Legal Fees on Failed Library Deal Raise Concern : Negotiations: Although the City Council agreed to pay Philip Morris’ expenses, the $221,000 bill has some members balking. Total cost of the scrapped plan may total $1.5 million, city reports say.

Six months after the Los Angeles City Council scuttled a plan to sell the landmark Central Library to a subsidiary of tobacco giant Philip Morris, city officials are upset by the size of legal fees the company is asking them to pay.

A bill for $221,000 is on the desk of council members, with hourly attorney’s fees that run as high as $400. That is in addition to $240,000 the city has already paid to the firm’s attorneys. When all the bills are tallied, including the city’s own legal and consulting expenses, the cost of the failed deal could come to $1.5 million, city reports say.

The City Council agreed in June, at the outset of the negotiations with Philip Morris, to pay the subsidiary’s expenses. But now that the bills are coming due, some council members and members of the city’s Community Redevelopment Agency say the charges far exceed what they had been told to expect.

The dispute comes in the wake of an unusual proposal, championed by Mayor Richard Riordan, under which the city would have sold the library to a private company and then leased it back in a financing maneuver that was supposed to save the city $11.5 million.

The Community Redevelopment Agency designated Philip Morris Capital Corp. as the firm best positioned to pull off the deal.

The firm agreed to pay $71 million for the library in order to gain tax credits under historic preservation laws. The city would have leased the building, maintained control of all operations and saved $11.5 million.

The City Council in June authorized the city to enter negotiations and said that if the deal fell through it would pay the company’s legal expenses up to $250,000. Later, the council agreed to raise that spending cap by an unspecified amount.

But Community Redevelopment Agency staff members who were working on the deal said they were bogged down in so many other details of the transaction that they never negotiated a maximum payment.

Curt Gibbs, a senior finance officer with the CRA, defended the payments to Philip Morris, which could total $461,000.

“This is standard for these sorts of transactions,” Gibbs said. “We were told by our consultants and attorneys that unless we offered this we would not find anyone willing to do transaction.”

Representatives for Philip Morris could not be reached for comment late Tuesday.

When the final proposal was presented to the City Council in September, all but Councilman Hal Bernson voted against it. Several lawmakers said they feared that the money used to pay the library lease would be taken out of the redevelopment agency account that goes toward low-income housing. The vote was seen as one of the first significant losses for Riordan.

A memo from the mayor’s office at the time of the vote warned that if the deal fell through the total cost could come to $1.5 million. But in the daily crush of events at City Hall, the Philip Morris deal had been all but forgotten--until a $581,000 bill from the tobacco firm’s lawyers arrived late last year.

A team of city officials persuaded Philip Morris to trim the bill by $120,000, and another $240,000 has already been paid to the tobacco subsidiary. But the CRA board this month declined to pay the remaining $221,000 in billings.

Board member Bobbi Fiedler said she was “incensed” when she went through the bill for Philip Morris’ attorneys, finding charges that ranged as high as $400 an hour for one lawyer who billed the city for up to 17 hours a day.

Another board member, Cynthia McClain-Hill, said a spending cap should have been set. “The agency had the responsibility to live within limits and that loop didn’t get closed,” she said.

Fiedler and McClain-Hill said the work on the deal was done before they replaced outgoing members of the board, who had been appointed by Mayor Tom Bradley.

Two City Council members joined in the criticism Monday.

“I’m deeply concerned about it,” Councilman Mark Ridley-Thomas said. “Some of it may be justified, but it just keeps growing and growing.”

Councilman Richard Alarcon objected in particular to more than $50,000 requested for legal fees after the council rejected the sale and lease-back of the library. Those expenses were charged by Philip Morris lawyers who prepared to make a second attempt at council approval, one week after their initial failure. The reconsideration also fell short, with the council rejecting the plan 10 to 1.

“I want to know what the heck they did in so few days that cost so much money,” Alarcon said. “I think it’s a sham.”

Ridley-Thomas and Alarcon, sitting as the council’s Housing and Community Redevelopment Committee, refused Monday to recommend payment of both the Philip Morris bill and the most recent invoice for $175,000 from the redevelopment agency’s lawyers involved in the deal.