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Audit Results Slam Billing Practices

The Courier-Journal of Louisville, Kentucky has uncovered a massive legal overbilling scandal stretching back to 2006. Larry Zielke, originally with Pedley, Zielke, Gordinier & Pence and currently of the Zielke Law Firm, billed the Louisville Municipal Sewer District (MSD) for 5.9 million dollars over the past 5 years for various legal services. In fact, as far back as April 2008, internal audits criticized the practices of Pedley, alleging they did not keep proper timesheets for billing and payroll purposes, charged partner rates for associates, and that no contract was ever signed between Zielke’s new firm and the board.

Even more egregious was that Zielke’s contract was a no bid contract, and that Zielke also provides consulting services for legal matters which he then gets hired to perform. Other alleged violations of accepted standards of legal billing included billing the MSD 1.09 million for bond counsel work, for which the agency also paid the firm Wyatt, Tarrant & Combs. Zielke alleges that the work was a division of labor, but during the period when the firm did not provide billing records this would not be apparent.

Cases like this illustrate the need for general counsels (or in this case in-house municipal counsel) to closely examine their hiring practices and legal billing. If necessary, outside auditing firms could be used to act as a check, especially when consulting services to the legal department where performed by the managing attorney.

In this case, the lack of billing records and specificity of hours billed should have triggered an immediate red-flag. The auditor accurately noted that these practices, along with a lack of a written contract required changes to the billing system of Pedley, Zielke and the Zielke Law firm. Despite denials by board members of seeing this audit, changes were eventually made to move more into compliance with accepted billing standards. Also worth noting this is that this is not the first time Zielke was criticized for his handling of a public contract – in 1986 he was billing the MSD and Parking Authority of River City as many as 19 hours in a single day.

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