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A House committee broadened its investigation into government-subsidized train operator Amtrak’s legal department and its outside legal counsel last week, calling for the Justice Department to investigate possible illegal activities. In a Dec. 4 letter obtained by Legal Times, outgoing House Transportation and Infrastructure Committee Chairman Don Young (R-Alaska) and committee member Rep. John Mica (R-Fla.) requested that Attorney General Alberto Gonzales review “what may constitute unlawful conduct” between Amtrak’s legal team and outside law firms. It’s the second letter the lawmakers have sent regarding potential mismanagement on the part of Amtrak and its outside law firms. In a separate letter sent Nov. 17 to Amtrak Inspector General Fred Weiderhold Jr., the congressmen singled out Manatt, Phelps & Phillips for its billing of support staff and expenses. The letter asked Weiderhold to review specific instances regarding Manatt’s work on the Northeast Corridor electrification project to see if they were “appropriate, justified, documented, and accurate.” “Manatt is proud of the work that we have done for Amtrak, and of the significant accomplishments that have resulted from that work,” the firm said in a statement to Legal Times. “We have fully cooperated with the [inspector general's] review of Amtrak legal services. Any issue that has been brought to our attention has been addressed, and if there are further questions, we will provide any information requested.” The lawmakers’ overtures come after a recent probe into Amtrak’s legal department by the Department of Transportation’s inspector general and Weiderhold, which came at the request of the transportation committee. The investigation found that Amtrak mismanaged more than $100 million in legal fees from June 2002 to June 2005. The inspector generals’ report, released in October, found that Amtrak’s outside legal counsel rarely turned in receipts and used block billing, the term for billing different tasks under one invoice entry, which is prohibited by Amtrak’s guidelines for dealing with outside counsel. The letter to the Justice Department, which does not name any specific law firms, addresses four areas in which Amtrak employees and outside legal counsel may have broken federal law by bill padding and possible collusion among Amtrak’s legal department and outside counsel to use side agreements benefiting the outside law firms. The letter also indicates that Amtrak’s in-house lawyers and outside legal counsel may have offered or solicited improper gifts and travel in exchange for legal work. And the lawmakers point to possible false statements to investigators and backdating of documents by Amtrak in an attempt to obstruct the probe. “We don’t believe the allegations have merit or that they warrant review by the Justice Department, but we stand ready to cooperate and provide information as it is requested, as we have done with the committee,” Amtrak spokesman Cliff Black said in an e-mail statement. Mica and Young’s offices did not return calls for comment. One lawyer familiar with Amtrak’s in-house legal department was surprised by the ongoing investigation. “There was never an issue raised about the Amtrak law department by Congress when I was there,” says James Lloyd, a former Amtrak general counsel who left in January 2002. “I really don’t believe that the Amtrak law department would just turn lawyers loose. . . . I don’t think there is any more cost-conscious group of lawyers than I saw at Amtrak.” Rail splitting Manatt first came under scrutiny in an unredacted copy of legal-audit expert John Toothman’s report, obtained by Legal Times in early November. (A redacted copy was released by the committee in October). Toothman’s report found that Manatt’s billing was “overall, the worst observed, with heavy staffing, attempts to pass off clerical/overhead as billable, failure to follow basic guidelines and heavy expenses.” The firm also benefited after one of its former partners, Marylin Milner, went to work in Amtrak’s general counsel’s office. As associate general counsel, she directly supervised her former firm’s Amtrak work. Milner, now general counsel at petroleum company Gilbarco Veeder-Root, declined to comment. Young and Mica’s letter to Weiderhold specifies several discrepancies with Manatt’s bills related to nonlegal work, miscellaneous billing, and large copying expenses. “Our office policy is not to confirm or deny any potential ongoing investigations,” says Hamilton Peterson, the lead investigator for the legal audit by Amtrak’s inspector general. Audit expert Toothman says he had substantial concern about the use and timing of Manatt’s side agreements and how legal work was transferred to the firm. “Manatt also had some pretty unusual terms [for] expenses that they were not limited to actual cost on expenses, but whatever they defined as a standard expense,” says Toothman. For nine months of work by a paralegal between 2004 and 2005, Manatt billed Amtrak for “1,877 hours, or $313,000 billed for three-fourths of a year’s work, with much of this work appearing to be clerical in nature or non-legal, construction work,” according to the lawmakers’ letter. In a different two-month sample of bills, the congressmen say their review found billings of $90,000 for 561 hours in two months in 2004, or what constitutes a billing pace of over 3,000 billable hours per year for the paralegal. In another two-month sample in 2003, the same paralegal billed $69,000 for 430 hours with “multiple double entries of time on the same date for the same work,” according to the letter. Manatt disputes the letter’s allegations about billing a paralegal for clerical work, however. The firm says experts from both sides of an ongoing arbitration were required to be on the railroad 10 to 12 hours a day, monitoring the work of experts in order to create an evidentiary record in a foundation dispute involving the Northeast Corridor electrification project. The lawmakers also want the inspector general to investigate Manatt’s miscellaneous expenditures and copying costs. According to the letter, the committee’s preliminary review of “four sample monthly invoices from 2003 and 2004″ found about $14,000 in nonitemized miscellaneous expenses. It also noted a single $15,900 expense for copying. Manatt, however, says the costs were justified because of the arbitration it was handling for Amtrak. The $14,000 in nonitemized bills were for hotel facilities, conference space, court transcripts, and other related costs, according to the firm. The firm also denies that the high copying costs were out of line because, it says, the firm was required to produce eight copies of every document for arbitration. With Democrats in control of Congress, the future of the Amtrak investigation is uncertain. Incoming Transportation Committee Chairman James Oberstar (D-Minn.) takes a much different view of Amtrak from his predecessor Young. Historically, Oberstar has championed Amtrak successes and has called it “chronically underfunded.” Rep. Corrine Brown (D-Fla.), who is likely to head the Railroads Subcommittee, is also supportive of the passenger railroad. A spokesman for Oberstar says the congressman hasn’t yet set the committee’s agenda for the next Congress. But just because the Democrats will be running the show doesn’t mean Rep. Mica won’t keep the heat on Amtrak. Last week he was picked as ranking Republican member of the Transportation and Infrastructure Committee. Anna Palmer can be contacted at [email protected]

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