Like a sick person, a company facing litigation is willing spend big bucks to get out of a trouble.
It’s entirely justifiable, and lawyers are only too happy to oblige, billing clients for every minute worked, and then some.
But is it possible to get sound counsel from someone who just pulled 52 all-nighters in a row? How about paying more than $1,000 for an hour of legal advice? And what about being charged for 26 hours in a single day?
Like all consultants, some lawyers find questionable ways to squeeze money out of clients. Some are legal, some aren’t, but all will make a CFO’s blood boil.
So review those invoices, make sure you know billing rates, and kindly remind Dewy, Cheatem and How LLP, that summer associates don’t need to stay in VIP suites at the Four Seasons.
Billing two clients for the same hour of work is dubious legally and ethically. That doesn’t mean it’s uncommon.
One egregious example is of a Long Island lawyer whose claims in government legal bills included working more than 1,200 days in a year and claiming to be a full-time employee of five different school districts, according to the ABA Journal.
Padding hours is a basic building block of consulting billing excess.
Work for 90 minutes? Call it two hours. Forget how long you worked? Call it five. Avery Tolar, Gene Hackman’s character in The Firm, sure made it work.
According to the Samford study, “a distressingly high percentage of attorneys believe that time-based billing results in bill padding and provides incentives for attorneys to perform unnecessary work.” Two-thirds of the respondents stated that they had specific knowledge of bill padding.
For example, an extensive Illinois hearing board investigation into the billing records of a lawyer at Mayer Brown found that he billed more than 150 hours during a two-week period in which he actually worked less than 50.
The lawyer’s routine was to arrive at the office around noon, stay until the other lawyers went home around 5, and then go home himself soon after — while claiming to stay at the office until late in the night. When he was in the office, investigators found, the lawyer made edits to documents at a rate somewhere in the range of one edit per hour.
That’s the more common version of over-billing, as opposed to the notorious 1990s example of an energetic Cravath attorney who billed 26 hours in a day, according to the Washington Monthly.
Are you paying for your lawyer’s air conditioning? Michael Vick was.
Faced with a $2.66 million fee for a bankruptcy case, Vick learned that his lawyers were charging for extensive overhead expenses. As Am Law Daily noted, these included the cost of running air conditioning during the weekend; taxi rides home for employees working late; and $1,200 for plane tickets from New York to Kansas.
Cromwell & Moring also billed the quarterback for an incredible number of hours — 7,200 billable hours of work over 10 months, equivalent to working 24 hours a day on the Vick case for 300 straight days.
Vick’s fee was subsequently reduced by a disapproving judge to $1.5 million.
Sometimes, law firms use high billing rates to stick clients with unnecessarily expensive bills for research, secretarial work, and other low-level tasks.
For example, a federal judge scolded Richards Kibbe & Orbe after a firm lawyer billed $325 an hour to review an estate landscaping plan and used a $190-an-hour paralegal to deliver a letter to court, according to the Bergen Record. Why not just use FedEx? the judge asked.
Expense reports can be great opportunities to practice greed — er, billing creativity. You might claim reimbursement for the cost of first-class tickets when actually you flew coach. Or you could claim reimbursement for plane tickets, hotels, and meals when actually you didn’t travel at all.
For example, a lawyer at Sullivan & Cromwell used these techniques and others to misappropriate over $500,000 before being disbarred in 2008, according to the Wall Street Journal. Besides outright false expenses, the lawyer admitted to improperly billing for personal “meals, travel and lodging” and first-class tickets on international flights, for which he paid for coach or business-class tickets, pocketing the difference.
Also in 2008, a lawyer at Latham & Watkins pleaded guilty to one count of mail fraud for mischaracterizing more than $200,000 of expenses as reimbursable.
Although fair by the virtues of the free market, there is something wrong about four-figure hourly rates.
Meanwhile the highest associate billing rate was $760 an hour at DLA Piper’s New York office.
That counsel better be good.
High legal fees often seem like a rip-off, and once in a while, a judge agrees.
In one case of indisputable inefficiency, attorneys tasked with the recovery of billions of dollars lost in the R. Allen Stanford Ponzi scheme recovered only $81 million. According to the AP, the attorneys charged $27 million for three months of shody work.
In other words, an unprecedented 34% of the recovered sum would be paid to legal fees. The situation was improved somewhat by a judge, who rejected and withheld about $7 million in fees.
Anytime you pay an upfront fee, you risk the lawyer not doing much or any work.
This was a growing problem in the past year with a high number of foreclosure cases, which often involve initial payments. In a typical case last month, Gladis Heras paid a lawyer to arrange a modification of her mortgage. Months later, her bank had not been contacted about the mortgage, and the lawyer had done his best to disappear, according to the Daily Business Review.
Thankfully, he was arrested after receiving dozens of complaints related to negligence and abandonment.
Sometimes, law firms charge clients for developing talent.
Recently, Tuckerbrook Alternative Investments sued Bingham McCutchen, claiming the firm stacked a case with young associates who had “inadequate” experience. “The billing statements reflect that these junior lawyers in essence were enjoying the benefits of on-the-job-training at Tuckerbrook’s expense,” the complaint states, according to Above the Law.
Working while sleeping
Even if clients believe the super-human hours lawyers sometimes bill, it’s hard to believe any counsel coming from someone who hasn’t slept in days is worth much.
One extreme (if-dated) example was a partner at Chicago’s Chapman & Cutler, James Spiotto, who charged clients for more than 5,471 hours in a single year – about 15 hours a day, every day.
Called “possibly the hardest-working lawyer in America” by his colleagues, Spiotto claimed to have pulled 52 all-nighters in a row in 1993, working on bankruptcy matters, according to the Washington Post.
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