Legal Fees Paid by FDIC to Frandzel & Share

(Audit Report No. 98-047, May 26, 1998)

The Office of Inspector General (OIG) has completed an audit of Frandzel & Share, a law firm hired to provide legal services to the Federal Deposit Insurance Corporation (FDIC). The audit was conducted by the independent public accounting firm (IPA) of Ollie Green & Company through a contract with the OIG, and covered billings paid by FDIC during the period January 1, 1990, through December 9, 1993.

The objective of the audit was to determine whether Frandzel & Share's legal bills present fairly the expenses and activities of the cases for which the fee bills were submitted. Accordingly, Frandzel & Share's fee bills were reviewed to determine whether they were: (1) adequately supported by source documentation; (2) prepared in compliance with applicable FDIC cost provisions; (3) consistent with the terms and conditions of the governing agreements; and (4) representative of the cost of services and litigation which were approved in advance by the FDIC. The total fees paid to the law firm for FDIC-related work during the audit period were $1,207,407. The audit sample covered $607,508, or 50 percent of the total. The audit resulted in net questioned costs of $24,265.

That the Assistant General Counsel (AGC), Legal Operations Section, Legal Division, should disallow:

Management Response

The AGC's response to a draft of this report provided the requisites for a management decision on each of the recommendations. Management disallowed a total of $14,156. Although management's corrective actions on recommendations 1 and 3 differed from the recommended corrective actions, we consider management's response as providing the requisites for a management decision.