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A rare contest over legal fees in a guardianship case raises issues likely to be explored by Office of Court Administration Special Inspector General Sherrill R. Spatz as she examines the court’s system for appointing fiduciaries. Ms. Spatz began looking into the system in January 2000 in the wake of publicized complaints by two lawyers active in the Democratic Party in Brooklyn that they had been frozen out of appointments despite “unquestioned” loyalty to their party. Ms. Spatz, who was widely believed to be ready to release her report shortly after Sept. 11, is expected to issue it shortly. At issue in the hotly contested guardianship case are fee requests of $716,340 for 17 months of work in connection with handling more than $60 million in assets belonging to a former medical director of the United Parcel Service. Five of the professionals involved were lawyers who submitted fee requests for a total of $492,970. The balance was requested for the services of a money manager, accountants and a private investigator used in tending to the affairs of the former UPS medical director ( Matter of Friedman, 500064/99). The legal battle does not raise any questions of improper political influence upon appointments. However, allegations in the case, which have been under consideration by Justice Richard T. Lowe since May, do raise questions about the handling of guardianship and other types of cases where the services of fiduciaries are required: How were the professionals selected? How was it determined what services would be required? Was the work of the professionals duplicative? Were the billings appropriate for the work performed? And how closely did the court scrutinize the requests before authorizing payments? The case was initially assigned to Acting Justice Diane A. Lebedeff in March 1999, when a niece of the medical director, Gerald J. Friedman, asked for the appointment of a guardian on the ground that he had had a series of small strokes and was unable to take care of himself. Justice Lebedeff, who sits in Manhattan, assigned Steven B. Shapiro, a former member of the Disciplinary Committee in the Appellate Division, First Department, to determine whether a guardian should be appointed. Justice Lebedeff also initially appointed Michael Miller, a trusts and estates specialist, as counsel for Dr. Friedman. About two months later, she named Shapiro, a solo practitioner, as Dr. Friedman’s emergency property guardian and co-guardian of his person, along with Dr. Friedman’s wife, Dorothy. Shapiro then hired Miller as his counsel for the guardianship. Justice Lebedeff next appointed Carol R. de Fritsch, a member of the Character and Fitness Committee of the Appellate Division, First Department, to succeed Miller as court evaluator. Shapiro at some point over the summer of 1999 added Arlene Harris, a former chief court attorney of the Surrogate’s Court in Manhattan, who is now at Kaye Scholer, and Lansing R. Palmer, an expert in complex and fiduciary litigation, to his legal team. By April, 2000, however, the relationship between Shapiro and Friedman had become contentious, with Shapiro seeking Ms. Friedman’s removal as co-guardian of the person. GUARDIANSHIP ATTACKED At that point, Ms. Friedman, who had been separately represented by Peter W. Schmidt of Willkie Farr & Gallagher, added Robert Abrams, of Abrams, Fensterman, Fensterman & Flowers, to her legal team. By August 2000, Abrams was seeking to turn the tables on Shapiro, attacking his handling of the guardianship and demanding his removal. In mounting the attack, Abrams faulted Justice Lebedeff’s selection and oversight of Shapiro, and demanded her recusal. He also demanded that any fees paid to Shapiro and the lawyers he hired be disallowed. By the end of summer 2000, Shapiro had resigned his guardianship, after Dr. Friedman had withdrawn his consent to the appointment, and Justice Lebedeff had recused herself. Additionally, Justice Lebedeff had vacated a previous award of $57,808 to Shapiro, and sent a copy of her decision to Ms. Spatz. Following Justice Lebedeff’s recusal, the case was reassigned to Justice Lowe, who has pending before him a motion to deny the fees requested by Shapiro and the lawyers he hired to help him handle the estate. Shapiro’s attorney, Blair C. Fensterstock of Fensterstock & Partners, yesterday in a written statement described the allegations against his client as “accusatory and hysterical hearsay.” “Considering the complexity of the issues, the fees were reasonable, and reported with the requisite specificity,” Fensterstock added. As for “unnecessary” expenditures, he stated, “unfortunately, other family members and their representatives have had other interests [than Dr. Friedman's personal and property needs], which have caused unnecessary efforts to be spent.” Justice Lebedeff’s lawyer, Ben Rubinowitz, of Gair, Gair & Conason, said yesterday that her conduct was “completely appropriate under the circumstances.” Because the matter is pending, he added, he could not comment further. RECUSAL In demanding Justice Lebedeff’s removal, Abrams, in an affirmation, called “troubling” her “outside” relationships through the New York County Lawyers’ Association with several of the lawyers she appointed. An association spokesman, Richard Mollot, reported the current status of several members mentioned in Abrams’ affirmation: Justice Lebedeff headed the County Lawyers’ Elder Law Committee until Sept. 10. Miller is the president-elect of the association and Shapiro was co-chairman of its Civil Court Practice Section until Sept. 10. Both Shapiro and Miller are current members of the Elder Law Committee. A third lawyer in the case, de Fritsch, headed the Judiciary Committee until Sept. 10. Abrams has withdrawn his objections to the payment of $59,580 in fees requested by Ms. de Fritsch, who succeeded Miller as court