Orr (Paul Sancya / AP)
Detroit — Lawyers and consultants working on the city’s bankruptcy case charged Detroit taxpayers for using travel agents and billed $13,000 to monitor media reports about the historic case, according to bills filed in federal court.
The 1,600 pages of bills gave unprecedented detail on the cost of the biggest municipal bankruptcy in U.S. history — $13.75 million and climbing — and showed that the court-appointed fee watchdog challenged some charges early in the case. One such bill was from a consultant who tried charging for envelopes.
Chicago attorney Robert Fishman, the fee examiner, issued his first quarterly report Tuesday.
“Although the fees incurred by the professionals during the reporting period are substantial by any measure, the fee examiner believes that all of the requested fees are commensurate with the complexity and speed of the case, and the quality of the services that the professionals have provided,” Fishman wrote in a court filing. “Furthermore, the fee examiner believes that all of the requested expenses were necessarily incurred by the professionals in connection with the services rendered.”
Fishman, who is being paid $600 an hour to examine the legal bills and contest charges, noted in a court filing Tuesday he does not have power to reject bills and “is limited to recommendations and challenges made through the preliminary reports and the resolution discussions.”
Fishman filed a motion Tuesday asking U.S. Bankruptcy Judge Steven Rhodes to approve his law firm and an accounting consultant's first quarterly bills of $65,796 in fees and $1,960.90 for expenses.
The report was initially due Jan. 15, but Fishman requested an extension from Rhodes, citing administrative hurdles and the holiday season.
Jones Day, the city's lead law firm and its deep bench of attorneys, billed the city $6.59 million in fees and $143,273 for expenses from the July 18 bankruptcy filing through Sept. 30, 2013, according to the report.
Other invoices include Conway MacKenzie Inc, which billed $2.26 million; Miller Buckfire & Co. LLC, $1.23 million; and Miller, Canfield, Paddock & Stone, $575,840.
One of Jones Day’s top lawyers, David Heiman, charged taxpayers for a car service to twice drive him to Detroit from Ohio, where the firm is headquartered. Total cost: $850.
Bill Nowling, spokesman for Detroit Emergency Manager Kevyn Orr, said the invoices have been thoroughly examined and approved by Fishman.
“The city only pays costs associated with work necessary to the bankruptcy litigation and mediation,” Nowling said. “Those costs must be reviewed by the fee examiner. If he deems them inappropriate, they are not allowed.”
The expenses include $1.96 million for attorneys and financial consultants working for the Official Committee of Retirees, a court-appointed panel set up to give Orr a negotiating partner on likely pension cuts.
Law firms and consultants billed the city for nearly $410,000 in expenses, according to Fishman’s report.
Legal bills in the largest municipal bankruptcy case are expected to balloon after bills roll in for October, November and December, when the city and its creditors were in court on an almost weekly basis for a nine-day eligibility trial and numerous hearings.
Fishman flagged several expenses submitted by various law firms, including Dentons US LLP, which represents the official retiree committee.
Fishman questioned why Dentons billed the city for reading or watching bankruptcy news reports and responding to media inquiries.
“Dentons explained that it was compelled to respond to certain media efforts undertaken by the city and to ‘inform its constituents of its efforts and to influence certain case events,’” Fishman wrote in his report.
Dentons should not be paid for time spent reading media reports or talking to reporters, Fishman added.
Fishman also questioned Illinois-based Kurtzman Carson Consultants LLC, which handles the case’s public-access website and other duties.
Fishman raised several questions after the firm charged $158,097 for fees and expenses in July and August, including “certain charges related to envelopes.”
Based on Fishman’s questions about the envelopes and other charges, the firm changed its invoice, but the exact changes were not detailed in his report.
Another firm drew Fishman’s attention after asking the city to pay $814 for travel agency fees.
The $814 bill came from Miller Buckfire, the city’s investment banking firm that is spearheading negotiations involving a possible spin-off of the Detroit Water and Sewerage Department.
After talking to Fishman, the firm agreed to remove the $814 charge.
In August, the watchdog proposed rules against “unreasonable” expenses, including charging taxpayers for booze, hotel-room movies and first-class flights.
In the court filing Tuesday, Fishman warns that “due to the magnitude and complexity of the case, the novelty of the legal issues,” the costs of professional fees related to restructuring Detroit’s $18 billion debt will be “significant.”
Detroit News Writer Tony Briscoe contributed.