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Amtrak's Lesson: Check Legal Bills Closely

Wall Street Journal
November 4, 2006; Page B1

By Nathan Koppel and Ashby Jones

Copyright 2006 WSJ

It can pay to read bills closely before signing the check.

That's the moral of a recent audit of Amtrak's legal bills, which found that the railroad allowed law firms to disregard its billing guidelines -- potentially costing Amtrak millions of dollars. From 2002 to 2005, Amtrak spent more than $100 million on lawyers, records show. But "with better management, Amtrak could have knocked [down] its legal fees" substantially, says John Toothman, an examiner hired by Amtrak's Office of the Inspector General to draft the report. ...

Mr. Toothman studied samples of legal bills submitted by six of Amtrak's main law firms, including Manatt, Phelps & Phillips LLP, Morgan, Lewis & Bockius LLP and Shaw Pittman (now known as Pillsbury Winthrop Shaw Pittman LLP, following a 2005 merger). The firms billed the company a combined $19 million from 2002 to 2005, records show.

Mr. Toothman's report found that 41% of the fees Shaw Pittman requested, in the sample studied, had "cryptic" descriptions. ...

The report cited Manatt, Phelps for a pattern of repetitive hourly billings. In 2004, for example, a firm paralegal billed exactly 9.0 hours on 10 different occasions in one month, according to Mr. Toothman. He found it unusual that none were, say, "8.9" or "9.1" hours. ...

Another issue is that in-house lawyers and outside firms often have longstanding relationships. In the Amtrak case, "the attitude of the law department was that they shouldn't manage the [outside] law firms, because they were their buddies," says Mr. Toothman. One lawyer, who was working for Amtrak at the time, Mr. Toothman says, supervised a law firm where she had previously worked. In another instance, he says, Amtrak used a law firm headed by a former Amtrak in-house counsel. ...


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