Legal-Fee Padding Alleged in Exec Life Case : Fired Attorney Accuses Rubenstein & Perry of Overbilling; State Hires Auditor to Investigate

A former attorney for a law firm representing the state Insurance Department has accused the firm of systematically padding its bills in the Executive Life Insurance Co. insolvency case.

The attorney, Adriana Moore, made the charge in a wrongful-termination suit against the firm of Rubenstein & Perry, which so far has collected more than $11 million in fees in the Executive Life case since Insurance Commissioner John Garamendi seized the insurer in April, 1991.

Garamendi has reacted to the allegation by hiring an independent auditor to examine the law firm’s bills and related records.

However, Bill Schulz, a spokesman for the commissioner, said Thursday that based on a six-hour deposition that Moore gave on Jan. 26, “there’s not a shred of tangible evidence that has led us at this point to conclude that there’s been overbilling.”

He said the auditor was hired “to erase any doubt.”

Moore alleged that part of the reason for her firing after only seven months on the job was her refusal to go along with the excessive billing.

She also charged her former supervisor, and the firm, with sexual harassment. She said she was abruptly fired last July 9, three weeks after refusing to sleep with her supervisor on a business trip to Pennsylvania. The supervisor, Rubenstein & Perry partner Charles Bronitsky, denies the charge.

In Moore’s deposition, she cited conversations with colleagues at Rubenstein & Perry that persuaded her that there was rampant bill-padding. After seeing the numbers of hours being billed by some lawyers, she asked a co-worker how such high totals were possible.

“She laughed and said, ‘Well, you’ll be surprised, but they just bill, bill, bill on Mission (another insolvent insurer) and ELIC (Executive Life), and it’s really easy,’ ” Moore said in her deposition.

Fees to lawyers and financial advisers in the Executive Life case have amounted to $60 million. Such fees are paid out of Executive Life’s remaining assets and reduce the amount that policyholders will ultimately recover.

Lawyers for so-called muni-GIC holders--investors whose municipal bonds were backed by Executive Life guaranteed investment contracts--have repeatedly objected to Rubenstein & Perry’s fees.

They brought the Moore lawsuit to the attention of Los Angeles Superior Court Judge Kurt J. Lewin and asked him to appoint a special master to examine the fees. Lewin, who is overseeing the rehabilitation of Executive Life, took the request under advisement in a hearing Thursday.

Moore, in her deposition, also supplied Rubenstein & Perry records indicating that several of its lawyers billed more than 300 hours a month and that one billed 3,326 hours in 1991--or 9.1 hours for each day in the year, including Sundays and holidays--at $200 an hour.

“It is very difficult to believe that anyone could actually put in so many hours, much less that work done under such conditions could be effective,” said lawyers for the firm of Pillsbury Madison & Sutro, representing muni-GIC holders.

Karl L. Rubenstein, who founded Rubenstein & Perry five years ago, denounced Moore’s accusations as “total hearsay.” In an interview at the courthouse on Thursday, he insisted that all hours billed to Executive Life were correct.

He said there was no doubt that the Los Angeles-based lawyer who billed 3,326 hours in 1991 had worked that much and more. All-night work sessions have not been unusual during periods of intense negotiations, Rubenstein said.