As lawyers jockey for the lucrative job of overseeing Herbalife Ltd.’s compliance with the terms of a $200 million settlement, top firms are giving a glimpse into their billing rates and revealing strategies for winning coveted independent-auditor contracts.
The Federal Trade Commission last week received more than two dozen applications from law firms, financial companies and other businesses vying to ensure the Los Angeles marketing company complies with its deal to resolve consumer-deception charges.
Jenner & Block; Squire Patton Boggs; McGuireWoods; Venable; Crowell & Moring; and Kasowitz, Benson, Torres & Friedman were among the large firms that submitted plans to regulators. If the FTC and Herbalife cannot agree on the selection of an auditor, a federal judge will make the appointment. Herbalife is on the hook to pay for the monitor.
Ranging from seven to 215 pages long, the law firms’ applications vary in detail. Some firms quoted billing rates, partnered with consulting firms, name-dropped prominent clients and references and provided detailed approaches to ensuring compliance. Others stayed coy. Jenner & Block provided no hourly rates, and the firm said it needed more information before it could provide a cost estimate.
Among some of the highest hourly rates reported in the filings: The $1,250 per-hour tab that former U.S. Sen. Joseph Lieberman, senior counsel to the New York office of Kasowitz Benson, noted in his application to serve the seven-year term as Herbalife’s independent monitor. The firm’s managing partner, Marc Kasowitz, reported his hourly rate at $1,500.
The FTC posted some of the submissions in full online Friday. The agency later uploaded redacted copies that shield cost estimates and billing rates. In many of the documents Law.com reviewed, the cost estimates and billing rates were not blacked out.
“At the request of Herbalife, cost estimate and billing information is redacted in the versions of the applications posted here,” the FTC wrote on its website. “These redactions do not reflect that the redacted cost estimate and billing information is confidential.”
Megan Jordan, a spokeswoman for Herbalife, said the company requested the redactions to “evaluate the the merits independently,” rather than allow the firms in competition to see the other proposals.
The FTC warned would-be applicants that their submissions could be made public. The agency said “applicants are therefore advised not to include in their responses any trade secrets, proprietary information, or other information they do not want made public.”
What follows are highlights from six of the submissions to the FTC.
Jenner & Block Jenner & Block’s submission—filed by Thomas Perrelli, the former third-in-command under U.S. Attorney General Eric Holder Jr.—was most striking for the information that was not presented to the FTC. Unlike its Big Law competitors, Jenner chose not to reveal its rates or provide references and a cost estimate.
“While we appreciate the FTC’s need for a cost estimate, we do not believe that one can be provided with any measure of reliability based on information available to us now,” Perrelli wrote. “What we do know about Herbalife and the scope of the consent judgment is swamped by what we do not.”
Perrelli said the firm “would be happy to discuss hourly rates or our past experiences, and we think a realistic budget can be developed in the course of preparing an appropriate work plan.”
Perrelli is serving as the independent monitor overseeing part of Citigroup Inc.’s compliance with a $7 billion settlement the company reached in 2014 with the U.S. Justice Department and five states over the marketing and sale of residential mortgage loans.
Venable Venable was one two Big Law applicants to disclose a potential conflict of interest, noting past work for Herbalife that was unrelated to the FTC settlement. Ellen Berge, a partner in the Washington office, had worked a combined 2 1/2 hours for the company in 2013 and 2014, according to the firm’s application. Otherwise, none of the Venable lawyers on the prospective compliance team have any experience representing Herbalife, the firm said.
Michael Bresnick, chairman of the firm’s financial-services investigations and enforcement practice, would lead the Venable team at an hourly rate ranging from $697 in the first year to $871 in the final year, according to the application.
Venable said it was “able to offer Michael Bresnick’s rate at a significant discount of 19% in year 1 of the contract,” a discount the firm said would “increase over the duration of the contract per the escalation schedule.”
Venable estimated that its monitoring would cost $15.7 million, with the annual bill declining from $2.6 million in the first year to $2.1 million in the seventh and final year as fewer hours become necessary.
Squire Patton Boggs Squire Patton Boggs estimated that its monitoring would cost between $7.8 million and nearly $11.5 million—including travel time and costs—over the course of the seven-year term. Squire Patton Boggs projected that annual expenses would be highest in the early years but decline over time.
“We would not expect that fees would exceed $15 million over a seven-year period,” the firm projected in its application.
The firm identified an hourly rate of $740 for its “key team members,” including partners Clark Ervin—the first inspector general of the U.S. Department of Homeland Security—and Alicia Batts, who previously served as an adviser to former Federal Trade Commissioner Mozelle Thompson.
Squire Patton Boggs partner Sam Rosenthal would lead the team. According to the firm’s application, Rosenthal, who was appointed to the team overseeing the city of Ferguson, Missouri’s compliance with a Justice Department settlement reached in the aftermath of the fatal shooting of Michael Brown.
Crowell & Moring Crowell submitted an application with the consulting firm StoneTurn Group LLP. “The combination of Crowell & Moring’s attorneys and StoneTurn’s auditing and forensic accounting experts meet the broad mandate” of the independent compliance auditor, the submission to the FTC said.
Kelly Currie, a Crowell white-collar partner in New York who leads the firm’s investigations practice, would lead the monitor team, according to the submission. Currie served as acting U.S. attorney in Brooklyn, New York, following Loretta Lynch’s appointment as U.S. attorney general.
Currie, the firm’s submission said, supervised federal prosecutors’ oversight of a deferred prosecution agreement with HSBC Bank. That deal required the bank to hire an independent compliance monitor.
Five Crowell partners, including Currie, reported hourly billing rates of $850.
McGuireWoods In an eight-page application, McGuireWoods partner Kenneth Bell highlighted his experience as a court-appointed receiver managing the remaining assets of ZeekRewards.com, a $600 million Ponzi and pyramid scheme that the U.S. Securities and Exchange Commission shut down in 2012.
Bell, a former assistant U.S. attorney in the Western District of North Carolina who is based in Charlotte, gave four judges from district’s federal court as references.
In his four-year tenure as a receiver, Bell said has considered the court his client.
“Such would be my conduct if selected as Herbalife [independent compliance auditor],” Bell wrote. “While I would necessarily work closely with the commission and Herbalife, my duty of loyalty would be to the court.”
The firm’s estimated costs were redacted in the application the FTC posted online.
Bell said the firm was not aware of any conflicts of interest that would prevent it from monitoring Herbalife. But he disclosed that former Virginia Attorney General Jerry Kilgore, now a senior adviser at McGuireWoods Consulting, has been on a monthly retainer with Herbalife to deal with any inquiries from state attorneys general.
Bell described McGuireWoods Consulting as a subsidiary of the firm and said that Kilgore would “resign his engagement with Herbalife in the event that I am selected.”
Kasowitz Benson Kasowitz, Benson, Torres & Friedman estimated the compliance monitoring would cost Herbalife between $950,000 and $1.75 million per year.
Former Sen. Joe Lieberman, the Connecticut independent who joined the firm in 2013, would serve as the compliance auditor, in association with Kasowitz Benson and FTI Consulting Inc. Lieberman declined interview requests.
“Senator Lieberman’s record of public service, including particularly six years as Attorney General of Connecticut and 24 years in the U.S. Senate, shows that he has been a persistent advocate for both consumer protection and private sector business growth,” the firm said in its application. “This resulted in a reputation for non-partisan support of a strong, but balanced and fair, regulatory role for government, which is exactly what the FTC has accomplished and seeks in the [settlement order] and why he would be privileged, if selected as ICA, to oversee Herbalife’s compliance with the order.”
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