Legal Fees Paid by FDIC and RTC to Arnelle, Hastie, McGee, Willis & Greene

Legal Fees Paid by FDIC and RTC to Arnelle, Hastie, McGee, Willis & Greene

(Audit Report No. 98-066, June 24, 1998)

Summary

The Office of Inspector General (OIG) has completed an audit of Arnelle, Hastie, McGee, Willis & Greene, a law firm hired to provide legal services to the Federal Deposit Insurance Corporation (FDIC) and former Resolution Trust Corporation (RTC). The audit was conducted by the independent public accounting firm of Windham Brannon, P.C. and covered billings paid from April 1, 1991 to August 31, 1995.

The objective of the audit was to determine whether the firm's legal bills presented fairly the expenses and activities associated with FDIC and RTC cases assigned to the firm. The total fees paid to the law firm during the audit period were $1,147,436 by FDIC and $3,798,894 by RTC. The OIG identified questioned costs of $252,055 from an audit sample of $1,120,268.

Recommendations

The Assistant General Counsel, Legal Operations Section, Legal Division, should disallow:

(1) $55,380 for unsupported time charges,
(2) $50,826 for unauthorized personnel,
(3) $41,361 for inadequate descriptions of work,
(4) $34,203 for unsupported expenses billed,
(5) $16,614 for inappropriate staffing,
(6) $15,759 for duplication of effort,
(7) $13,481 for hourly rate variances,
(8) $11,173 for overhead/administrative staff,
(9) $7,438 for excessive time billed,
(10) $2,114 for time sheet/fee bill discrepancies,
(11) $1,412 for expenses billed in excess of allowable costs,
(12) $990 for billing errors,
(13) $769 for travel time not billed at one-half rate,
(14) $375 for learning curve charges, and
(15) $160 for excessive travel time billed.

Management Response

The General Counsel, Legal Division disallowed questioned costs totaling $67,709. Although management's corrective actions for recommendations 1 through 9, 13 and 14, differed from the recommended corrective actions, we consider management's response as providing the requisites for a management decision.

Management either ratified or allowed $184,296 of the $252,055 questioned in the draft report based on additional information provided by the law firm. Except for management's response to recommendation 1, the OIG accepts management's explanations regarding these recommendations.

Specifically, in recommendation 1, the OIG recommended that FDIC disallow net questioned costs of $54,512 for unsupported time charges. This was due to the firm not maintaining time sheets to support fees billed. Management allowed $49,929 and disallowed $5,451. Management believes that the firm provided benefit to the FDIC and RTC for the time charged. Accordingly, after considering other factors, management determined that $5,451 was an appropriate disallowance. However, in the absence of time sheets or other original source documentation, the OIG could not independently verify the questioned time charges. Therefore, for recommendation 1, the OIG will question $37,675 ($54,512 less $16,837 which overlaps with questioned costs under other report recommendations).

After considering $67,709 in disallowances taken by management and management's comments on the draft report, we will report questioned costs of $99,933 (including $48,101 of unsupported costs) in our Semiannual Report to the Congress.

Last Updated 03/27/01