David Nosal (S. Todd Rogers)
SAN FRANCISCO — A federal judge has ordered fallen corporate recruiter David Nosal to pay $827,983 in restitution to Korn/Ferry International, including $595,758 to cover his former employer’s fees to O’Melveny & Myers.
Federal prosecutors had advocated a $1.35 million restitution award for Korn/Ferry. In a 13-page order issued Tuesday, U.S. District Judge Edward Chen in San Francisco took a red pen to that request, particularly the proposed $948,703 for attorney fees. But he still found that Nosal’s case, which made new law under a controversial computer hacking statute, called for restitution, noting that Korn/Ferry had devoted eight years to the criminal investigation and prosecution.
“As a result of defendant’s scheme, key KFI personnel had their attention and activities diverted away from the company’s business purposes and towards assisting and participating in defendant’s prosecution,” Chen wrote.
A San Francisco jury convicted Nosal last year for conspiring with former colleagues to infiltrate Korn/Ferry’s files after he left to form his own recruiting firm. Chen sentenced Nosal in February to one year and one day in prison.
Nosal’s lawyer, Dennis Riordan of Riordan & Horgan, said he was pleased that Chen had whittled down the government’s request, but still found his client’s bill to be an “extremely excessive amount of restitution.” He added that he will attack the award as part of his appeal of Nosal’s underlying conviction.
“Of course, if the appeal is successful on the conviction, the totality of the restitution order will disappear,” he said.
Riordan fought Korn/Ferry’s bid for attorney fees with particular venom.
“We think that essentially all of the attorney fees were an attempt by Korn/Ferry to use the criminal case as leverage in the civil case,” he said.
Chen brushed aside complaints from Nosal’s legal team that O’Melveny’s billing rates are generally “35 to 100 percent higher” than market rates for firms outside the top tier. An expert retained by Nosal stated that a reasonable billing rate for the services performed by the firm would be just $250 per hour. But Chen found that Korn/Ferry could not be penalized for its choice of counsel.
“The court finds it reasonably foreseeable that a corporate victim would seek to retain an (as defendant concedes) ‘excellent’ or ‘premium’ law firm to assist the government in investigating and prosecuting a security breach and conspiracy of the kind organized and perpetrated by the defendant,” Chen wrote.
But Chen did slice the request for attorney fees by 10 percent to account for tasks included by the firm in its bills that were not critical to the government investigation and prosecution. He also subtracted $31,446 for time entries that should not be included in a restitution award, citing the example of a lawyer who billed $988 in part for analyzing press coverage of the case.
Chen slashed the request for attorney fees by an additional 25 percent to address staffing inefficiencies that he detected in O’Melveny’s bills. He noted that multiple attorneys had billed Korn/Ferry for participating in the same conferences or reviewing the same document.
A spokeswoman for O’Melveny declined to comment on the order. Assistant U.S. Attorney Matthew Parrella, who handled the case with Assistant U.S. Attorney Kyle Waldinger, did not immediately respond to a request for comment.
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