ARTICLES

TOP-DOLLAR DEFENSE IS OFTEN NO BARGAIN

Chicago Tribune (Illinois)
Distributed by McClatchy-Tribune Business News
July 15, 2007 Sunday

Top-dollar defense is often no bargain: Black latest to lose case despite having a legal dream team

BYLINE: Greg Burns, Chicago Tribune

SECTION: BUSINESS AND FINANCIAL NEWS

LENGTH: 1335 words

Jul. 15–Like many other defendants in the recent wave of corporate crime trials, Canadian press baron Conrad Black was convicted Friday despite assembling a dream team of legal talent costing millions of dollars.

The boom in white-collar prosecutions in the past decade has produced a bonanza for attorneys sparing no expense to mount defenses on behalf of their executive clients. Yet for all the massive efforts, they mostly lose.

The legal team of Enron’s Jeffrey Skilling, for instance, spent $70 million, according to court documents. The Rigas family of Adelphia spent $25 million, and Dennis Kozlowski of Tyco spent $26 million in two trials.

Though his expenditures have yet to be tallied, Black employed the trial teams of not one but two of the most sought-after criminal lawyers, Chicago’s Edward Genson and Toronto’s Edward Greenspan.

In part, the spending surge stems from the increasing willingness of federal prosecutors to bring complex, document-intensive cases that require months to try.

At the same time, top corporate executives more than ever can afford a megabucks defense. Besides vast increases in their personal wealth over the past decade, many routinely obtain employment contracts obliging their companies to pay for open-ended representation. Black had 75 percent of his trial expenses covered.

While some legal sources say the scope of white-collar cases these days all but demands a multimillion-dollar war chest to fund a credible challenge, others see waste and overbilling that at best makes no difference in the outcome and at worst might hinder justice.

So is an eight-figure defense worth the money for the privileged few who can pay? “I seriously doubt it,” said John Toothman, founder of the Devil’s Advocate legal-fee consultancy. “I’m sure it makes them feel better to have that security blanket of people around them, but they’re probably not well-served. There’s too many people and not enough thought.”

Some estimate the defense cost in the most prominent white-collar criminal trials has shot up as much as tenfold in as many years. And it shows no sign of moderating, said John Marquess, president of the Legal Cost Control Inc. consultancy. “The numbers keep climbing and climbing and climbing,” he said. “Nobody can get their hands around it.”

Black and his three co-defendants faced a sweeping, complicated case based on the allegation that they diverted some $60 million in payments from their company, Hollinger International, now Sun-Times Media Group, publisher of the Chicago Sun-Times. Although the four won acquittal on the majority of charges against them, they still face years in prison.

None of the defendants testified, but their attorneys launched blistering attacks on government witnesses throughout the nearly four-month-long trial.

Former Illinois Gov. James Thompson, an ex-Hollinger director, was compelled to admit that he merely “skimmed” key audit-committee documents before signing them.

And one-time Hollinger deputy chairman F. David Radler, the government’s star witness when the trial opened, endured a cross-examination that lasted almost three times longer than his direct testimony. He fared so poorly that prosecutor Eric Sussman disavowed him as the trial concluded, telling jurors, “He was their witness, not ours.”

One of the most daunting aspects of the case for defense attorneys was the massive number of documents, said Ronald Safer, the Chicago lawyer who represented Mark Kipnis, Hollinger’s former corporate counsel. “There are hundreds of millions of pages of documents, which is really atypical in a criminal case,” Safer said.

The eight-member team working for Kipnis set up a document management system to code and prioritize those pages, and organize them in a searchable database, drawing on the experience of Safer’s national law firm, Schiff Hardin LLP. “You need the resources a large law firm has,” he explained.

Indeed, by no means did Black and his co-defendants orchestrate the priciest individual criminal defense in recent years. That distinction probably belongs to Skilling, now serving a 24-year, four-month sentence at a federal prison in Minnesota: His lawyers collected $55.5 million of the $70 million they reportedly were owed. The former Enron executive and the company’s insurers paid the bills.

Black is said to have spent less so far, but the tab remains open.
Under a court-approved settlement, Sun-Times Media Group agreed to pay 75 percent of the legal fees and costs for Black’s criminal defense.

In its quarter ended March 31, the Sun-Times disclosed that its “indemnification costs” for Black and others whose legal expenses it is obliged to reimburse had shot up to $17.4 million, from $6.2 million in the year-earlier quarter.

As of March 31, the company had advanced nearly $80 million in expenses for those it had indemnified over the years. The trial got under way March 20, so presumably many associated costs have yet to be paid.

In theory, defrauded companies like the Sun-Times can go after convicted defendants to pay back the fees, but the money often proves difficult to recover.

Running up a big bill in complex cases, on the other hand, is a snap. A series of expert witnesses might be hired to pore over evidence, for instance, rather than just one. Instead of a single lawyer reviewing a document, many might take a look. Clerks contracted for a relatively low wage to help manage paperwork might show up on bills at much-elevated levels.

“It has become acceptable to have large teams of people, almost all billing by the hour,” Toothman said. “What you see in the courtroom is the tip of the iceberg.”

Direct expenses can soar as well. The cost and manpower involved in imaging documents can run into millions of dollars. Office space, computer services and technical assistance with courtroom exhibits all add up, too. So do meals and hotel accommodations for late-night work sessions.

Some companies have pushed back, trying to limit their financial exposure. They also have come under pressure to sever ties with accused executives as a condition of cooperation with prosecutors.

In a high-profile case against KPMG, for instance, a New York judge blasted the Justice Department for pressuring the accounting firm to cut off the financial support of partners accused in a tax-shelter scheme.

And in a long-running case involving two former executives facing a third trial, a federal judge recently rejected requests from federal prosecutors and Kansas utility Westar Energy to restrict the flow of attorneys’ fees and expenses.

No one expects Black and his co-defendants to retreat. They are likely to mount an aggressive appeal and to vigorously contest a prosecutor’s assertion that sentencing guidelines call for long prison terms.

Of course, that sets them apart from most defendants, who rarely take their cases to trial, and typically receive only perfunctory legal defenses when they do.

Safer, the attorney for Kipnis, not long ago led the courtroom team that freed an Illinois mother, Julia Rae Harper, who spent two years in prison after being convicted of murdering her 10-year-old son. In a retrial, the defense team won an acquittal after uncovering evidence that implicated a convicted serial killer.

But the effort cost Safer’s law firm about $1 million in donated fees and expenses, he said. “To come close to evening the scales, to really give the defendant a chance of defending herself, in not the most complicated of all cases, it took a million dollars,” he said. “What if you don’t have a million dollars? She’s in jail for the rest of her life.”

gburns@tribune.com
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