In early October 1997, he bought 50 shares of Oxford Health Plans. Three weeks later, the stock nose-dived, and Mr. Vogel lost about $3,000 of his investment. Still, Mr. Vogel reaped $1.1 million.
How was that possible?
Mr. Vogel was a plaintiff in a shareholder lawsuit filed by the New York securities litigation powerhouse Milberg Weiss Bershad Hynes & Lerach against Oxford Health. In 2003, the company, along with other parties that were sued, paid $300 million to settle.
Most of the investors received pennies on the dollar for their losses. But Mr. Vogel, then a real estate mortgage broker in Englewood, N.J., was not just a hapless investor who bought the wrong stock at the wrong time.
Mr. Vogel now says, according to a plea agreement with federal prosecutors, that he and members of his family were actually linchpins in a long-running arrangement that helped Milberg Weiss snare the lucrative lead counsel position in the Oxford Health and many other securities lawsuits, reaping hundreds of millions of dollars in legal fees.
Mr. Vogel, who has since moved to Florida, is a central figure in the government’s case against Milberg Weiss Bershad & Schulman, as the law firm is now called. Last month, a federal grand jury in Los Angeles indicted the firm and two of its name partners on several criminal charges, including racketeering conspiracy and money laundering. The firm is accused of making $11.3 million in illegal secret payments to Mr. Vogel and two others who served as plaintiffs in more than 150 lawsuits.
The firm contends it has done nothing improper and has vowed to fight the charges against it. But Milberg Weiss is struggling to keep its lawyers and clients from walking away. Several lawyers have left the firm and a number of institutional investors, including the New York state employee pension fund, have removed it as counsel in high-profile lawsuits.
The Oxford Health lawsuit was widely watched at the time, and it takes on new significance in light of Mr. Vogel’s admissions and prosecutors’ charges.
It provides a window into how, even after Congress passed legislation in 1995 aimed at undermining Milberg Weiss’s dominance, the firm worked feverishly to find ways to maneuver around the new landscape.
Yesterday, William W. Taylor, a lawyer at Zuckerman Spaeder who represents Milberg Weiss, said in response to questions: “On behalf of the firm, the Oxford case was handled in the highest traditions of Milberg’s practice. The result obtained was exemplary and the firm is proud of the result in that case as it is in all of its cases.”
The 1995 law, the Private Securities Litigation Reform Act, or P.S.L.R.A., was intended to make it harder for plaintiffs’ lawyers to file lawsuits after merely finding a single investor who held the stock of the company to be sued. Under the law, courts were required to select the investor with the largest loss as lead plaintiff, whose lawyer then coordinated the lawsuit.
The law was meant to rein in lawyers who simply eyeballed companies that were in trouble and ran to the courthouse with a plaintiff in tow at the first hiccup in the share price.