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Uncle Sam's corporate lawyers.

Thousands of lawyers work in-house at the various agencies and departments of the U.S. government. So it may surprise you to learn that more than 120 government agencies are permitted by law to hire outside lawyers and that, each year, the government pays approximately $600 million to those lawyers for representation in litigation or other legal services. This figure happens to be more than twice the amount the government gives the federally chartered Legal Services Corporation to provide basic legal representation to millions of low-income people.

And it gets worse. The government actually pays the legal bills of its outside contractors who run into legal trouble in the course of their work, even when that legal trouble is defending themselves against employees who blow the whistle on their illegal or unsafe activities. At the Department of Energy (DOE), the largest civilian user of private contractors in the executive branch, this indemnification scheme costs taxpayers approximately $30 million in legal fees and costs each year.

The DOE's own regulations require workers to report unsafe conditions. But when they do, DOE contractors can - and often do - use federal funds to battle those same workers. How can this be? To attract private sector companies to run its nuclear weapons programs, the DOE enters into deals that specifically protect contract companies from certain liabilities. This means that in addition to paying these companies, legal fees, the government may be responsible for money damages arising from their improper operations. The DOE accepts such a bad deal in part because it fears that, if contractors were responsible for their own legal costs and liabilities, they might frequently sue the government, claiming that government negligence or misconduct caused the harms alleged. By assuming the costs up front, DOE hopes to maintain greater control of litigation decisions.

Unfortunately, the real-life result is that the DOE allows its contractors to decide whether to defend a case, to choose the lawyers (subject to approval by the DOE), and to exert tremendous influence over decisions such as whether to settle or go to trial. Then, the government rubber-stamps the company's legal bills. This often forces whistleblowers into protracted litigation, fighting companies that want to beat them into the ground and that have little incentive to quit since taxpayers are paying the bills. Meanwhile, whistleblowers frequently must pay their own legal fees, even as they risk losing their jobs.

Just ask Ed Bricker. In 1977 he went to work at the Hanford Nuclear Reservation, a federal facility in Washington State that processes plutonium for nuclear weapons for the DOE. Under contract with the government, Rockwell International Corporation operated portions of Hanford from 1977 until 1987, when Westinghouse Electric Corporation took over the contracts. That same year, Bricker reported what he thought were safety deficiencies that could have exposed workers directly to plutonium, one of the most dangerous carcinogens known to humankind.

Bricker first noticed that alarms in his work area had been shut off because they were malfunctioning. That meant workers exposed to unsafe levels of radiation would not be aware of the contamination. Bricker also noticed leaks at the "hood windows," through which workers observed plutonium processing and used insulated gloves to reach into sealed processing areas.

There was more. Bricker realized that the original schematic drawings of the plant had not been updated over the previous 30 years, even though the layout of the plant had changed. That meant there was no accurate map to safe and unsafe areas. The last straw came one day when Bricker walked into the plant control room and found no plant operator at the controls - only an engineer who clearly didn't know what to do in an emergency. "It was as if the whole plant was on autopilot. That was when I decided to nail my 'Ten Theses' to the church door."

Bricker complained about the safety deficiencies he had observed. He got nowhere going up the chain of command, so he took his complaints to The Seattle Times, which reported them. That, he says, "is when the campaign of harassment began."

"I was called a nitpicker and a troublemaker. I was called a government mole.' I was told that if I didn't stop complaining, the facility would be shut down and everyone would lose their jobs. I began to receive poor work performances. I was threatened. Petitions were circulated with managements active involvement stating that I had mental health problems. The icing on the cake came when my air equipment was sabotaged that allowed me to go safely into contaminated areas. I held my breath and ran out of the facility and passed out,

Bricker filed a formal complaint against Rockwell and Westinghouse with the Department of labor, contending he was being harassed on the job because he had engaged in legally protected whistleblowing activities. After an extensive investigation, the Labor Department's Occupational Safety and Health Administration (OSHA) concluded that Rockwell Hanford had retaliated against Bricker for making the complaints, but that Westinghouse seemed to have attempted to correct the problem after taking over.

