THE LAW : Overbilling Gets Top Billing--Thanks to Hubbell Case : High-profile figure helps put issue back in the spotlight. But the extent of the practice is largely unknown, and in dispute.
Until five years ago, flamboyant Wall Street lawyer Harvey Myerson was as renowned for his lavish lifestyle as he was for the high-profile corporate clients he represented. That’s when one of them blew the whistle.
Shearson Lehman Hutton, the major client of Myerson’s law firm, went to federal authorities with suspicions that Myerson had overbilled for several years. A subsequent criminal trial in 1992 put Myerson out of business and into prison, convicting him of stealing more than $2.5 million from Shearson and five other clients.
Normally, overbilling is a subject only whispered about in the upper echelons of some law firms. Now, however, it has reared its head again in the case of former Associate Atty. Gen. Webster L. Hubbell, a close friend of President Clinton and a former law partner of First Lady Hillary Rodham Clinton. Hubbell, onetime chief justice of the Arkansas Supreme Court, pleaded guilty Tuesday to mail fraud and tax evasion charges in connection with overbillings for the Rose Law Firm.
The extent of bill-padding by much-sought-after attorneys is largely unknown. A Justice Department lawyer who has some familiarity with the abuse says: “The larger the law firm, the more rampant the practice.”
Others, however, disagree. Joseph E. diGenova, a well-known Washington lawyer and former U.S. attorney for the District of Columbia, insists that overbilling “is not a common practice because billing is highly controlled by most firms.”
“Travel and other normal expenses are thoroughly itemized and identified for clients and most law firms have control mechanisms,” DiGenova adds. “Dining is a regular charge for clients because it often involves going out and getting information for a case. But expenses like country club memberships and clothes, that’s a no-no.”
Still, Hubbell’s case is only the latest in a long line.
In the Myerson prosecution, trial testimony showed that he had overbilled clients to pay for expensive jewelry and Caribbean trips for his friends and family as well as dry-cleaning for his toupee. His bills even had included “counsel fees for Joseph Rahn,” a brother-in-law who was not a lawyer and who provided no services.
As another part of the scheme, three young partners who were Myerson proteges said that they followed orders to inflate their hours or lose their jobs. One partner testified that he had billed as much as 10 hours in fees for a scant 12 minutes of work.
Last month a federal grand jury in Miami indicted prominent attorney James F. Dougherty on 10 charges that he defrauded Lloyd’s of London by submitting more than $5 million in inflated bills--the largest amount ever alleged in an overbilling prosecution.
Dougherty, who had been investigating fraudulent insurance claims for a Lloyd’s syndicate, had testified before a U.S. Senate subcommittee in 1991 about illicit practices that he had uncovered by the infamous Bank of Credit & Commerce International. He has denied any wrongdoing, saying that Lloyd’s was willing to spare no expense for his legal and investigative work.
In Chicago, federal authorities reportedly are looking into the billing practices of a senior partner at the big corporate law firm of Chapman & Cutler. The firm declined to comment on whether the partner, James E. Spiotto, has been contacted by federal authorities but a firm spokesman, Tim Metz, defended his billings.
According to knowledgeable sources, records of Chapman & Cutler show Spiotto worked 5,471 billable hours last year--an average of nearly 15 hours a day every day of the year. Metz said that Spiotto worked 52 “all-nighters” last year and is “possibly the hardest-working lawyer in America.”
American Bar Assn. rules of professional conduct set no maximum hourly fee for lawyers, saying only that “a lawyer’s fee shall be reasonable.” Complaints of shoddy practices or overbilling are usually handled by state and local bar groups and there is no national clearinghouse that keeps records of such cases. Officials seek to resolve complaints without referring them to law enforcement agencies.
Fees that an ordinary client might view as exorbitant often are paid routinely by wealthy litigants or large corporations locked in a multimillion-dollar winner-take-all court dispute.
For example, on the way to billing millions of dollars in legal fees in a bitter intra-family business dispute involving the wealthy Haft family of Washington, the firm of Wilmer, Cutler & Pickering charged $2,700 for a lawyer’s work on a memo about the meaning of “irreparable injury.” The attorney said that she spent 13 hours on the subject.
A senior partner involved in the Haft case listed “thinking about loan-closing issues” as an explanation for one $320-an-hour fee. The litigants have not complained about any of those fees.
