firm dominated the field of securities class-action lawsuits involving shareholders who claim they suffered losses because executives misled them about a company's finances.

Lawsuits filed by the firm targeted now-defunct energy giant Enron Corp., AT&T Inc., Lucent, WorldCom, Microsoft Corp., Prudential Insurance and other companies.

Last month, the firm itself admitted former partners paid about $11.3 million in kickbacks to professional plaintiffs in class-action cases that brought it roughly $239 million in legal fees.

The firm agreed to pay $75 million to settle the case involving more than 165 lawsuits filed from the 1970s through 2005.

John C. Coffee, a professor of securities law at Columbia University Law School, said the kickback scheme dealt a lingering black eye to legal firms representing plaintiffs in class-action securities cases, even though the practice of having a paid lead plaintiff has ended.

"It was a bad practice because it predictability invited -- and even necessitated -- perjury," Coffee said.

Walter told Selzer his plea could lead to the revocation of his law license, though that has not yet occurred.

The judge also asked if Selzer understood he was giving up certain rights, possibly including the rights to vote and bear arms.

"Yes, your honor," Selzer said with his lawyer at his side.

Prosecutors have said Selzer, of Palm Springs, has agreed to pay a $250,000 fine. He could face up to three years in prison at his Nov. 3 sentencing, but prosecutors intend to recommend a probationary sentence that could include home confinement.

Prosecutors and attorneys for Selzer declined to comment after the hearing.

Prosecutors said Lazar was paid about $2.6 million to be a professional plaintiff and help Milberg Weiss, previously known as Milberg Weiss Bershad & Schulman, in its pursuit of the lawsuits.

Lazar, 80, pleaded guilty to obstruction of justice, subscribing to a false tax return and making a false declaration to the court.

He was sentenced in January to six months home detention and two years probation. He was also fined $600,000.

Walter said while sentencing Lazar that he was outraged that a former attorney could "flatly lie" as part of legal proceedings. The judge said he would not have hesitated to send Lazar to prison if not for his age and deteriorating health.

As part of the agreement with Milberg Weiss, prosecutors agreed not to pursue criminal charges against the firm, which had been accused of aiding and abetting mail fraud and with money-laundering conspiracy.

Judge Walter previously sentenced firm co-founder Melvyn Weiss to 30 months in prison for helping orchestrate the kickback scheme. Weiss, 72, was also ordered to pay $9.7 million in forfeitures and $250,000 in fines.

He pleaded guilty to a racketeering conspiracy charge in April as part of an agreement with prosecutors.

Former partner William Lerach is serving a two-year prison sentence after pleading guilty to one count of conspiracy to obstruct justice and making false statements.

Former partner Steven Schulman pleaded guilty to a racketeering conspiracy charge, and David Bershad pleaded guilty to conspiracy. Both are scheduled to be sentenced later this year.

Coffee said Selzer was a peripheral figure in the case who was used by prosecutors to get to the law firm partners.

"He was there as a means to an end," Coffee said.

In a separate hearing later Monday, Walter officially dismissed all criminal charges against the Milberg Weiss firm despite expressing some doubts about the appropriateness of the firm escaping a conviction.

"I guess that concludes the Milberg Weiss chapter," the judge said after thanking the attorneys and law enforcement involved in the case.

"Except for the sentencings, we're done," Assistant U.S. Attorney Richard Robinson replied.

(This version CORRECTS that the Milberg Weiss firm reached an agreement with prosecutors, not a plea.)