Lerach was sentenced by Los Angeles federal judge John Walter on Monday (11 February) following Lerach’s plea deal last year in a long-running investigation to alleged kickbacks at his former firm, Milberg Weiss.
Lerach will also be on supervised release for two years, pay a $250,000 (£127,000) fine and disgorge nearly $8m (£4.06m) in fees. He also must complete 1,000 hours of community service.
Walter did not challenge the terms of the prosecution deal with Lerach but the securities class action king was handed the toughest sentence allowed under his agreement. However, Walter made plain his disapproval of Lerach’s conduct, subjecting prosecutors to tough questioning over the terms of the their plea deal.
The alleged conspiracy at Milberg Weiss to kick back fees to class action name plaintiffs - and the alleged lies told in court to cover it up - deprived other law firms that "played by the rules" a fair shot as lead counsel in securities cases, Walter said.
The judge said the lies formed the very bedrock of Milberg Weiss' business model, allowing it to prosper and collect millions in fees over the years, all based on falsely-earned credibility.
"With all of his intelligence, I cannot imagine how Lerach lost his moral compass to become a key member of the conspiracy," Walter said.
Lerach, appearing in a black suit and a subdued blue tie that matched his tone, uttered just a few sentences to Walter, punctuated with pauses just long enough for the row of reporters to take down every word.
"I pled guilty in this case because I was guilty. I knew what I was doing was wrong," he said, halting. "It was, as they say, felony stupid."
Lerach apologised to his family, his former law firm and "to the legal system I've abused". He added: "The conduct was completely unacceptable. I guess all I can hope is that you won't find it completely unforgivable."
Lerach, 61, pleaded guilty in September to conspiracy in connection with kickbacks paid to Daniel Cooperman, a former Californian doctor who named Lerach in exchange for leniency in an unrelated art fraud prosecution. The US Government indicted Lerach's former firm, Milberg Weiss, in 2006, along with partners David Bershad and Steven Schulman. The indictments capped a seven-year investigation into alleged improper payments to plaintiffs.
Both Bershad and Schulman have pleaded guilty and agreed to co-operate. They await sentencing, which is scheduled for June. Melvyn Weiss, meanwhile, has pleaded not guilty and is currently scheduled for an August trial.
Some defense lawyers involved in the case said before Lerach's sentencing that if Walter took a harsh posture toward Lerach, it might make the 72-year old Weiss more likely to take his chances with a jury, figuring that the prospect of leniency before Walter would not be great. Given Weiss' age, though, a conviction at trial could effectively mean a life sentence. Weiss' lawyer, Benjamin Brafman, declined to comment.
Other name plaintiffs involved in the scheme, Howard Vogel and Seymour Lazar, have already been sentenced.
The Lerach sentence is the latest chapter in a remarkable fall from grace for Milberg Weiss, until recently
Lerach and Weiss were personally credited with pioneering a model that has won billions of dollars for claimants but has been dogged by controversy and bitter claims that the aggressive litigation model acts as a form of legalised blackmail targeting big business.
The current woes of the embattled Milberg Weiss are also believed to have directly led to a slump in securities litigation in the
In 2004 Milberg Weiss Bershad Hynes & Lerach split into two firms: one then known as Lerach Coughlin Stoia Geller Rudman & Robbins in
Attention will now turn to whether the sentence and ongoing case will impact on attempts to import elements of the group action litigation model to Europe.
Such moves have been supported by some competition bodies, including the UK's Office of Fair Trading, as a means of achieving consumer redress, but any shift towards the emotive 'class action' model remains controversial.
SJ Berwin partner Hilton Mervis told Legal Week: "Events such as this have the effect of people confusing the worst aspects of the US system with changes needed [in the UK]. This is not a valid basis for the UK not to consider changes that would allow greater access to justice."
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