Citing costs, judge moves court date to New York
Editor’s note: This story first appeared Thursday, in the April 19-25, 2018, issue of Caribbean Business. It has been updated to include compensation for firms and individuals that was authorized by Judge Laura Taylor Swain.
It is no secret that bankruptcy is very expensive. The government has already said it expects to spend $1.4 billion over the next five years just on lawyers and consultants to help adjust the island’s $70 billion debt. At an omnibus hearing in March, lawyers requested payment of about $70 million in fees and more than $2 million in expenses for five months of work. Judge Laura Taylor Swain, who is overseeing the bankruptcy process, approved less than $50 million of these charges and is reviewing the rest. She also warned lawyers to find ways to keep costs under control as the bankruptcy process is just beginning.
At the request of the Financial Oversight & Management Board (FOMB), Swain opted to hold the upcoming April 25 omnibus hearing in New York, so the government would not have to spend money on lodging and plane tickets for lawyers. Prior to that decision, she issued certain guidelines to reduce costs. For instance, she said she would only authorize the payment of travel expenses for those lawyers speaking at a court hearing and a second lawyer, but indicated she was not going to authorize such payments to a law firm sending an entire battery of lawyers to appear at a court hearing.
Nonetheless, she is expected to go over the expenses of the leading firm in the bankruptcy cases.Proskauer Rose LLP, which turned over to the court five invoices for work completed not only for the commonwealth but also for the four public corporations that filed for bankruptcy.
Proskauer, whose lawyers earn an average of $730 an hour, is seeking about $15 million. Its lead lawyer in the case, Martin Bienenstock, is seeking a huge portion in fees. For the period between May 5 and Sept. 30, Proskauer is seeking $1.6 million for legal work for the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym). In addition, the firm is seeking, for the period of May 21 to Sept. 30, some $1.5 million in fees and $24,131.76 in expenses for work completed for the Employees Retirement System. As representative of the Puerto Rico Electric Power Authority (Prepa) from July 2 to Sept. 30, the firm is seeking $1 million in fees and $67,275.25 in expenses.
As counsel for the Highways & Transportation Authority (HTA) between May 21 and Sept. 30, the firm is seeking $4.4 million in fees and $154,512 in expenses. As the legal representative of the commonwealth, Proskauer is seeking more than $7 million in fees and $233,000 in expenses. Bienenstock, who is the lawyer arguing cases, is seeking $290,000.
In justifying the fees, the firm said, “Proskauer’s efforts resulted in the formulation and pursuit of legal strategies designed to further the Oversight Board’s mandate under Promesa [P.R. Oversight, Management & Economic Stability Act] of returning the Commonwealth and its instrumentalities to fiscal responsibility and access to capital markets.”
Proskauer’s notable undertakings include: All processes to commence Title III bankruptcy proceedings on behalf of all instrumentalities, and negotiation and development of commonwealth-Cofina dispute procedures, which is a gating issue in the commonwealth’s restructuring. Proskauer’s efforts resulted in the appointment of agents for the commonwealth and Cofina, and the commencement of an adversary proceeding to expeditiously determine significant legal rights, and ultimately define the parameters for settlement negotiations. The firm also helped reduce burdensome or duplicative discovery and litigation by contesting the scope of numerous Rule 2004 discovery motions, where the information sought would result in a substantial and undue burden on scarce commonwealth resources. Proskauer has worked with the commonwealth, its representatives and its advisers in making available relevant documents, financial information and analyses.
The judge recently authorized the fees from other firms. O’Neill & Borges firm has done a significant amount of work in the Title III process but is charging much less. For the period of May 3 to Sept. 30, the firm sought $299,691. The firm has 22 lawyers devoted to the cases. Each lawyer charges anywhere from $125 to $335 an hour. Hermann D. Bauer, who is the lawyer writing most of the firm’s motions and legal paperwork presented in this court, has an hourly rate of $280. He is seeking $116,000 in legal fees.
Other individuals whose compensation for professional services were approved include Andrew Wolfe, who for the period of Aug. 1 to Sept. 30 sought $50,000 in fees and $7,526.14 in expenses for professional services provided to the Oversight Board. Wolfe is currently an adjunct professorial lecturer at American University in Washington, D.C. Previously, for 27 years, Wolfe was a senior manager of the Western Hemisphere Department of the International Monetary Fund, until his retirement in 2014.
Ankura Consulting Group sought payment of $1.9 million in fees and $63,804.29 in expenses for work done for the government from June 1 to Sept. 30. Ankura also sought payment for work done for Prepa from July 2 to Sept. 30 at a cost of about $2.2 million in fees and $129,303 in expenses. Ankura’s work centered on the development of the fiscal plans, all liquidity-related matters and management of the projects. On the other hand, the judge has yet to approve the expenditures for McKinsey & Co., which is seeking $5.1 million for fees and expenses for the period of July 1 to Sept. 30 for work done as a consultant to assist the HTA, Prepa and the commonwealth in their Title III bankruptcies. The firm charged each entity up to $740,000 a month.