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Greenberg Traurig is likely to lose $2.6 million in fees for its work on a long-running bankruptcy case. From July 2007 to April 2009, the firm represented the unsecured creditors committee in the bankruptcy of tax shelter outfit The 1031 Tax Group LLC. Early on, the firm submitted two bills totaling more than $3.2 million. The bankruptcy trustee objected, and a federal judge awarded the firm just $323,000. In a settlement approved in the Southern District of New York late last week, the firm agreed to forgo its multimillion dollar fee request until all other creditors had been paid. Greenberg did not respond to a request for comment. Michael Fox, an attorney for the trustee and the senior partner in the business restructuring and bankruptcy group of New York-based Olshan Grundman Frome Rosenzweig & Wolosky, said Greenberg “understood that getting money back to the victims was important.” “Our concerns were that if these fees were allowed, the administrative expenses would have eaten [up] dollar for dollar any funds available for the general unsecured creditors, the victims.” The 1031 Tax Group filed bankruptcy in 2007. It was owned by Edward H. Okun, who earlier this month was sentenced by a Virginia federal judge to 100 years in prison and ordered to pay $40 million for defrauding clients of $126 million. The trustee also has a pending motion to disallow $3.3 million in fee requests submitted by the dissolved Dreier law firm, which served as debtors counsel to The 1031 Tax Group. Bankruptcy trustees are scrutinizing fees more frequently in the current wave of corporate bankruptcies, particularly when the assets are sold for less money than the debtor expected, said Sam Stricklin, a Dallas financial restructuring partner at Houston-based Bracewell & Giuliani, who isn’t involved in the case. “Although it’s case by case, in a lot of circumstances where the [bankrupt company's] assets are falling short [to pay creditors] there’s more scrutiny of fees,” Stricklin said.

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