Law Firm Seeking Big Bonus From O.C.

In a move that has sparked outrage from some county leaders, a law firm that has already received $26 million for handling litigation related to Orange County’s 1994 financial collapse is seeking a bonus of $48 million.

If a federal court upholds the recommendation, it would bring the total legal fees paid to $74 million--about 9% of the $865 million the county has collected in settlements with firms it accused of helping cause the bankruptcy.

But county officials expressed opposition to the proposed bonus in court, saying that the attorneys from Hennigan, Mercer & Bennett have already been generously compensated and that any additional payment would have to come out of money earmarked for public services.

“The bankruptcy continues to wrap its arms around the necks of the taxpayers,” said Supervisor Todd Spitzer.

The attorneys are asking for the additional payment even though the official in charge of administering the county’s bankruptcy litigation, former state Treasurer Thomas Hayes, turned down their request.

Hayes said that he accepted increases in the lawyers’ hourly fees three times during the litigation effort--to as much as $450--and that additional payments are unnecessary.

The hefty bonus was suggested by retired Judge John G. Davies, who at the request of the law firm agreed to review how much compensation it should receive. Davies, who oversaw most of the bankruptcy settlements before stepping down last year, analyzed the bonus issue as a private citizen and not in any official capacity.

In his seven-page recommendation, Davies praised the attorneys, saying their services were “spectacular by any standard, particularly given the extraordinary and difficult circumstances under which they were achieved.”

Hennigan, Mercer & Bennett was selected in 1995 to lead the county’s effort to recoup money lost in the largest municipal bankruptcy in U.S. history. The county sued numerous Wall Street financial firms, including Merrill Lynch & Co., which sold securities to Orange County’s ill-fated investment pool. The litigation ended in July when the last firm settled with the county.

The law firm’s contract did not specify a compensation package, but said it was dependent on a number of factors, including hourly fees and the complexity of the cases.

J. Michael Hennigan, a law firm partner, said a $48-million bonus is reasonable, especially given that most contingency arrangements provide attorneys with a larger share of the total settlement than the roughly 10% his firm would receive.

“It is a huge number, but well deserved I think,” he said.

But Christopher D. Cameron, a bankruptcy law expert at Southwestern University School of Law in Los Angeles, termed the size of the proposed bonus “extraordinary.”

One of the two federal judges handling the county’s bankruptcy case--John Ryan or Gary Taylor--will ultimately decide how much of a bonus, if any, the attorneys receive. A decision should be made within the next month.