The October 2011 Lehman Brothers monthly operating report was recently released. The report contains, among other things, the professional fees paid to the various entities providing services in the bankruptcy case. Fees were paid to a variety of professionals, including attorneys, banking and financial advisors, and fee examiners. For October 2011, these professionals were paid more than $37 million in fees and disbursements. This brings the total received by professionals in the Lehman Brother’s bankruptcy to more than $1.4 billion. It is troubling that the fees paid to these professionals have reached more than one billion dollars, especially since three separate fee examiners were retained by the bankruptcy court.
Earlier this year, Sterling Analytics conducted an independent evaluation of past invoices submitted by a number of firms in the Lehman Brothers bankruptcy. These invoices totaled $349,258.57 in attorneys’ fees. The following is a summary of the objectionable billing practices that were identified:
Nearly twenty percent, or $66,924, of the reviewed charges represented multiple attorneys attending the same meetings, hearings, and conferences. This billing practice is generally not permitted because it results in charging multiple times for work that could be performed by one attorney.
More than $47,000 of the reviewed charges contained block-billed time entries. Block-billing prevents the court or auditor from determining whether each task was performed in a reasonable amount of time.
Nearly $30,000 of the invoices consisted of charges for reviewing, editing and preparing fee invoices. Many bankruptcy courts find that time spent amending invoices is not compensable.
More than $22,000 of the reviewed charges contained tasks that were performed by an overqualified professional. For example, it is unethical for an attorney or paralegal to charge for performing clerical tasks. Examples of these overqualified charges include organizing files, uploading documents, and charging full hourly rates for time spent traveling.
It would be interesting to see what the fee examiners found in their own reports considering the objectionable billing practices that were found by Sterling Analytics in only a small sample of the total $1.4 Billion paid out by Lehman Brothers so far.