Today's WSJ carries a story about bill padding at the Chicago office of law firm Holland & Knight. Apparently the junior partner in charge of a trial blew the whistle on the senior billing partner, who was inflating the bills. The junior partner noticed discrepancies in the billing. For example:
The first invoice struck him as odd, he says. It claimed he worked 6.5 hours on Aug. 7, 2002, the day he learned of the suit. Mr. Farmer says he distinctly recalls hearing about the case late that day and spending only 15 minutes on it.
According to the junior partner, the billing partner made up hours under the names of attorneys who did no work on the case at all during the periods in question. All tolled, the overbilling exceeded $100,000. According to the story, it sounds like the firm circle the wagons around the senior partner. The junior partner has since left the firm.
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1. Posted by Christine on August 30, 2006 @ 9:11 | Permalink
Bill-padding is also the perfect crime because the corporate client rarely fusses. The agents of the client are humans, who are probably friends of the overbiller. They don't want to stir up a fuss for people that they socialize with, especially if they are happy with the representation. So, the senior partner pads the bills -- he also took me to three professional basketball games in the firm's suite, a PGA tournament, and the opera. It all evens out in the end, right?
Another unhappy example of the law firm whistleblower is Coleen Bohatch. Gordon's book tells this story on p. 117. She alleged overbilling by her fellow partners at Butler & Binion in their representation of Pennzoil and was booted out of the partnership, only to slip into legal employment oblivion. This case is also in "Ethics Stories."
2. Posted by Jake on August 31, 2006 @ 20:19 | Permalink
Fertile ground for an article awaits any legal scholar who is ready to review (or get a research assistant to do so) fee applications in major Chapter 11 cases.
3. Posted by Fred Tung on September 1, 2006 @ 7:21 | Permalink
Jake, I like the idea of reviewing Chapter 11 fee apps, but I wonder what the mechanism would be for verifying each item. At least in the Holland & Knight case, the junior partner had internal billing records available to compare to the invoice sent to the client. I suppose bankruptcy courts could occasionally order production of internal billing records?
4. Posted by Jake on September 2, 2006 @ 16:29 | Permalink
Fred, bankruptcy courts can order the production of law firms' internal billing records. Fed. R. Bankr. P. 2004. And internal billing records can be redacted to protect privileged information. (It's unclear what accounting records have to do with providing legal advice; but law firms often claim their accounting records are privileged.) Why other creditors or the US Trustee do not more often use Rule 2004 to scrutinize law firm fee applications in Chapter 11 is a mystery.
To take the suggested analysis one step further, an interested scholar could perform a comparative analysis of fee applications by major law firms that do a lot of Chapter 11 work (available via PACER). Might any lawyers be billing 10 hours a day to Chapter 11 Company A, plus another 10 hours the same day to Chapter 11 Company B? It is not inconceivable.
5. Posted by Larry on September 2, 2006 @ 18:32 | Permalink
Jake, have you seen this?
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=913841
Not exactly what you're proposing but along the same lines.
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