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In the end, says the lawyer who defended the Milberg firm for more than four years, he had no choice: If Milberg was to survive as a law firm, it had to reach a deal

In the end, says the lawyer who defended the Milberg firm for more than four years, he had no choice: If Milberg was to survive as a law firm, it had to reach a deal with Los Angeles prosecutors to avoid a guilty plea or conviction in the federal probe of kickbacks to lead plaintiffs in securities class actions.

“The firm had to accept terms which were onerous financially,” says the soft-spoken William Taylor III. “I can’t tell you I’m happy my client has to pay $75 million.” But, he adds, “the firm will survive. Its lawyers can practice law. … It will be tight [financially] but they have a platform that is well-established [and] they’re very good at what they do.”

Taylor said the government placed no restrictions on contributions to the firm’s $75 million payment by the three one-time name partners who’ve pleaded guilty, including firm patriarch Melvyn Weiss. He declined to comment on reports that Milberg had asked spin-off firm Coughlin Stoia to contribute and had been turned down. Unlike Milberg, Coughlin Stoia was never indicted in the kickback case.

As part of the deal with the government Milberg also agreed to follow a new “best practices” program that will make it the first law firm with a federally mandated monitor. That role will be filled by Barton Schwartz, a 62-year-old former federal prosecutor who has been auditing Milberg’s referral fees since the fall of 2005, when, in an effort to stave off indictment, Milberg voluntarily hired him as a monitor. “It was an indicator of how serious the firm was” about shoring up internal ethics and compliance procedures, Taylor says.

Since then, Schwartz has maintained an office at Milberg, where he works closely with management committee members Sanford Dumain and Michael Spenser. Schwartz is well-known as a monitor. In 2006, he was appointed by Hewlett Packard to examine its investigations procedures in the wake of HP’s pretexting scandal; and last October, he was appointed by prosecutors for a three-year job of overseeing BP’s trading operations when BP entered into a deferred prosecution agreement.

At Milberg, Taylor says, Schwartz made sure that firms receiving referral fees certified that they were not being shared with plaintiffs. He also vetted all fee-sharing arrangements, as well as payments to vendors. His responsibilities will be broader under the nonprosecution deal. Milberg has pledged to disclose all referral fees to the courts overseeing its class actions. Schwartz will monitor those referral fees and disclosures.

Schwartz’s appointment required approval from the Justice Department, Taylor says. And like most monitors appointed in nonprosecution deals, he will be paid by the defendant. How much is Milberg ponying up for Schwartz’s scrutiny? Taylor laughs. “I’m not going to tell you. It’s not a John Ashcroft-type deal.”

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