Melvyn Weiss, once one of the most feared securities class-action lawyers in the country, must report to prison on Thursday.

For years, until entering a guilty plea in June, Weiss proclaimed his innocence on charges that he paid kickbacks to the investors who served as plaintiffs in his lawsuits against corporations. But the former founding partner of the law firm once known as Milberg Weiss is, if nothing else, a master deal maker.

Last October, he cut a deal in preparation for this day—an agreement to keep some of the future legal fees from cases he brought to his former law firm. Fees he might not otherwise have been entitled to share with his former partners, as an admitted felon who has lost the right to practice law, having pleaded guilty in June to racketeering and obstruction-of-justice charges.

Justice Herman Cahn of the New York State Supreme Court has approved the deal between Weiss and his former firm, now known simply as Milberg L.L.P. "Law firms are generally prohibited from sharing legal fees with non-lawyers," Justice Cahn wrote in his decision. But the ethical rules governing lawyers also allow a disbarred or suspended lawyer to be compensated for the fair value of his work before the termination of his or her right to practice law.

Cahn's decision notes that Weiss, who is 72, cannot be compensated for matters that were the subject of the federal prosecution. He will not get any fees for some lawsuits against Xerox, for example.

Weiss's deal with his former firm came under harsh criticism by the editorial board of the Wall Street Journal. On July 14, the eve of a court hearing regarding the agreement before Justice Cahn, the Journal published an editorial under the headline "The Milberg Double Cross," suggesting that prosecutors "may have been conned" by the "felonious" Weiss and his former firm. Already annoyed that the firm "got off easy" with its deal to avoid prosecution by paying $75 million, the Journal was disgusted that current partners would ink a deal to allow him to reap millions in the future: "Apparently, crime does pay," the piece huffed.

The Journal editorial, however, was inaccurate: The federal prosecutors in Los Angeles in fact had been apprised of Weiss's deal, as Justice Cahn's opinion points out.

The Journal itself acknowledged the error, if snarkily, in an August 5 editorial, after five Milberg partners wrote a stinging letter about it. ("Poor Bernie Ebbers, the former WorldCom boss now serving a 25-year prison sentence," the Journal editorial said. "If he'd been a class-action lawyer, he might have gotten a fat payout from his employer despite his felony rap.")

Sanford Dumain, Milberg's managing partner, defended the firm's deal with Weiss in an interview, noting that under the former partnership agreement, "Weiss had absolute dictatorial power if he wanted to use it."

"He gave up a lot in terms of monetary value, and he gave up all of his power," Dumain said.

And whatever fees Weiss collects under the deal may go back to the firm, at any rate. The firm has not given up its right to sue Weiss for contribution to its $75 million settlement with the Justice Department.

"Dollars are fungible," Dumain said. "You know, if Mel ends up contributing either by agreement or because we go after him for a judgment, dollars are dollars."

Weiss, for his part, will soon begin serving a 30-month prison sentence at a minimum-security camp in Morgantown, West Virginia.

And with Justice Cahn's ruling, the remaining lawyers at Milberg have their vindication that all was on the up and up with the prosecutors: There was no "double cross," as the Journal called it.

Now they soldier on. There have been rumblings that the firm kept the name Milberg so as not to trigger a dissolution clause in the original partnership agreement, an event that would require a payout of capital to former partners. In fact, two former partners of the firm, Steven Schulman and Robert Sugarman, brought arbitration proceedings in June 2006, claiming that such dissolution occurred when what was then Milberg Weiss Bershad Hynes & Lerach had a bicoastal divorce.

Does this smell of another Milberg "deal"? No way, says Dumain. "The only way that the firm can be dissolved is if the firm's executive committee votes to dissolve the firm," he says. At any rate, the arbitration has not proceeded vigorously. It is moribund, and an arbitration panel has not yet been selected.

The Milberg name refers to Lawrence Milberg, who died in 1989. Then 76, Milberg suffered a heart attack while playing tennis near his home in Great Neck, Long Island. Milberg was one of the unnamed co-conspirators in the kickback scheme, a fact admitted by the firm when it signed its plea agreement with the prosecutors.

So why continue with the name of a dead felon?

"We took the name because there is great value in the name," said Dumain. "The name still represents high-quality and tenacious work on behalf of our clients."

And the firm, by the way, is very much alive and well, Dumain says. There was a large defection out the door when the indictment against the firm was handed up in June 2006, he said. But that stopped in early 2007, and the firm now has 65 lawyers and 175 other employees. Dumain himself was co-lead counsel in the securities class action against Tyco, which landed a $3.2 billion recovery.

The firm has survived despite attacks on all sides by competitors and defense counsel attempting to use the pending indictment against it. But more often than not, the lawyers for the defense used the indictment against the firm—lawyers from powerful Wall Street firms like Milbank Tweed Hadley & McCloy.

But an opinion from September 2007, in a case called In re Flag Telecom Holdings Ltd. Securities Litigation, put these complaints to rest. Judge William Conner had some fun with Milbank Tweed's complaints that the firm would "face difficult decisions about how to manage the case" if the firm was "convicted" or "collapses before a criminal trial begins." Judge Conner had a simple response: "Defendants' argument is, to say the least, unpersuasive."

These days, the Milberg name is part of a larger crowd of firms. Firms such as Grant & Eisenhofer and Bernstein Litowitz Berger & Grossman carry most of the buzz in securities class actions. But Milberg is holding its own.

Even so, Judge John Walter of the federal district court in Los Angeles, who approved the firm's deal to avoid prosecution in the case, did so fairly reluctantly. "I am not a hundred percent convinced that a dismissal of all the charges based on the case disposition agreement that allows the firm to escape the consequences of the guilty plea to these charges is an appropriate disposition of the case," he noted at a July 14 hearing. But he also said, "In ruling on this motion, the court's discretion is extremely limited."

But Judge Walter tipped his hat to the current members of the firm. And he commended the prosecutors for "allowing those good people who didn't have any involvement in the conspiracy to earn a living."