Case

HK – OIG Billing Audit identified $1,422,038 of questionable legal bills

In 1 on December 29, 2008 at 11:53 pm

 Legal Fees Paid by RTC to Holland & Knight

(Audit Report No. 98-062, June 19, 1998) Summary

The Office of Inspector General (OIG) has completed an audit of Holland & Knight, a law firm hired to provide legal services to the Resolution Trust Corporation (RTC). The audit was conducted by the independent public accounting firm (IPA) of Doshi & Associates, P.C. through a contract with the OIG, and covered billings paid by RTC from January 1, 1990, through June 30, 1993. The objectives of the audit were to determine whether Holland & Knight's legal bills were adequately supported and in compliance with the cost limitations set forth by RTC and the Federal Deposit Insurance Corporation (FDIC) and that charges for legal services provided to RTC were reasonable. The total fees paid to the law firm for RTC-related work during the audit period were $5,735,630. The audit sample covered $3,103,209, or 54 percent of the total. The IPA identified net questioned costs of $1,422,038.

Recommendations

That the Assistant General Counsel (AGC), Legal Operations Section, Legal Division, should disallow:

(1) $10,258 for billing errors,
(2) $616 for excess travel time,
(3) $662 for transient billers,
(4) $1,329,399 for unauthorized billers,
(5) $926 for entries with vague descriptions,
(6) $1,145 for professional fees billed for administrative tasks,
(7) $5,238 for unauthorized research,
(8) $15,595 for excess copying charges,
(9) $2,695 for excess telephone charges,
(10) $30,124 for unsupported facsimile charges,
(11) $394 for unauthorized data base charges,
(12) $1,221 for duplicate and unsupported travel charges,
(13) $576 for surcharges on courier services,
(14) $8,048 for express mail overcharges,
(15) $1,642 for overhead expenses,
(16) $44 for ordinary postage,
(17) $2,339 for unsupported charges related to a missing invoice, and
(18) $11,116 for inappropriate billings.

In addition, the OIG recommended that the AGC (recommendation 19) assess the appropriateness of the unaudited billings and disallow the costs deemed inappropriate.

Management Response

The General Counsel's response to a draft of this report provided the requisites for a management decision on each of the recommendations. Management disallowed a total of $48,461. Management's corrective actions on recommendations 5 through 10, 15, and 17 differed from the recommended corrective actions. Nonetheless, we consider management's response as providing the requisites for a management decision. Specifically, for recommendations 5, 15, and 17 management allowed all the questioned charges for vague descriptions, messenger services, and costs related to a missing invoice, respectively. The OIG accepts management's explanation for each of these recommendations and, accordingly, reduced questioned costs to $0.

In recommendation 6, the OIG recommended that FDIC disallow $1,145 for professional fees billed for administrative tasks. Management allowed $482 and disallowed $663. Specifically, management reviewed all the questioned charges and allowed $482 charged by an attorney to prepare settlement packages. The OIG accepts management's explanation and, accordingly, reduced questioned costs to $663.

In recommendation 7, the OIG recommended that FDIC disallow $5,238 for unauthorized research. Management allowed all the questioned charges. Lacking specific evidence or independent confirmation from the oversight attorney that the research was approved, the OIG cannot verify that the research was authorized. Therefore, the OIG will continue to question $5,238 for research.

In recommendation 8, the OIG recommended that FDIC disallow $15,595 for excess copying charges. Management allowed all the questioned charges. Management concluded that the Legal Division did not have a contractual right to lower the rate charged by the firm because all of the questioned charges occurred before the date of the firm's first legal services agreement (LSA) with RTC. The OIG will continue to question the $15,595 for excess copying charges because, notwithstanding the lack of an LSA, FDIC guidelines explicitly stated that photocopying would be reimbursed at cost.

In recommendation 9, the OIG recommended that FDIC disallow $2,695 for excess telephone charges. Management allowed $1,385 and disallowed $1,310 for the excess charges occurring after the firm executed an LSA with RTC. The OIG will continue to question $2,695 for excess telephone charges because, notwithstanding the lack of an LSA, FDIC's policy was to only pay actual costs for expenses.

In recommendation 10, the OIG recommended that FDIC disallow $30,124 for unsupported facsimile charges. Management allowed $17,030 and disallowed $13,094 for facsimile charges occurring after the execution of the firm's LSA. The OIG will continue to question $30,124 for unsupported facsimile charges because, notwithstanding the lack of an LSA, FDIC's policy was to only pay actual costs for expenses.

Based on the IPA's audit work, $1,422,038 was questioned in the draft report transmitted to management. In addition to the recommendations previously discussed, in recommendation 4, the OIG recommended that FDIC analyze the qualifications of employees working on RTC matters but not listed on the LSA, determine how much of the $1,329,399 in questioned charges should be ratified, and disallow any of the charges not approved. Of the $1,329,399 questioned, the Legal Division ratified $1,328,940 and disallowed $459 because some rates charged were excessive. The OIG accepts the action taken by management and, accordingly, reduced questioned costs to $459. After considering $48,461 in disallowances taken by management and management's comments on the IPA's findings, we will report questioned costs of $87,709 (including $41,267 of unsupported costs) in our Semiannual Report to the Congress.

Posted via email from HKLaw Investigation

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: