The Firm:That Specialized in Extortion

The Wall Street Journal reports:

If there's a moral in this week's felony settlement by class-action lawsuit giant Milberg Weiss, it's this: Prosecutors should keep digging into tort-bar practices. The details are even worse than the headlines.

Milberg admitted its crimes and will fork over $75 million, rather than go to court to fight federal charges over a kickback scheme. The agreement ends a seven-year probe that also resulted in four former Milberg partners -- including trial bar barons Bill Lerach and Melvyn Weiss -- admitting to felonies.

The firm perfected what's known as a "strike suit," in which a corporation is sued over a dubious claim of "fraud" merely when its stock price falls. Milberg now admits that, over 30 years, seven former partners (three remain unnamed) paid secret kickbacks to plaintiffs in 165 suits. Those suits earned the firm some $240 million in fees.

The plea deal itself reveals how elaborate these strike-suit cons were. In addition to paying plaintiffs, Milberg was also funneling kickbacks to New York-area stockbrokers who referred clients for Milberg suits. One of these was Paul L. Tullman, who received some $9 million in finder's fees over 24 years. Milberg Weiss was also illegally paying at least one class-action expert witness, a man named John Torkelsen, on a contingency-fee basis. Torkelsen, now serving jail time for defrauding the government, was famous for providing the court with estimates of the "damages" owed to shareholders.

You'll want to read the whole thing.