The steep legal fees that are being paid in connection with the bankruptcy case of Jeffrey Prosser, former owner and CEO of Innovative Telephone, will not be stopped by the court’s recent appointment of a fee auditor.
The amount of these legal fees relates directly to both Prosser’s continuing foot-dragging and his legal maneuvers, on one hand, and, on the other, to the high rates charged by the mainland firms that have been working for the non-Prosser forces in the case, primarily for the two court-appointed trustees.
Recently U.S. Bankruptcy Judge Judith Fitzgerald, in an apparent effort to rein in the fees paid by the principal creditor, the Rural Telephone Finance Cooperative, appointed a fee auditor to examine at least some of the fees being charged. The appointment went to Warren H. Smith & Associates, a Dallas, Texas, accounting firm.
The initial results show Smith’s outfit recommending the trimming of the fees of one of the law firms, Vinson & Elkins, by a hair. In the first quarter of this year that firm billed $1,815,000 for its services and reported expenses totaling $41,933.42. After much auditing Smith recommended to the court that the first figure be reduced by all of $590 to $1,814,410.00 and the second by $4,287.15 for a total reduction of $4,877.15.
That reduction, in percentage terms, came to about one quarter of one percent (0.25 percent).
Further, the reduction of $4,877.15 should be compared to Smith’s bill for the job, of $66,277.25 in fees and $5,663.69 in expenses.
There may, of course, be further developments, but at the moment it looks like the appointment of an auditor did not turn out to be a cost-cutting success.
The auditor dealt only with the appropriateness of the charging system used by the law firm, not the basic rates. Partners at the law firm bill at rates ranging from $675 to $880 an hour, and junior lawyers as much as $625 an hour. The individual lawyers, of course, are not paid at these rates, the billing rates cover the firm’s costs, such as rent, communications, and support staff, as well as wages and fringe benefits for the individual attorneys.
Smith’s firm’s ability with numbers, incidentally, might be questioned by those reading the last line of the report to the judge, which follows:
“…and costs totaling $37,706.27 ($41,993.42 minus $4,287.15) . . . ”
The Source’s hand calculator finds: $41,993.42 minus $4,287.15 equals $37,646.27, not $37,706.27 . . . but what do we know?
We are not the trained accountants.