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Several law and accounting firms working on the Pacific Gas and Electric Co. bankruptcy case will have to defend more than $1 million in disputed fees when they go before Northern California U.S. Bankruptcy Judge Dennis Montali today. The fees in question are for work done between April and July. The big issue is billing for duplicate work and overhead expenses that U.S. Trustee Linda Ekstrom Stanley says are not reimbursable. Some of the charges Stanley says she questions are $82,522 spent by Heller Ehrman White & McAuliffe for binders and almost $10,000 spent to fly Skadden, Arps, Slate, Meagher & Flom lawyers between San Francisco and London. PricewaterhouseCoopers attempted to bill PG&E $64,278 for an extranet it built for use by 11 people, and another $210,495 was spent to build a model of California’s electric power grid, a system Stanley contends PG&E is probably already familiar with. The lawyers involved dispute the trustee’s findings and say they are ready to defend the charges in front of the judge. Heller Ehrman’s Peter Benvenutti, for one, said the fee objections may be based on a lack of information by the trustee. Still, if the lawyers are unsuccessful in convincing Montali that the charges are legitimate, they may have to pay back a chunk of the $14 million in fees collected so far. Other firms whose bills are being evaluated are San Francisco-based Howard, Rice, Nemerovski, Canady, Falk & Rabkin; New York-based Milbank, Tweed, Hadley & McCloy; and San Francisco-based Keker & Van Nest. Stanley, whose job it is to evaluate the fees, stopped short of calling the bills “padded,” but she said when a debtor has more than $4 billion in cash there is a temptation to put more lawyers on the case than are needed. She said the biggest problem is when firms that are employed to perform a certain task begin duplicating the work other firms were assigned to do. “[Billed] time has to be actual and necessary,” Stanley said. “There has to be some benefit for the estate.” She added that because ratepayers will eventually have to pick up the tab, it is only fair that billing partners better manage the work their lawyers are doing. “There is a special need to be prudent in the exercise of billing judgment,” Stanley said. In bankruptcy proceedings, lawyers representing a debtor or other parties can ask the court for payments before the case is resolved, meaning firms are paid monthly. A portion of that payment — in this case 10 percent of the fees — is held back pending a review by the judge. That first review is today. If Montali throws out fees in excess of that 10 percent, the targeted firms will have to pay back some money out of pocket. Heller Ehrman has already agreed to write off more than $50,000 in its fees, Stanley said. The firm put 48 attorneys on the case and had asked for more than $2 million in fees, of which more than $200,000 was billed for administrative work performed by law students, staff and paralegals, according to court records. Stanley points out that under the law, administrative work and staff time can’t be billed to the bankruptcy estate. Heller Ehrman partner Benvenutti said the firm has agreed to reduce fees by $50,000, but that was the result of a discussion the firm had with its client and predated the trustee’s objection. Heller is serving as special counsel to PG&E. Benvenutti said the trustee’s fee objection is not well taken at his firm. “My firm has not duplicated work,” he said. “And we’re prepared to tell the court that.” Benvenutti said the case is unique in a lot of ways, and he suggested that maybe the visibility of the case was driving the trustee to go too far. “Whether that is leading the trustee to take a different approach is something you’ll have to ask the trustee,” he said. Howard Rice, which has done the bulk of the work on the case so far, faced little scrutiny from the trustee. The only question in the report regarding Howard Rice, which has billed $4.4 million, had to do with work that overlapped with work done by Heller Ehrman. Skadden Arps is being questioned about a bill for a plane trip. Stanley said she couldn’t figure out why a firm representing the California Public Utilities Commission would need to fly lawyers to London. A flight was madeby partner Jeffrey Christie, who works in the London office and specializes in energy matters. Milbank Tweed was blasted for putting high-priced partners on regulatory and legislative matters, billing as much as $595 per hour for what is regarded by the trustee to be routine work. Milbank also came under fire for spending $13,000 to hire the public relations firm Rogers & Associates. The firm also charged $3,000 for a Hewlett-Packard printer. Stanley wants about $200,000 knocked off Milbank’s bill. Edwin Feo, Milbank’s managing partner for the Los Angeles office and lead counsel for the creditor’s committee, did not return calls Friday.

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