A recent BLT Blog posts, “Audit Questions $8.1M in Legal Fees” reports that a new audit report says that four major law firms failed to justify $8.1 million in legal fees that they charged the U.S. Treasury Department for work related to the financial crisis. The 52-page legal audit report (pdf) indicates that billing problems at law firms working for the Treasury Department have been more widespread than previously known. The latest report is especially critical of Simpson Thacher & Bartlett. Legal bill auditors looked at $5.8 million in fees that the firm received under three Treasury Department contracts, and they called into question all of it. The firm, the report says, “provided no detail of work performed in its fee bills, and did not provide receipts or proper documentation for expenses.”
On one day, the report says Simpson Thacher submitted two legal bills, one for $200,000 and another for $300,000, that “contained only the total dollar amount owed” with no detail of the work performed, the hours worked or hourly rates. Later, the firm was able to provide the names of lawyers and their hours and rates but no detail of what work they did. “No invoice contained enough information to justify [Treasury officials] paying Simpson Thacher,” the report says. Three other law firms come in for criticism: Cadwalader, Wickersham & Taft; Locke Lord; and Bingham McCutchen along with Bingham predecessor firm McKee Nelson. Those firms’ legal bills were plagued by inadequate detail and block billing, the report said.
Legal auditors wrote that the Treasury Department’s Office of Financial Stability contracts with the law firms were inadequate because they had little direction for how detailed the firms’ legal bills should be, and the office had inadequate and inconsistent policies for reviewing legal bills once they were received. The report is a product of the special inspector general for the Troubled Asset Relief Program, known as “SIGTARP.”
Legal auditors recommended that the Treasury Department try to get at least $91,482 from Simpson Thacher. The amount reflects what auditors called “questioned, ineligible fees and expenses” that the firm should not have been paid for, such as instances of billing above rates that were agreed upon in the firm’s contracts. Further, auditors recommended that Treasury “specifically determine the allowability” of the other $8 million in questioned legal fees: $5.8 million from Simpson Thacher, $2 million from Cadwalader, $146,867 from Locke Lord and $57,939 from Bingham.