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The legions of lawyers squabbling over the bankrupt Enron Corp. may now be able to agree on at least one thing: Joseph Patchan is a real burr under their saddle. Patchan, a former bankruptcy judge who goes by “Jerry,” is now retired and living in Hunting Valley, Ohio. He’s also the chairman of the least-popular entity to have emerged during Enron’s year-old Chapter 11 proceeding: the fee committee. Patchan and his five-member team were appointed by the judge overseeing Enron’s case. Their task is to scrutinize the bills submitted by the law firms, accounting firms and other professional advisers now gainfully employed by the world’s most notorious corporate debtor. At stake are nearly $60 million in fees and expenses racked up during the first four months of Enron’s bankruptcy. A court hearing on Patchan’s findings is slated for Thursday. Patchan last month filed his first “advisory reports” — dissections of the fees and expenses of Weil, Gotshal & Manges; Cadwalader, Wickersham & Taft; and several other firms. Some of these firms’ bills emerged relatively unscathed. But in the case of other firms, Patchan has recommended that the court slash expense reimbursements, cut high billing rates and refuse to approve fees for timekeepers who bill just a few hours and, as he puts it, “add little or no value.” Patchan’s reports highlight some unsavory billing practices, such as marking up the costs of photocopies and faxes, and charging for clerical work at lawyers’ steep hourly rates. The reports also reveal embarrassing expense account charges at some firms. Andrews & Kurth, which represents Enron, sought to pass along to the client $70 in tabs from an establishment described as “Sir Harry’s.” These “appear to be charges for alcoholic beverages,” Patchan concludes, which “should not be reimbursed by Enron.” Patchan also suggests knocking another $468 off the firm’s $284,000 in expenses “as an allowance for the many bar charges” included in reimbursement requests for out-of-town meals. The Houston firm was not the only adviser to suffer this embarrassment. Patchan suggests docking PricewaterhouseCoopers for “non-reimbursable personal charges” incurred for in-room movies and mini-bar refreshments. Patchan also picks out $183 in hotel “bar charges” among Weil Gotshal’s $2.25 million in expenses. The firms working on Enron’s behalf — and on behalf of Enron’s key creditors — must submit bills to Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York for approval. But before Gonzalez will approve the fees — and authorize Enron to start cutting checks — Patchan and his squad of bill-police get to pick through the firms’ fee applications, which often include hundreds of pages of detailed time and expense records, as well as underlying receipts and other documentation. Patchan has retained Legal Cost Control, a Haddonfield, N.J., consulting firm that specializes in whittling away at bloated or erroneous bills. He’s also relying on a small professional staff that includes John Hopkins III, the New Hampshire-based author of the “Bankruptcy Litigator’s Handbook.” BILLING TIME Patchan’s first set of reports covers fees and expenses incurred by several firms between early last December, when Enron filed for bankruptcy, and March 31, 2002. The reports delve into the bills submitted by Weil Gotshal; Cadwalader; Andrews & Kurth; PricewaterhouseCoopers; Milbank, Tweed, Hadley & McCloy; Ernst & Young; Togut, Segal & Segal; Goodin, MacBride, Squeri, Ritchie & Day; and the Blackstone Group, a financial restructuring firm. Patchan’s own fee application to the bankruptcy court — he has to submit one, too — reveals that his team has also been unpacking bills submitted by Skadden, Arps, Slate, Meagher & Flom, which has represented Enron in connection with congressional inquiries and corporate matters. Patchan, in an interview, said his report on Skadden Arps’ bills is forthcoming, pending a meeting between the committee and the firm. Reports on several other firms’ bills are also in the works, he said. Weil Gotshal’s bills dwarf all others. The New York-based bankruptcy powerhouse has requested a total of $26 million for fees and expenses through March 31. Milbank Tweed, the next-highest biller in the group, asked for just $9 million. But in the eyes of the fee committee, Weil Gotshal’s billings practices compare favorably with those of its peers. Patchan comes close to patting Weil Gotshal on the back at times, describing its Enron work as “properly managed and staffed” and the firm’s bills as “informative” and even “helpful.” Still, Patchan’s team finds fault with Weil Gotshal. His report caustically describes, for