Drexel Owes Millions in Legal Fees
Drexel Burnham Lambert Inc. owes millions of dollars to lawyers who helped defend the collapsed Wall Street firm and its employees during the government’s lengthy insider trading investigation.
Atop the list is Drexel’s main outside counsel, which has claims to $2.1 million in back fees, and attorneys for indicted junk bond ex-king Michael Milken, whose monthly allowance of about $1 million wound down when Drexel went belly up.
“There are outstanding fees they haven’t paid and they’re not going to pay anything going forward,” said a Milken associate who asked not to be named.
When Drexel became entangled in the largest Wall Street criminal probe ever, the firm promised to pick up the tab for all current or former employees who became involved.
In addition, the demise of the firm that dominated Wall Street’s junk bond deal making is affecting big law firms that derived a large amount of work from Drexel’s criminal woes and its day-to-day securities business.
A slowdown on Wall Street--investment banking firms need lawyers for activities from underwriting stocks to completing mergers--hasn’t helped either.
Roger Meltzer, a partner with Cahill Gordon & Reindel, which has represented Drexel for 10 years, conceded that Drexel’s demise would hurt, but added that the firm has a “substantial and diverse client base.” The firm reportedly did about $10 million in Drexel business a year. Cahill Gordon said in court papers that it is owed $2.1 million.
“This firm is not based on the financial health of one client,” Meltzer asserted.
Drexel said it spent $75 million on legal fees associated with its criminal and civil troubles last year, when it pleaded guilty to six felonies and paid $500 million of $650 million owed in government penalties. A mountain of litigation spawned by Drexel’s behavior still is outstanding.
Drexel spokesman Steven Anreder said backed-up legal bills “will be dealt with in due course” but he didn’t know how much was owed. Anreder said Drexel had for the time stopped paying for individuals’ new legal expenses.
Drexel reportedly owes Milken attorneys--mostly at the New York firm Paul, Weiss, Rifkind, Wharton & Garrison--back pay for three or four months, consistent with what other firms representing Drexel people claim is due.
