Class-action lawsuit firm Milberg LLP has cut a $75 million deal with federal prosecutors to avoid misconduct charges.

Under the settlement, prosecutors have agreed to dismiss all charges against the firm, formerly known as Milberg Weiss Bershad Hynes & Lerach LLP, in return for payments over the next five years. The firm was involved in lawsuits against PricewaterhouseCoopers over its Tyco audits and against KPMG over its tax shelters, as well as against WorldCom executives.

The settlement related to charges that the firm paid some of its lead plaintiffs in the class-action suits. Former partners Melvyn Weiss and William Lerach have left the firm and pled guilty to charges related to the scheme (see Weiss Pleads Guilty to Racketeering).

"We are pleased that the government specifically recognizes that none of the lawyers now at the firm 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," said Sanford Dumain, a member of the firm's executive committee, in a statement.

Dumain defended the amount of the settlement, saying the firm risked having to pay forfeitures and penalties of many hundreds of millions of dollars if the criminal case against the firm had gone forward. As part of its agreement with the Justice Department, Milberg agreed to follow a best practices program for two years to ensure compliance with all legal and ethical rules. The firm also agreed to submit its referral agreements to a court-appointed monitor for review.

Several of Milberg's former partners, however, face legal proceedings of another kind. Former partner John Richards sued three other former partners - Weiss, Lerach and Steven Schulman - claiming their actions in the kickback scheme caused him professional and financial harm. In court papers, he estimated the damages at more than $3 million. Another former partner, Michael Buchman, has filed a similar suit.

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