example, how the firm hired contract paralegals for some Enron work, but billed them out at multiples of their actual cost. In one case, Patchan details how the firm paid Special Counsel, a legal temp agency, $28 per hour for a paralegal identified on Weil Gotshal’s bills as “Hou Paralegal, Hou.” But the firm charged this person’s time to Enron at $105 an hour — for a total of $46,851. Another temp cost Weil Gotshal $18.50 an hour, but was billed to Enron at $50. Overall, Patchan suggests reducing Weil Gotshal’s bills by $834,000 — a small fraction of its $26 million request. Others, however, got tough reviews. PricewaterhouseCoopers has requested $6.4 million in fees and $568,694 in expenses. Patchan suggests granting virtually the entire expense request. But he also suggests cutting the firm’s total fees by close to 10 percent — including a reduction of $140,000 to fees charged by auditors. “Audit fees are rarely collected at the standard hourly billing rate,” Patchan writes. He advises discounting PwC’s auditor fees by 10 percent. Other culprits included PwC’s tax team and its transaction restructuring group, which advised on tax issues. Patchan recommends cutting their high average hourly rates substantially. The restructuring group, which billed at an average hourly rate of $880, captured his attention. He describes it as the “highest in this bankruptcy case,” and recommends slashing it by 25 percent. Patchan singles out one PwC restructuring guru, Donna Coallier, for her $930 hourly rate, which Patchan calls “significantly higher than any other professional in this bankruptcy.” After his recommended reduction, she would bill $700 per hour, just shy of the top rates commanded by the most-senior professionals at other firms. Andrews & Kurth, meanwhile, faces a report from Patchan that recommends cutting the firm’s expenses by about 35 percent. Citing poor expense reporting, Patchan’s committee “suggests” in its report “that Andrews & Kurth instruct its accounting department in the future to include adequate information in the descriptions of expenses.” Patchan notes that the firm included $17,000 in expenses “incurred before the commencement of this case.” These should be rejected, Patchan writes, as “unsecured prepetition claims that cannot be collected” through a bankruptcy fee application. Patchan also faults Andrews & Kurth for failing to provide documentation for some expenses at the fee committee’s request. Patchan’s report indicates, for example, that invoices “were not provided” for $33,000 in expenses attributed to Lexis and Westlaw research. Patchan suggests cutting the entire $33,000 unless the firm delivers the invoices before Dec. 20. Andrews & Kurth’s fees also received attention, although Patchan ultimately recommends reducing them only modestly. He observes, for instance, that the firm raised the billing rates of 26 attorneys in January 2002, the month after the firm was retained in Enron’s bankruptcy. Many law firms seek to raise their fees each year. But some of the Andrews & Kurth rate increases highlighted by the committee appear unusually steep. Three partners’ rates climbed by about 20 percent. Rates for five associates and one of counsel all jumped by more than 30 percent, reaching a high of $400. One associate’s hourly rate spiked 60 percent. Patchan raises a flag over the rate hikes, but shies away from any conclusions about them in his report. “The committee makes no recommendation with respect to the billing rate increases of Andrews & Kurth,” he writes. According to his report, “Andrews & Kurth explained to the committee that it was in the process of transforming from a regional law firm to a national law firm; that its consultant had advised that its hourly billing rates were considerably lower than those of national law firms; and that it has been increasing its hourly billing rates by percentages similar to these for the past three years.” Andrews & Kurth did not reply to a request for comment. Not surprisingly, Patchan’s own bills are models of clarity and detail. In the only fee application he has filed so far — covering his work during September — he seeks payment of $20,220 for 67.40 hours of work at $300 an hour. Each time entry is accompanied by an exhaustive description. “We anticipate that every lawyer in New York is going to be looking” at the fee committee’s filings, Patchan said in an interview. He also anticipates that one or more of the firms he has scrutinized may challenge his recommendations before Judge Gonzalez. “We’re talking about matters very close to their hearts and their bank accounts,” Patchan said. “I would say they’re very focused.”

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