[BITList] Fwd: [snippets] $50,067 for preparing the bill itself

[John Feltham]

Begin forwarded message:

> 
> “Grazing,” Photocopying And Other Tricks Inflate Legal Bills
> 
> May. 11 2011 - 2:23 pm |
> By DANIEL FISHER
> 
> Picard: $120 million man. Image by Getty Images via @daylife
> 
>  
> Baker & Hostetler has charged the Securities Investor Protection Corp. $110 million so far for its work unraveling the Madoff Ponzi scheme. In April the law firm of Irving Picard, the trustee in charge of the Madoff estate, submitted another bill for $43.2 million plus $1.1 million in expenses.
> 
> In it: $2,000 for photocopying, $13,065.93 for stationery and “office supplies,” and $50,067 for preparing the bill itself.
> 
> Those are all charges that would get kicked back if SIPC employed David Paige. He spent 18 years litigating legal bills for insurance companies before setting his own firm, Sterling Analytics, to advise companies on how to root out questionable legal charges.
> 
> Baker & Hostetler declined to comment. SIPC said in a statement that it follows the rules established by bankruptcy courts to differentiate between legitimate expenses and overhead. “Stationery,” for example, actually refers to bound documents required by the court. Baker & Hostetler also notes in its fee application that its efforts have recovered more than $7 billion for Madoff investors including $5 billion from the estate of Jeffry Picower and $470 million from Union Bancaire Privee, the Swiss bank that funneled money to Madoff.
> 
> Such justifications don’t satisfy Paige, whose clients have included financial institutions like Regions Bank and homebuilders Avalon Bay and KB Homes.
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> Court rules notwithstanding, “the client should be paying for the exercise of legal judgment,” Paige says. “You should be paying a lawyer to do what went to law school to do.”
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> Using a combination of software and human auditors, Sterling snoops out charges for services like photocopying and making travel arrangements that law firms would dearly love to shove off on their clients, but properly belong under the category of  “overhead.”
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> One of his favorites: Charging clients for the use of conference rooms. Paige says he’s  uncovered some law firms that form separate LLCs to rent out their conference rooms, turning them into profit centers instead of a cost of doing business.
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> “If you went into most non-law firm offices and sat in a conference room with a professional, you would not expect to get a bill for that,” he says, speaking in the precise, unemotional tones of an insurance adjuster. (SIPC says it refused to pay $16,000 in conference-room charges sought by one firm.)
> 
> Another favorite is a practice Paige calls “grazing.” The telltale sign: A rainmaker partner, the type who brings in the big clients and charges $750 an hour or more for his services, who bills in 15-minute increments for an afternoon or entire day. Paige pictures the partner wandering through the office, checking in with associates and junior partners on various client matters — or possibly inquiring about their daughter’s latest lacrosse game.
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> “I suppose it can be justified as checking up on client business, but it’s also a way to fill up a slow day,” Paige says.
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> Sterling’s auditors also look for “pyramiding,” or putting a high-priced lawyer to work on a task better handled by a paralegal or secretary. At law firms across New York, he says, lawyers with fancy degrees and several years of experience are running photocopiers, scanning legal documents for routine issues like conflicts, and making indexes of exhibits — all at a rate of $200 an hour or more.
> 
> For most of his career, Paige specialized in representing insurance companies that disputed bills submitted by outside lawyers working for their customers in complex legal battles. Fee disputes are common in these cases, where the client is sticking somebody else with the bill.
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> He formed Sterling three years ago and has developed a database of state regulations and legal precedent to help determine whether, say, it is ethical and legal to charge a bill for preparing bills. (SIPC says the federal bankruptcy code allows lawyers to charge for preparing a fee request but Paige can rattle off a string of cases suggesting otherwise.)
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> “If we can’t save a client at least 10%, we won’t sign them up,” Paige says.
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> The first step is to make sure the client is getting detailed electronic bills. That way, software can make the first cut, identifying questionable charges for photocopying, or a firm that assigns a new lawyer to the case without first obtaining approval from the client. Software can also sniff out whether there was an unnecessary number of lawyers on a conference call or if the client is being charged for putting documents in chronological order.
> 
> Sterling urges its clients to construct a protocol that its firms must agree to sign. Most firms do, Paige says, agreeing as a matter of contract, for example, not to pass on the cost of training summer associates or overhead as defined by the client.
> 
> Sterling also hires auditors — many of them top third-year students at New York law schools — paying them up to $60 an hour to go through bills looking for more subtle evidence of overcharging. Lawyers being lawyers, the evidence is usually right in the bills. Nobody wants to risk a law license by submitting a materially false bill, so hiding in plain sight will be charges like the $200 an hour Sterling once found for a paralegal to make travel arrangements for a partner. Or the $250-an-hour associate who was billing a client to walk across the street to make copies at Kinko’s.
> 
> What Paige is really attacking is an entire business model, the big-firm practice of hiring armies of associates and paying them $50 an hour while charging the clients $250 or more. The latest Baker & Hostetler bill lists some 300 associates billing at rates as high as $557 an hour and more than 60 paralegals and clerks billing at an average of $250 an hour.
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> “This structure is needed to support the overhead of these large firms, and the expectation of the partners of how much money theyre going to make,” Paige says.
> 
>  http://blogs.forbes.com/danielfisher/2011/05/11/grazing-photocopying-and-other-tricks-inflate-legal-bills/?partner=daily_newsletter
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