Fortune magazine has a long story on the troubles at famed class-action law firm Milberg Weiss, which was recently indicted for allegedly paying the plaintiffs in their cases millions of dollars in illegal kickbacks. Interestingly, it was a case of art-related insurance fraud that put in motion the chain of events that led to the indictment.
As Fortune tells the story, it all started with a report of domestic abuse in a Cleveland suburb in 1996. The alleged abuser was James Little, an attorney with Arter & Hadden, a large (but now defunct) Cleveland firm. The complainant mentioned to police that Little, in addition to having a serious crack habit, was also in possession of millions of dollars worth of stolen paintings. In February 1997, Little struck an immunity deal and led the FBI to a storage locker rented by his mother. Inside were Picasso's "Nude Before a Mirror" and Monet's "The Customs Officer's Cabin in Pourville." Little said he had brought the paintings to Ohio after having been given them to hold for "safekeeping" several years earlier by a former colleague in Los Angeles, an entertainment lawyer named James Tierney, who in turn had taken possession of them as part of an insurance scam pulled off by a retired eye surgeon named Steven Cooperman. Cooperman had reported the two paintings stolen from his Brentwood home in 1992 (by which time he had served as lead plaintiff in dozens of Milberg Weiss lawsuits). He was deeply in debt and facing foreclosure on his house when the paintings disappeared:
"Police were immediately suspicious. Nothing else was missing, there was no sign of forced entry, and the ... alarm system hadn't made a sound. But the doctor had an alibi: He and his third wife had been vacationing on the New Jersey shore. The theft, of course, was faked. Cooperman had enlisted his lawyer friend Tierney, who agreed, as Tierney later put it, to 'help him bury the body.' Cooperman gave him the keys and the alarm code for the house; Tierney made off with the paintings after the doctor left for vacation."
Cooperman filed an insurance claim for $12.5 million. Initially, the insurance companies refused to pay, but Cooperman sued for the full $12.5 million plus punitive damages. The case soon settled for $17.5 million, and the paintings remained missing for five years, when the domestic abuse complaint led police to James Little's chatty girlfriend. Little then led the FBI to Tierney, who in turn led them to Cooperman, who in 1999 was convicted in Los Angeles of insurance fraud.
"Facing up to ten years in prison, he was released on a $10 million bond .... He hired a new lawyer, ... who raised the idea of cutting a deal with prosecutors to reduce his client's prison time. Did Cooperman know anything - anything big - that might be of interest to the federal government? ... As it turned out, Cooperman did know something big: the secrets of Milberg Weiss."