But Bricker contends even though the Labor Department report led to an agreement by Westinghouse Hanford officials to cease all harassment, the intimidation continued unabated. "The company was thumbing its nose at the Department of Labor and sending the message to other workers that it did not, pay to blow the whistle because the government could not protect you," Bricker says.

Finally, after suffering years of abuse, Bricker gave the officials of Hanford what they so dearly wanted: He quit and took a job working for the state of Washington. Fittingly, he now is a state regulator overseeing some of Hanford's health and safety practices.

In August 1990, Bricker brought a lawsuit in the Yakima, Wash, federal district court against both Rockwell and Westinghouse, alleging that the companies had waged a campaign of illegal harassment because he blew the whistle. Despite the OSHA finding in his favor, and despite substantial reporting by the media on Hanford's harassment campaign, Rockwell and Westinghouse, with the support of the DOE, denied the charges and fought Bricker every step of the way. Here's where the corporate lawyers come in. According to material supplied by the DOE under the Freedom of Information Act, the agency paid two Seattle law firms, Helsell, Fetterman, Martin, Todd & Hokanson and Davis Wright Tremain, more than $1 million in taxpayer dollars for legal fees and expenses to fight Bricker's claim. What makes that figure especially outrageous is that Bricker offered to settle his entire dispute with the companies for $65,000, which would have done little more than cover his legal fees. The DOE rejected this offer, according to Bricker's lawyer, as outrageously high"!

How could these law firms spend so much money? First, Westinghouse and Rockwell appear to have authorized, and the DOE appears to have approved, a full-bore, all-out, spare-no-expense litigation. Then, the company representatives merely sent the legal bills on to the general counsel at the Richland, Wash., DOE office for rubber-stamp approval, after which the DOE accommodatingly wrote a check.

We reviewed the lawyer billing sheets charged in the Bricker litigation. They reveal that each month, the two Seattle firms billed the taxpayers (through Westinghouse or Rockwell) between $18,000 and $45,000. Thus, two or three months, worth of lawyering more than equaled the entire amount for which Bricker had been willing to settle his case. The bills show how many hours corporate lawyers, billing at high hourly rates, are wilting to devote to cases, with tremendous amounts of time spent on reviewing records, pleadings, correspondence, deposition notices, responses to discovery, writing memoranda, revising memoranda, conferring, telephoning, and so on.

Legal expenditures on the Bricker case achieved their desired effect: stalling a final resolution of Bricker's claims. in September 1991, Hanford lawyers convinced the federal trial judge that Hanford employees, who worked for a private company rather than the government, had no right under federal law to recover damages for whistleblower harassment. Because all of Bricker's other claims arose under state law, the federal judge ruled that he had no jurisdiction to hear the case. Two years later, the U.S. Court of Appeals for the Ninth Circuit affirmed that decision, and in October 1994 the U.S. Supreme Court refused to review the lower court rulings. Bricker would have to start all over again, with fewer legal claims, in state court.

The DOE approved the settlement of these remaining state law claims against Rockwell and Westinghouse in December 1994 Bricker got $200,000. As late as August 1994 the DOE Richland Field Office had offered only $25,000. Bricker's lawyer, Tom Carpenter, reports, "It was only through Washington headquarters, intervention that a reasonable settlement figure was offered.", (The DOE's contractors admitted no wrong-doing. Officials at the DOE Richland office did not make themselves available for comment)

Meanwhile, the government had spent more than $1 million on outside attorneys, fees and costs in resisting Bricker's legitimate claim-plus costs incurred by assigning the DOES own in-house lawyers to the matter. Only the corporate lawyers, who received fat fees for throwing legal obstacles in the way of a clearly meritorious case, suffered no adverse consequences from the litigation.

Government payouts of taxpayers, money to corporate lawyers representing private interests are in no way limited to controversies involving the DOE. For example, when health care corporations are denied Medicare benefits for services rendered, the government pays their legal fees, win or lose. Indeed, as a recent General Accounting Office report showed, 11.1 percent of one company's Medicare payments were reimbursed legal fees. (The company's name was kept confidential by the GAO.) The average proportion of legal fees to total Medicare payouts to providers was 3.3 percent. That represents many millions of dollars that could be better spent on citizens in need of health care than on lawyers representing corporations, sometimes against the very government that is paying their bills.

