Tuesday, February 06, 2007

High Priced Lawyers --- Only the Best for Tollpayers

From this morning's Globe, we learn that the Mass Turnpike Authority paid almost $600,000 to a battery of legal and financial consultants to advise it whether or not it could eliminate the western tolls:

$145,744 to Mintz Levin to analyze whether the authority had the legal power to take down the tolls;

$156,004 to Choate Hall & Stewart to assessed whether the leases on the turnpike service plazas could be sold to help pay off the $199 million in debt on the western portion of the highway;

$106,000 to WilmerHale for unspecified work;

$63,124 to Foley Hoag for unspecified work.

Each of these firms is on "regular retainer" with the Authority -- meaning that (1) each has at least one "special relationship" that assures its ongoing access to the public trough, and (2) anyone who wants to sue the Authority has to find someone else to do it. But is the price worth it?

Board member Mary Connaughton, a Romney appointee who supports removing the tolls, said she found it "hard to believe" that the Turnpike spent so much money on consultants.

"I would want to go through those issues with a fine-tooth comb to make sure those are appropriate billings," she said. "I'm not convinced that is appropriate billing for the amount of service we got."

[query -- as Romney's hand-picked advocate for this plan, and an accountant and business professor, I would think she'd feel it prudent to keep an eye on this]

Mary's onto something. As a former general counsel to a public authority, I am all too familiar with the way large firms bill their public clients. As a general rule, in my opinion (two clauses that are designed to insulate me from any specious allegation of libel), some large firms (I am not saying any of these four, mind you) use opportunities like these to train their associates, sending them off to do hours and hours of legal research on issues about which the firm already has extensive knowledge and a ready research database.

Let's examine further.

I suspect that most or all of these firms represent the Authority on the basis of what is called a "blended rate." That is, rather than the senior partners charging their usual $650 per hour and billing their associates at $200, the firms will charge a blended hourly rate for all counsel of, say, $275 (I know one of the firms was charging me $225 in the mid-90's, so I'm being modest with rate inflation).

If Mintz Levin billed $145,000 to examine whether the Authority had the legal authority to remove the tolls, that would represent a combined total of over 525 hours of lawyers' time -- the majority of it being associates. I suspect that the bulk of the issue involves whether or not removing the tolls would violate any of the covenants contained in outstanding bonds that were previously sold in the public market. Mintz Levin has been bond counsel for Massachusetts public agencies since before I was born (that's more than 50 years, folks). They've written the book on bond covenants. Do you really believe it would take one of the foremost authorities on public bonds 525 hours of time to reach an answer to a question that has been in front of the Authority for more than ten years?

Choate Hall's $156,000 would represent 567 hours of time -- to assess whether the leases they have granted to service plaza lessees can be sold. It would shock me if there was the slightest doubt that, as a matter of real estate law, the Authority hasn't reserved in its leases the right to turn them into casinos if it wants -- that would be par for the course. So what are the big issues? Perhaps whether or not the revenue generated from the leases has been pledged to pay the bonds and therefore could be sold without violating bond covenants? Call Mintz. Or perhaps the lessees have given security for their development capital in the improvements they have made on the properties, and therefore mortgage covenants must be analyzed. Okay, arcane question, but 567 hours of time?

What troubles me most about this excess is that the toll removal plan was launched late in the game, when Romney was all but departed and Healey's chances of success were miniscule. The prospects for the plan's achievement were slim to none by then. What was gained by this expensive exercise?


You might be an optimist and say that at least now, the Authority will not have to research these issues if it determines sometime in the future to reconsider such a plan.

But by then, its counsel will advise that it would be "prudent" to "take a second look" to insure that laws and regulations haven't "altered the landscape" and that their advice is still sound.

All for another $600,000.

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