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USTP Targets Expenses in A&P Bankruptcy

February 15, 2016 | Posted in : Bankruptcy Fees / Expenses, Expenses / Costs

A recent WSJ story, “Government Watchdog Targets A&P Bankruptcy Expenses,reports that, hundreds of dollars in car-service charges, meals costing $50 a head and overly expensive copying charges are among the expenses that a government watchdog is targeting in supermarket operator A&P’s bankruptcy case.

U.S. Trustee William K. Harrington recently filed court papers raising questions about thousands of dollars in expenses that several law and consulting firms incurred for their work on A&P’s liquidation.  In bankruptcy, legal and other professional bills are subject to public scrutiny and court approval.  Bankruptcy watchdogs like Mr. Harrington, who is part of the Justice Department, also keep an eye on the bills in what is typically an expensive process.

The trustee’s filing reminds professionals what kinds of bills are acceptable in a bankruptcy and which aren’t.  Charges must be “reasonable,” Mr. Harrington points out, and detailed explanations must be provided to help the judge and others evaluate the bills rather than forcing the judge and others to embark “on a treasure hunt” for crucial information.  What’s more, lawyers and consultants can’t charge a bankrupt company for clerical tasks that are part of their firms’ overhead.

The trustee questions 17 pages’ worth of fees and expenses charged by A&P’s lead bankruptcy lawyers at Weil, Gotshal & Manges that he says lack detail, would be considered overhead and lack substantiation, among other causes for concern.  The expenses include thousands of dollars of catering charges from Sodexo and hundreds of dollars in taxi charges from car service Skyline Credit Ride, used to ferry Weil lawyers the roughly 30 miles between their offices at the GM Building in midtown Manhattan and the bankruptcy court in White Plains, N.Y., where A&P filed for chapter 11 protection.

Mr. Harrington further objected to more than $17,000 in expenses from A&P investment banker Evercore Group, which he said is overhead.  He also objected to reimbursing A&P financial adviser FTI Consulting for “numerous meals in excess of $20 per meal per person,” including “a significant number of meals charged at $50 per person.”

Also drawing Mr. Harrington’s attention are the expenses of the professionals working for A&P’s unsecured creditors, whose bills A&P must foot.  For instance, he wants to make sure that the court documents purchased by unsecured creditors’ lawyers at Pachulski Stang Ziehl & Jones and their financial advisers at Zolfo Cooper couldn’t have been obtained free online.