When powerhouse class-action securities law firm Milberg Weiss Bershad & Schulman LLP was indicted here last month, it was a public relations gut punch for a Los Angeles legal community still smarting from fallout stemming from the Anthony Pellicano investigations.
The 20-count indictment accused the firm and partners David Bershad and Steven Schulman of benefiting to the order of $200 million in cases where they illegally paid clients to sue companies.
Los Angeles lawyer Richard Purtich has pleaded guilty to funneling cash between Milberg and a former ophthalmologist who was a frequent plaintiff.
Milberg Weiss has described the charges as unjust and said it would vigorously defend itself against the charges. But the negative publicity from the indictment of a firm that has long prided itself as a uncompromising champion of shareholders won't go away soon and could tarnish the reputation of other legal firms.
"Anytime there is a cloud over one plaintiffs' firm, it tends to reflect poorly on all of us," said William A. Daniels, of Schwartz Daniels & Bradley. "When something like this happens it's a tragedy, not just for the firm but for the legal system at large. As class action counsel, we take pride in ourselves for keeping honesty in the system. When there are allegations of corruption, it distresses us, but we have to carry on."
That's why it's more important than ever for lawyers to avoid even the semblance of impropriety, said Albro Lundy III of Baker Burton & Lundy LLP. His firm won a major class action verdict against Sempra Energy earlier this year.
"It really depends on the individuals who are running the cases," Lundy said. "And if you've got moral, honest people running the cases, you don't have the problems that Milberg Weiss had. I don't have to talk to my clients about it, because we try to be above-board in everything we do."
Still, Lundy continued, bigger firms are harder to police and Milberg is the most prominent class action practice in the country.
"When you get to the level of business that Milberg Weiss was doing, it's tough to keep it all under control. So some things can get sideways without ever seeming like it wasn't technically wrong," Lundy said. "I'm not prejudging Milberg Weiss; everybody gets their trial, but those allegations alone can be devastating to a firm."
The reputation of attorneys has traditionally been "famously lacking," according to Adam Winkler, acting professor of law at UCLA. "Consequently, their ethics are always in question."
He said that the Milberg Weiss indictments are in part the result of an increasing desire on the part of the federal government to police lawyers, who have traditionally been governed by the Bar.
Winkler said that after corporate scandals precipitated passage of the Sarbanes-Oxley Act in 2002, the federal government began casting a more-watchful eye on attorneys, particularly those who practice before the Securities and Exchange Committee. The government wants to assure that attorneys function in a gate-keeping role, Winkler said, because "there is a growing sense that lawyers who have traditionally been thought of as agents of their clients are becoming more active participants" in the cases.
Cheryl Bame of Bame Public Relations, whose firm frequently works with law firms, said there was no feeling of crisis among her clients or colleagues.
"I think lawyers always get a bad rap just because legal services are expensive," she said, "but you can't do business without lawyers."
And she said that the doubted there would be much peripheral damage from the charges leveled at Milberg.
"Firms need to make sure their clients are happy and hopefully they're doing this all year," she said. "So that when something like this comes up, they don't need to scramble."
Barbara Sayre Casey, whose public relations firm specializes in law firms, found a positive spin by pointing out the parallels between the law profession and the public relations field, in the wake of the recent Fleishman-Hillard case, in which executive Doug Dowie was convicted of fraud for over-billing city taxpayers for his firm's services.
"Just because there have been a few missteps, I don't think that there's going to be an overall effect," she said. "In fact, I think it gave our clients more appreciation for our integrity and the way we do business."
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