Bill Preparation Cost Questioned in Court
The legal, but some say outrageous, practice by attorneys and others helping Orange County through bankruptcy of charging for their billing time has been challenged in court.
Mary Ann Schulte, a court-appointed representative for vendors who were owed nearly $200 million when the county declared bankruptcy in 1994, filed a document this week in U.S. Bankruptcy Court questioning the practice.
On Wednesday, U.S. Bankruptcy Court Judge John E. Ryan will be asked to review the running total of bills charged by the long list of attorneys and advisors guiding the county through its unprecedented bankruptcy. Totaling more than $25 million, some of the bills date back to the start of the bankruptcy.
Ryan at that time also may consider Schulte’s comments.
In the past, some firms have made a practice of charging the county for their billing procedures. Schulte said that, while those charges amount to a small percentage of the fees, each additional cost sets back the bankruptcy recovery effort.
“In any other business, billing is the cost of doing business, it’s overhead,” Schulte said. “No matter how long it takes me to prepare an invoice in my business, I can’t pass that cost along.”
Others say the professionals are being paid so much money, the billing costs should be thrown in.
“To me, it’s a form of padding,” said Bruce Whitaker, spokesman for the Committees of Correspondence, an activist group that has been critical of such bankruptcy costs. “It looks like a lot of feeding at the trough.”
But for many, billing costs are a legitimate expense.
John L. Amsden, a county bankruptcy attorney, said billings are complicated procedures. For instance, bills that will be viewed by the public must be carefully screened to protect-attorney client privilege, he said.
But Amsden said his firm, Hennigan, Mercer & Bennett, has been waiving thousands of dollars it could pass on to the county in billing costs.
Meanwhile, the price tag for the county’s bankruptcy continues to grow.
As of Dec. 31, the county was being billed more than $42 million for professional services related to the bankruptcy, Amsden said.
The county was plunged into financial chaos when former Treasurer-Tax Collector Robert L. Citron gambled on a risky investment strategy and lost $1.64 billion in funds belonging to the county, as well as cities, school and other government districts.
