A couple weeks ago it was revealed that among the investors in the Ponzi scheme orchestrated by Bernie Madoff was Mel Weiss from the plaintiff class action law firm Milberg Weiss Bershad & Schulman LLP. Weiss was convicted last year with several of his law partners for their roles in a racketeering conspiracy allegedly spanning decades in which serial plaintiffs were illegally paid to file shareholder class action suits against corporations. The firm also was indicted but managed to escape prosecution after it -- now simply known as Milberg LLP -- agreed to pay a $75 million fine and employ a compliance monitor.
Walter Olson from Overlawyered now is asking whether there might be more to the story on Weiss' investments with Madoff, and cites correspondence he received from New York securities lawyer Howard Sirota:
Sirota believes that other persons and entities on the Madoff victims list have also served as lead plaintiffs in securities litigation or as plaintiffs in other litigation handled by class-action firms. All of which could be mere coincidence, or could suggest that either Madoff himself or others in his circle might have played some role in funneling lead plaintiffs to the class-action bar.
Sirota states the basis for his questions as follows:
I wouldn't be so quick to jump to the conclusion that Mel Weiss [fouled] up investing with Madoff. Weiss' wife and son Stephen A. Weiss invested with Madoff, as did [Milberg Weiss partners] David Bershad and Pat Hynes. In addition, convicted serial Milberg plaintiff Howard Vogel invested with Madoff. Buchbinder Tunick, Milberg's accountants and ironically Milberg's principal forensic accounting experts, appear on the list, although the entries may be clients of the Buchbinder firm. Class action firms Wolf Popper and Wolf Haldenstein also appear.
Bernard Madoff is said to have ruined many a fortune. But for one law firm, history’s largest alleged Ponzi scheme is opening the door for a comeback. The law firm formerly known as Milberg Weiss—considered the go-to firm for shareholder class-action suits until a 2006 kickback scandal landed several of its name partners in prison—is once again in demand. The firm, now called simply Milberg LLP, has signed up more than 100 Madoff victims, the biggest group assembled by any one firm to date. All told, these clients face estimated losses of $1.5 billion to $2 billion. In addition to representing a potential windfall in fees, the cases could help restore the firm’s reputation.
Milberg has teamed up with law firm Seeger Weiss -- where Mel's son Stephen Weiss is a name partner -- on the cases.
Speaking on the intregity of the remaining partners at Milberg, Ariana Tadler said: "The lawyers that stayed were not implicated or involved in the indictment, and we are going to work just as aggressively as we always have to do the best for our clients."
Although Milberg LLP claims that none of its remaining partners participated in the illegal conduct the question still begged is whether some of them were aware of the scheme and what, if any, steps they took to address the problem. After all, what did they think was happening when the same individuals repeatedly were serving as plaintiffs in dozens of lawsuits? Indeed, in 1995, Congress enacted the Private Securities Litigation Reform Act specifically for the purpose of curbing the abuses for which Milberg Weiss and its partners were indicted, and surely this legislation raised a red flag even among the innocents at the firm.
Frankly, the apparent failure of Ariana Tadler and other current partners at Milberg to uncover the racketeering crimes of Mel Weiss that allegedly occured for decades at the law firm right under their noses hardly instills confidence in their ability now to represent effectively those burned by Madoff.
There is no word on whether the presumably defrauded Mel Weiss -- currently in prison for his own fraud -- is a client of his former firm and Seeger Weiss, and Sirota asks whether the firms have "adequately disclosed to potential clients in their literature that their firms' own names figure on the Madoff victims list."
Meanwhile: The New York Post reports that several top Wall Street executives "were convinced Bernard Madoff was a fraud as early as 2005" which leads one to ask if an investment scheme can be fraudulent if so many people knew it was a fraud? Harry Markopolos, the securities industry executive and fraud investigator who attempted to warn the S.E.C. for years that Bernard Madoff was involved in a Ponzi scheme, may have been among the first skeptics but he hardly was the lone unbeliever. Indeed, The New York Times reported Friday based on court documents that convicted felon Victor Teicher, purportedly "[o]ne of the top advisers to the money manager J. Ezra Merkin, who invested $2 billion of his clients' money with Bernard L. Madoff," allegedly warned Merkin that Madoff's "trading results were impossible to achieve."