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Orrick, Herrington & Sutcliffe profited — and was overpaid by nearly $96,000 — from improperly handled state funds, according to a bipartisan Nevada legislative audit. Auditors of the state’s college savings program found that $6 million in earnings from the $3.3 billion fund was held outside the state system and was used to pay for various legal, marketing, and other services with contracts that were not always properly approved. In total, Orrick was paid nearly $1 million for its work on the Nevada College Savings Program. But auditors said that, in some cases, the firm exceeded the scope of its contract — which resulted in the $96,000 overage. In other cases, the auditors found that contracts had not been legitimately approved. The audit, released May 14, found no wrongdoing by Orrick but criticized how work was given to the firm. The college savings program had been managed by then-state treasurer and current Lt. Gov. Brian Krolicki (R) — a recipient of $29,000 in campaign donations from Orrick and its lawyers. With one of the nation’s leading public finance practices, the 980-lawyer, San Francisco-based firm also has a history of supporting political candidates all over the country. Nevada Democrats have taken Krolicki to task over contracts given to campaign contributors, an issue they say should be included in an investigation announced by the state attorney general. Orrick says campaign donations played no role in its work for the state. “We believe �pay to play’ is illegal and wrong,” says Allan Whitescarver, an Orrick spokesman. “Any allegation that we’re engaged in such a practice is 100 percent false and misleading.” Current State Treasurer Kate Marshall says she may ask that the firm return the $96,000 that auditors say were overpayments. The firm contracted with the treasurer’s office in 2000 to provide bond counsel or other legal services for $225 per hour. However, the audit found that Orrick charged a composite hourly rate of $428 during the term of the contract, which expired in 2002. “I’m not in favor of overpaying law firms,” says Marshall, a Democrat who succeeded Krolicki as treasurer in 2007. Auditors noted that at a Nevada College Savings Program board meeting in 2001, the board voted to appoint Orrick as counsel for the college savings program as well, and Krolicki indicated that the existing bond contract would probably be amended to include additional fees. Such changes were never made, though Orrick did bill for the added work. Orrick’s Whitescarver said last week that “this matter has come to our attention and we’ve just begun reviewing it.” Questions were also raised about Orrick’s contracts to provide legal counsel to the college savings program from 2002 to 2006, which were not approved by the board as they were supposed to be, the audit says. But a state attorney’s opinion left open the possibility that the board could have believed that the 2001 vote would apply to future contracts between Krolicki’s office and the law firm. Paul Townsend, the legislative auditor who headed up the audit, says criticism of the way contracts were handled was not directed at Orrick. “Our criticism is more directed at the board,” he says. “At all relevant times, Orrick had a valid contract with the Nevada state treasurer to provide legal services to other state agencies,” says Orrick’s Whitescarver. In the near future, though, the firm won’t have to worry about contracts with the state of Nevada. Orrick did not respond to a request for proposal for legal services put out by Marshall’s office in February — including bond work. “We made a business decision that we would not submit a reply and formally notified the treasurer’s office,” Whitescarver says. According to the audit, Orrick has done more than 2,000 hours’ worth of work for the college savings program and billed $984,900 since 2001. Sacramento, Calif., of counsel William Donovan has been the lead attorney working on the matter, according to the firm. The firm had done bond work for the state since the late 1980s, according to the firm. Since 1998, the firm has donated to Krolicki’s campaigns for state treasurer, lieutenant governor, and U.S. Senate. The firm donated $27,000 and Donovan donated $2,000. Calls to Krolicki’s office were not returned last week.
Zusha Elinson is a reporter for The Recorder , the ALM publication in which this article first appeared.

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