The class-action law suit giant Milberg Weiss finally admits criminal conduct and agrees to pay $75 million and not fight federal charges of paying kickbacks to several clients. The agreement ends a seven year probe into the practices of the law firm (renamed Milberg LLP). To date four former Milberg partners including trial bar barons Melvyn Weiss and Bill Lerach have admitted to felonies.

The firm perfected what’s known as a “strike-suit,” in which a corporation is sued over a dubious claim of fraud merely because its stock price falls. Milberg’s website claims it was “one of the first law firms to prosecute class actions in federal courts on behalf of investors and consumers. The Firm pioneered this type of litigation and is widely recognized as one of the nation’s leading defenders of the rights of victims of corporate and other large-scale wrongdoing.” In a press release dated June 16, 2008, regarding the settlement, Milberg partner Sanford Dumain states, “We are pleased that the government specifically recognizes that none of the lawyers now at the firm [my emphasis added] was involved in any of the misconduct, and that in fact our former partners who were prosecuted were deliberately concealing their illegal activities from us.” The press release makes no mention of the $75 million settlement or that its former partners had paid kickbacks to plaintiffs in 165 suits from which the firm earned $240 million in fees. Most interestingly, it fails to explain how the firm’s accountants expensed the kickbacks it paid Mr. Paul L. Tullman, the Wall Street broker who steered clients to Milberg, to whom Milberg paid some $9 million in finder’s fees over a 20 year period.

Like those of now-convicted tort king Dickie Scruggs, Milberg’s mass-tort claims gave an incentive for settlements divorced from actual justice. The risk to a defendant of having liability imposed by several hundred cases is often more than a defendant is willing to bear. The effect of these cases did little more than redistribute corporate assets and line the pockets of greedy lawyers. Congress has yet to hold a single hearing on the case.

But let’s go back and do the math. Milberg will now pay $75 million to make nice with government prosecutors on a gain of $240 million over a 24 year period. For simplicity, that’s $10 million a year for 24 years. If Milberg was able to invest the first $10 million in its entirety and receive an annualized compounded return of 7 percent, in 23 years that investment would be worth $47.41 million. Of course, not all of the fees and expenses, (or the investment income) was investable. However, I calculate had it invested about one-half of the $240 million as it was earned, with compounding the total investment, today it would be worth roughly $700 million. In other words, even after the $75 million government payoff, Milberg is still be very much ahead. How much it really earned, retained, or invested is not public knowledge. But what is clear, for some at least, is that crime still pays¾to wit, my first exhibit: Mr. Tullman, and his $9 million in finder’s fees.

However, not so lucky ringleader Mr. Weiss will start a 30 month sentence this month, while Mr. Lerach has already begun the two year sentence he received in February.

 Rumor has it that the two are co-authoring a novel which they intend to title: Dah Firm.