5 Million Reasons to Quit Milberg

So is Steve Schulman’s departure from Milberg, Weiss, Bershad & Schulman a sign that the indicted name partner has flipped? Lawyers familiar with the case say it's hard to tell, since — as in so many other aspects of the government’s kickback case against what used to be the nation’s top securities plaintiff firm — there’s a lot of money obscuring any legal decision. In this case it seems to be about 5 million bucks.

In a Friday press release, a Schulman spokesman said his client was leaving Milberg because he seeks "new professional opportunities and desires to encourage class action law. And while we’re sure the class action bar is seeking active encouragement from a lawyer accused by the feds of taking illegal fees and misreporting them to the courts, we’re hearing that Schulman’s financial arrangement with the firm was a much more immediate impetus than his desire to give back to the plaintiff bar.

Schulman’s deal with the firm required that upon his departure, he receive a sum based on Milberg’s income during his last year at the firm. With 2005 a considerably better (as in, indictment-free) year for the firm than 2006, the partner had a real incentive to leave. Indeed, we’re told that by departing before the end of 2006, he’s in line to get about $5 million more than if he had waited. And that $5 million could come in handy if Schulman does strike a plea deal — something that, according to lawyers familiar with the case, has not happened yet, but very well could.

We hear that Schulman is open to the idea, and his switch of attorneys earlier this year — from the NY brawler Ed Hayes to former federal Judge Herb Stern — would seem to lend itself to negotiations. The hitch is that if he were to flip, Schulman would probably have to offer up a superior or two, namely Melvyn Weiss or William Lerach.

—  Justin Scheck