They are partners in one of the most feared firms in America. Mel Weiss and Bill Lerach have won $30 billion suing corporate America. Now they too are under investigation.

William Lerach, 57, is a flamboyant, sharp-elbowed showman. Together, as cochairmen of one of the most feared law firms in the nation, Milberg Weiss Bershad Hynes & Lerach, they have bullied corporate America out of $30 billion in damages and counting. In building the modern-day model for the shareholder class action, their mission has been unbelievably profitable–especially for themselves.

In 1990 they helped land $1.2 billion in damages in the Drexel Burnham junk bond scandal. In the late 1990s they went after misleading sales tactics at the 25 largest life insurance companies, exacting $10 billion in damages. Since 1995 Weiss and Lerach have handled half of all class actions alleging securities fraud.

Some 80% of the time they land cash settlements, often pocketing half of total legal fees. The firm’s profits hit $112 million in 1995, up more than fivefold from 1990; in the same period Weiss’ and Lerach’s annual pay more than quadrupled to $16 million apiece. Weiss flies around in a chartered jet and owns a widely admired collection of Picassos.

Now Weiss and Lerach are eyeing their biggest payday ever, thanks to the corporate scandals still reverberating on Wall Street. In a giant suit in federal court in New York, they are going after 55 investment banks, alleging fraud in 310 initial public offerings of stock. Ten of the firm’s 212 lawyers (including 5 of its 93 partners) are on the case. Milberg and other plaintiff firms have rented 15,000 square feet of space to house 15 million documents in the fight. The goal: several billion dollars in damages.

They hope to win that much or more from Citigroup and J.P. Morgan Chase for their role in the Enron collapse. The next honeypot will be the fund mischief uncovered by New York Attorney General Eliot Spitzer. Says Weiss with a grin: “The mutual fund scandal will be the greatest in Wall Street history.” The firm has filed 46 lawsuits so far.

But a significant obstacle stands in his way. Federal prosecutors are investigating whether Milberg Weiss violated criminal laws in its hell-bent pursuit of securities fraud cases in the 1990s. A federal grand jury in Los Angeles is probing, in particular, the relationship between Milberg Weiss and a convicted felon named Steven Cooperman. Cooperman, an eye surgeon who went to jail in 2001 for an art insurance fraud, was Milberg Weiss’ plaintiff in some 55 class actions from 1988 to the late 1990s. In many of these cases Cooperman’s lawyer, James Tierney, was paid 10% of Milberg’s legal fees for having referred the cases to Milberg. Investigators are looking at whether Tierney then kicked back some money to Cooperman, which would be illegal under state law. Milberg’s Lerach insists the firm made no improper payments: “I never paid a plaintiff,” he told FORBES.

Both Cooperman and Tierney are cooperating with the grand jury investigation. A former Milberg partner has been granted immunity and is aiding investigators. Federal agents recently visited the offices of Buchbinder Tunick, a small accounting firm that audits Milberg’s books. The U.S. Attorney in Los Angeles continues subpoenaing Milberg documents about past class actions. In Philadelphia, meanwhile, another federal grand jury is studying whether the firm, among others, wielded undue influence over the city controller’s office in trying to win business.

The long-simmering investigations may never lead to any charges being filed; both investigations began about two years ago. MelWeiss is infuriated by the long wait in limbo. “The grand jury [in Los Angeles] is costing us a fortune in reputation as other law firms tell institutional investors not to hire us,” he says. One lawyer in that case sees a 50-50 chance of charges getting filed.

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