evaluator. While involvement in professional associations is to be “applaud[ed],” Abrams contended in his affirmation, dated Aug. 21, 2000, that “a reasonable person could conclude that there is an appearance that Justice Lebedeff is rewarding her professional associates with the ‘dollar for dollar’ blanket approval of all fee requests.” According to a list Abrams prepared of the fee awards, the judge approved all but $299 of $381,217 Shapiro and the lawyers he hired had requested. In court papers, Shapiro called Abrams’ allegations concerning his appointment “utterly false, baseless and vile.” Justice Lebedeff on Sept. 15, 2000, recused herself, stating in her order that she was doing so because resolution of the dispute over fees might require her testimony. In an earlier order, she had called Abrams’ criticism of her performance “unwarranted, unjustified and designed to induce recusal.” The conclusions drawn by Abrams, she had added, were “entirely erroneous.” SHARP WORDS TRADED Abrams’ attack on the lawyers’ fee requests was equally as fierce. His legal papers, dated March 12, 2001, described the requests as demonstrating “more of a desire to benefit from the trough of free-flowing fees that [the guardianship statute] can generate than to fulfill the duties of trust and loyalty imposed on fiduciaries.” There were “many duplicative requests” and “padding of bills,” he charged, as well as hourly billing at attorneys’ rates for non-legal tasks such as “a pickup at a drug store.” Shapiro dismissed the attack in an April 6, 2001, affidavit as “thuggish tactics,” which are “blatant attempts to weaken the independence of the judiciary and their fiduciary appointees.” Shapiro cited several instances in which he did not bill for time spent attending to Dr. Friedman’s personal needs. He also stated that he “never charged for significant portions of this time.” In attacking Shapiro’s “excessive hiring” of attorneys, Abrams pointed out that at one time he had three sets of attorneys, all charging substantial hourly rates. Miller billed at $375 an hour. Harris billed as high as $400 an hour, Abrams reported. The third attorney, Palmer charged $325 an hour. Harris has notified Justice Lowe that she is no longer pursuing her request for $27,977 in fees and, in fact, has returned $16,725 of the amount that had already been approved and paid. According to a series of e-mail messages cited in Abrams papers, Miller expressed misgivings about the legal staffing for the case. Apparently after seeing that both Palmer and Harris had been provided copies of correspondence, Miller asked Shapiro, “Are they retained at this time? If so, for what issues? As your counsel I have previously indicated that absent exigent circumstances, I am certain that the judge is not going to approve legal fees of additional counsel.” Shapiro responded in an e-mail that he had discussed the use of the two “special counsel” with Justice Lebedeff and she had approved of the arrangement. “If used properly,” Shapiro stated in the message, they will make us look good and assure we maintain a proper track.” Several months later, on Feb. 28, 2000, Miller resigned as Shapiro’s counsel. Only four days earlier, according to Abrams’ court papers, Miller had warned Shapiro in an e-mail that “I understand your desire to help out friends but the judge made it very clear that she doesn’t want any more solos on this case.” After Miller resigned, Palmer assumed the role as Shapiro’s lead counsel. Shapiro’s e-mail response rebuffed the suggestion that the purpose was to help out friends. A second lawyer involved in the case has expressed reservations about “extreme duplication of services shown in the billings.” That lawyer was Arthur Greig, counsel to the Democratic Party in Manhattan, who was appointed by Justice Lebedeff in August 2000 to assess whether Dr. Friedman had the capacity to withdraw his consent to Shapiro’s appointment. Greig advised Justice Lowe in an affidavit that his concerns had prompted him to meet with Thomas Cahill, the chief counsel of the First Department Disciplinary Committee, to discuss “the potential overbilling and ethical issues in the case and seek advice on how to proceed.” In an affidavit submitted to Justice Lowe, Shapiro defended his retention of Palmer and Harris as necessitated by “the numerous complex issues involved in the matter.” Harris is “well regarded in the area of estate planning,” he pointed out, and Palmer, formerly of Sherman & Sterling, “is often hired by several of the large New York firms to be their lead trial attorney on complex cases.” In criticizing the fee requests, Abrams zeroed in on Shapiro’s request for compensation for 42 hours of work in a single day. Abrams called it “remarkable” that not one of the many persons responsible for reviewing the fee — Palmer, who was Shapiro’s lawyer, de Fritsch, the court evaluator or Justice Lebedeff — noticed the request for 42 hours of work on a single day. Shapiro in his affidavit acknowledged the mistake, saying that he had meant to bill for .7 tenths of an hour, or 42 minutes worth of work, not 42 hours. The request was “simply and clearly a clerical error,” he stated, noting that he had “immediately” returned the $12,600 he had received for the 42 hour billing once the error had been brought to his attention. Justice Lebedeff took note of the problem in her decision of Aug. 29, 2000, in which she withdrew her June 29 approval of Shapiro’s application to be paid $57,808 in fees. She specifically noted that she would be sending a copy of her decision to Inspector General Spatz. Two days later, Justice Lebedeff issued another opinion, and stated she was forwarding it to Spatz. That opinion dealt with Shapiro’s draft of a trust in connection with the potential structuring of Dr. Friedman’s assets, which Justice Lebedeff said she would not have approved.

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