As some anticipated, one of the nation's most famous (or perhaps infamous) litigation firms has been indicted on a range of charges, including money laundering, mail fraud, conspiracy, racketeering, and filing false tax returns. For years Milberg Weiss has been the nation's dominant plaintiffs' firm in class-action securities cases.

From today's WSJ (subscription required):

The 102-page indictment details cases, reaching back more than two decades, in which partners in the firm allegedly conspired to pay clients who agreed to act as lead plaintiffs. This would give Milberg an edge in the scramble to be named lead law firm in a case by providing the firm with a "ready stable" of plaintiffs, the grand jury alleged.

The firm paid more than $11 million in kickbacks, the indictment charges, often going to great lengths to disguise the payments as referral fees or other legitimate payments. With the exception of expenses and incidentals, it is illegal for the lead plaintiff in a class action to be paid more than other members of a class.

"This case is about protecting the integrity of the justice system," said Debra Wong Yang, the U.S. Attorney in Los Angeles. "Class-action attorneys and plaintiffs occupy positions of trust in which they assume responsibility to tell the truth....This indictment alleges a wholesale violation of this responsibility." Officials said the investigation was continuing and that more indictments could be expected.

Melvyn Weiss, Milberg's co-founder, said in a statement that the firm and its employees are "outraged" at the indictment. "Our firm is the champion of consumers and investors. We provide access to the courts so that the victims of corrupt corporations can achieve justice." He added that over the years, the firm has recovered more than $45 billion for these victims. "We will vigorously defend ourselves and our partners against these charges, and we will be vindicated," he said.

Aside from the specific charges against Milberg Weiss and some of the firm's partners, this case is of particular interest given the government's aggressive prosecutorial tactics, including pressure to waive attorney client privilege. The WSJ also notes that former Bush Administration Justice Department official Viet Dinh is among the attorneys on the Milberg Weiss defense team, and that the firm launched a website to present its side of the case.

UPDATE: More on the specifics of the case from the New York Times:

The charges against the firm and the two partners were included in a revised indictment against a retired California lawyer and former Milberg client, Seymour M. Lazar, who was originally charged last summer.

From 1981 through about 2004, Mr. Lazar, 78, or members of his family served as plaintiffs in about 70 lawsuits for Milberg Weiss and got about $2.4 million in "secret and illegal kickback payments," the new indictment said.

According to the charges, the scheme involving Mr. Lazar and two other paid plaintiffs worked like this: Plaintiffs would buy securities anticipating that they would decline in value, hence positioning themselves to be named plaintiffs in the class actions.

After the court in a lawsuit awarded lawyers' fees, the firm and Mr. Bershad and Mr. Schulman [two Milberg Weiss attorneys] gave cash directly to the plaintiffs or to intermediary lawyers.

The firm also falsely accounted for the payments as referral fees or professional fees, the indictment said.

Under New York law, it is illegal for a lawyer to promise or give anything to induce a person to bring a lawsuit or to reward a person for having done so, the indictment said.

Furthermore, the payments created a conflict because the paid plaintiffs had a "greater interest in maximizing the amount of attorneys' fees awarded to Milberg Weiss than in maximizing the net recovery" to others in the class, the indictment said.