Law Firm’s Bid for Extra Pay Blamed on O.C.’s Contract

Some officials Friday blamed a vaguely written contract with the law firm representing Orange County in its bankruptcy litigation for allowing attorneys to seek $48 million in extra compensation.

The contract was approved by former state Treasurer Thomas W. Hayes, who was appointed to oversee the county’s effort to recoup losses it sustained in the financial collapse. Elected officials gave Hayes wide latitude in crafting legal strategy and determining attorney fees, with little public oversight or review.

The contract states that the law firm will receive an hourly rate as well as unspecified adjustments based on a number of factors, including the complexity of the case and how much the attorneys win for the county.

To the dismay of some officials, the contract was signed without any review by either the county Board of Supervisors or other public entities involved in the litigation.

“No one was aware of this,” said Pat Shea, an attorney who represents the dozens of cities and schools who lost millions of dollars when Orange County’s investment pool collapsed in 1994.

Shea, after reviewing the contract for the first time this week, called it vague. Because the document did not clearly lay out a compensation package, attorneys from Hennigan, Mercer and Bennett are using it to win extra contingency fees that government officials have consistently refused to grant them, he said.

The law firm plans to ask a federal bankruptcy judge to approve the $48-million payment on top of the $26 million in basic fees the attorneys have already received.

If approved, the firm’s compensation would total 8.5% of the $865 million the county won in settlements with Merrill Lynch & Co. and other firms it accused of helping cause the bankruptcy.