Law firm that sued garment industry scramble to stave off an indictment

Two top partners of the New York-based law firm that lodged a $1 billion class-action lawsuit against the CNMI garment industry reportedly left the firm as it mounts a campaign to stave off a criminal indictment for paying kickbacks to clients.

According to a May 16 Wall Street Journal article, the departures of David Bershad and Steven Schulman from Milberg Weiss Bershad & Schulman LLP are only part of a last ditch-effort to avoid an indictment against the law firm.

The article quoted lawyers close to the case as saying that Bershad and Schulman face likely indictment themselves.

The case, which is before a federal grand jury in Los Angeles, has been underway for six years, the Journal said.

The article said the departures of the two top partners were triggered by a guilty plea last month by a New Jersey businessman who admitted taking secret payments as a plaintiff in Milberg class-action lawsuits between 1991 and 2005.

The Journal quoted Bershad in a statement that he and Milberg’s management came to a “mutually agreed-upon decision” to take a leave of absence after nearly 40 years, “in the belief that my action will improve the firm’s chances to avoid unfounded charges that would be detrimental to our hundreds of hard-working employees and the hundreds of thousands of class members we represent.”

Milberg is known for filing shareholder class-action lawsuits in which investors go against corporate management with big money at stake. Last year, the firm sued at least 75 companies for securities fraud. In 2004 and 2005, the firm reportedly settled 90 cases and extracted more than $1.5 billion from investors.

In January 1999, Milberg and other law firms, on behalf of some garment workers, sued several garment factories on Saipan, alleging that workers were made to work in sweatshop conditions. Garment owners branded the lawsuit “embellished and unreal.”

After years of costly litigations, the lawsuit was settled in the U.S. District Court for the NMI. The combined settlement fund reached close to $20 million. Almost $5.8 million of this amount would go to cash payments to the workers. Some $500,000 would be paid to the claims administrator of the distribution fund.

Under the settlement, $400,000 were allotted as repatriation fund for garment workers. Some $4 million would go to a monitoring fund to prevent the harm previously caused by the industry to the workers.

Over $565,254.80 would go to a trust fund that would be administered by the non-profit Tides Foundation for the court action before the California Superior Court.

A total of $8.75 million would go to plaintiffs’ lawyers. Some $5.6 million represents incurred expenses, while $3.15 million would be allocated for attorneys’ fees.

Milberg reportedly agreed to waive its fees amounting to $16 million, but had indicated pursuing recovery of its expenses.

U.S. District Court for the NMI Chief Judge Alex R. Munson has set a status conference for May 24, 2006 to determine, among other things, whether payments have been made to the workers involved in the case.