Power Billing

If you think its bad that the government is paying for high-priced lawyers, how would you feel if you knew it was overpaying them? In too many cases, that's just what's happening. Its actually not that surprising: When government agencies retain outside lawyers, they usually turn to the same large firms that represent the country's major corporations. Many of those corporations have long been taken for a ride by power law firms. Why should the government get treated any differently?

Consider just one case that has come to light, involving the two agencies responsible for by far the most hiring of outside lawyers@ the Resolution Trust Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC), both of which have had key responsibilities for regulating the country's financial institutions. (The RTC, which was established to clean up the savings and loan debacle, has subsequently fulfilled its mandate and been shut down.)

When the RTC and FDIC contended that the investment banking firm Drexel Burnham Lambert and its employee Michael Milken had fraudulently rigged the market for high-risk junk bonds - resulting in, among other things, the collapse of 45 federally insured savings and loans-Drexel and Milken were already in deep, documented trouble. The agencies were alleging more than $2 billion in damages, and they sought to recover $6.8 billion from Milken and other Drexel and savings and loan executives. They hired Cravath, Swaine & Moore and its top litigators, Thomas Barr and David Boies. In March 1992, Cravath concluded a settlement that resulted in a $500 million payment from Drexel and Milken to the government - only 25 percent of the claimed damages.

The governments agreement with Cravath guaranteed the firm's senior partners a $300 hourly billing rate and other partners $425 per hour, with a major bonus built in:If the Cravath lawyers obtained $200 million or more for the government in the case, senior partner fees would double to $600 per hour, partner fees would increase to $425 per hour, associate fees to $270 per hour, and paralegal fees to $85. Tallying up all its efforts, Cravath submitted a bill for about $40 million.

Considering its rather high hourly rates, Cravath might have been satisfied with a straightforward accounting of reasonable time and necessary expenses. But it wasn't as an Investigation by the RTC's inspector general (the office in charge of RTC internal investigations) made clear. The investigation spot-checked the overall bill. Although the inspector generals office concluded that Cravath "typically verified through supporting documentation" that expenses billed were accurate and related to the case, it questioned many of the charges. For the three months-out of a 17-month representation - that were closely reviewed, the inspector general challenged or found Improper $379,000 in fees and expenses. The inspector general also questioned $165,069 in "overhead" charges over the entire 17 months, as well as $60,000 for five months, worth of undocumented photocopying charges. The report added that a detailed review of charges relating to other months would undoubtedly reveal additional unallowable charges."

Included in the disputed $165,069 for "overhead expenses" were charges for use of Cravath's in-house computer systems (58,494), office supplies (57,314), transmitting document facsimiles ($1 per page for all outgoing transmissions, totaling $45,924), and binding documents ($3,337). According to the report, Cravath had billed the government in the same manner it billed its corporate clients, despite restrictions in the retention agreement with the government prohibiting such charges. Cravath also charged the federal agencies for a New York hotel room for a lawyer who lived in the New York area and for a weekend hotel stay for a lawyer not working on government matters over that weekend. Out of $43,526 claimed for three months, travel expenses by Cravath, the RTC inspector general disallowed $10,763 and recommended that Cravath's $308,081, 17-month travel claim be subjected to further auditing.

The inspector general also found that Cravath had overbilled hours. One energetic Cravath attorney had charged for a 26-hour day. In that instance, the inspector general reduced the allowable hours by two, allowing a 24-hour billed day despite serious reservations about the effectiveness of individuals working these type of hours." Cravath had also charged $22,095 for "learning curve costs" and $9,639, according to the report, "for services rendered by employees who were on vacation or sick leave."

Cravath eventually agreed to reduce its payment, although we have been unable to confirm the amount It ultimately received. The RTC advised us that it has performed no further audits of the Cravath bill. Cravath declined to respond to repeated requests for comment.
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Title Annotation:waste in government spending
Author:Smith, Wesley J.
Publication:Washington Monthly
Date:Oct 1, 1996
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