Attorneys and consultants have billed nearly $141 million for services in the Detroit bankruptcy, the largest Chapter 9 bankruptcy case in U.S. history.  The hefty costs have not gone unnoticed by U.S. Bankruptcy Judge Steven Rhodes, who stressed his “independent obligation” to examine and carve out a mediation strategy to determine the reasonableness of the fees that the city of Detroit is obligated to pay.  The judge noted that quarterly reports from the bankruptcy fee examiner won’t be enough, and that the fees require further judicial review.

Bankruptcy fee examiner Robert Fishman of Chicago-based Shaw Fishman, appointed last year to keep tabs on the legal bills, proposed rules to prohibit billing for “unreasonable” expenses including alcohol, hotel room movies and first-class flights.  Fishman has challenged some of the charges in the case, but in a Nov. 6 filing, he noted professional fee expenses incurred during his fourth quarterly report, “while substantial by any measure, are commensurate with the complexity and speed of the case, and the quality of the services that professionals have provided.”

Fishman wrote, however, that he is reserving judgment on the adequacy and overall reasonableness of the expenses.  Such determinations must be made at the conclusion of the case, he said.  Rhodes praised Fishman and his team for their “skill assistance on the delicate responsibility that they took on and embraced.”

The largest tab is from the city’s lead bankruptcy firm Jones Day, which billed $52.3 million.  In addition, bills from Detroit’s restructuring consultants have reached $17.2 million for Conway MacKenzie; about $20 million for Ernst & Young; and $6.2 million for the investment banking firm Miller Buckfire.  Also, the city actuarial consultant Milliman billed more than $2 million.  Detroit’s legal bills have already surpassed the cost of the General Motors’ bankruptcy, in which fees topped out around $120 million. 

Jim McTevia, financial consultant at McTevia & Asociates, cautioned that the figures don’t represent the true cost of the city’s bankruptcy.  Rather, they only reflect the professionals who have applied for bankruptcy court approval of fees and do not include fees that the city’s creditors are paying to attorneys not subject to any orders or approvals.  Those fees, being paid privately by creditors to their professionals, could easily be another $50 million, McTevia says.