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Tuesday, 26 March 2013 11:08

Pricey Law Firms That Inflate Their Bills Are Part of a Corrupt Culture of the One Percent

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lawbooksAnyone who knows anyone who has worked at a high-end law firm knows that there is a two-word key to becoming a partner: billable hours.

The most prestigious big sticker law firms are now global in nature, just like the corporations and the elite whom they represent – and to keep pace with the wealth of their clients an unknown number of these firms likely pad their bills.  

“Lawyers sometimes conflate their own financial interests with the interests of the client who pays the bills,” William G. Ross, a law professor, observed in the New York Times (NYT).

Ross was speaking about revelations of "churning" client bills in a law suit against the legal giant DLA Piper that is causing a stir in what might be called the legal business, although it's hardly the first time a major law firm has been accused of charging sky-high partner billable hours for everything from junior attorney work to basic office tasks (or maybe even getting one's shoes shined before a meeting with a client).  

In essence, Ross is politely saying that at least some Gucci-shoed lawyers consider themselves of the same moneyed-elite that thrives on greed: "If it makes you more money and doesn't get you prosecuted, do it."

As the NYT reports:

They were lawyers at the world’s largest law firm, trading casual e-mails about a client’s case. One made a sarcastic joke about how the bill was running way over budget. Another described a colleague’s approach to the assignment as “churn that bill, baby!”

The e-mails, which emerged in a court filing late last week, provide a window into the thorny issue of law firm billing. The documents are likely to reinforce a perception held by many corporate clients — and the public — that law firms inflate bills by performing superfluous tasks and overstaffing assignments.

The internal correspondence of the law firm, DLA Piper, was disclosed in a fee dispute between the law firm and Adam H. Victor, an energy industry executive. After DLA Piper sued Mr. Victor for $675,000 in unpaid legal bills, Mr. Victor filed a counterclaim, accusing the law firm of a “sweeping practice of overbilling.”

It's a nasty case, but noteworthy because lawyers are usually smart enough not to leave any trace of their chicanery in e-mails, writing, correspondence or telephone messages. After all, this is what they are paid to advise people not to do: don't put it in writing if it implicates you.

According to the Global Post, the attorneys for Mr. Victor (the plaintiff) filed a court document that "added that the ‘churning’ admission [of DLA Piper] provides ‘a window into a culture of avarice and ruthlessness that casts a pall not only on DLA Piper, but on the entire legal profession.’"

DLA Piper is not just a run of the mill swanky law firm, as the NYT reports:

Through acquisitions, joint ventures and the aggressive hiring of partners from other firms, DLA Piper has grown into a global monolith of 4,200 lawyers in more than 30 countries, making it the world’s largest firm by lawyer count. Last year, it posted revenue of $2.25 billion, according to The American Lawyer magazine.

“As the firm got bigger, there were all of these lawyers who I didn’t know suddenly showing up on my bills,” Mr. Victor said.

He said he was particularly irked by the routine practice of DLA Piper partners farming out assignments to the firm’s junior lawyers. He complained that this resulted in higher bills and often subpar work.

DLA Piper's alleged "enhancement of revenue" is not likely a rare occcurrence: it's just rare that it was bragged about in e-mails by DLA Piper attorneys.  Maybe they were snorting coke and lining up hookers with some hedge fund manager buddies when they typed the compromising computer messages, throwing caution to the wind in a brief moment of 1% hedonistic privilege.

Earlier this month, the American Bar Association Journal revealed a lawsuit that echoes the allegations against DLA Piper:

Ruling from the bench, a federal judge in Manhattan on Thursday gave a green light to a request for discovery by a class action activist concerning the wages paid by a law firm to the contract attorneys it billed out at $1,000 an hour.

Citigroup Inc. agreed last year to pay $590 million to settle a lawsuit brought by plaintiffs firm Kirby McInerney over the financial institution's claimed papering-over of risks concerning toxic subprime mortgage debt. However, the law firm's subsequent request for $100 million in legal fees brought objections from Citigroup shareholder Ted Frank, who contended that law firms typically pay contract attorneys around $50 an hour for the kind of work done in this case, Reuters reports.

"I think the court, and Mr. Frank, are entitled to specifics," said U.S. District Judge Sidney Stein at a Thursday hearing, also agreeing to allow discovery concerning the contract attorneys' qualifications.

An yes, specifics on an alleged law firm profit of $950 per hour. That might be in order.  The accusation of exorbitant bill padding grew out of a successful suit against Citicorp Inc. for understating risk by intentional deception in regards to the infamous suprime mortgage debacle. That's one incestuous bunch of shysters.

After awhile, one gets the feeling that the crooks who reach the top 1% aren't just cheating the public of its hard-earned money; they are scamming each other.

After all, it's perfectly legal, right?

(Photo: limaoscarjuliet)