Enron Fee Flood

By Christopher Stern
Washington Post Staff Writer
Š Copyright 2003 The Washington Post Company

After more than a year in bankruptcy court, WorldCom Inc. won a federal judge's approval for its plan of reorganization earlier this month. Now it's time to fight over the bill.

Ashburn-based WorldCom filed the biggest bankruptcy case on record in July 2002, and it has racked up legal and other professional fees ever since at the rate of $10 million a month.

In addition to paying its own bankruptcy lawyers at the law firm of Weil, Gotshal & Manges LLP as much as $3 million a month, WorldCom is also required to foot the bills for its creditors' lawyers and financial advisers.

Included in the $150 million in fees it has paid during the past year is the cost of an exhaustive investigation commissioned by the board of directors into the company's massive accounting fraud. That investigation alone cost in excess of $40 million, according to the company. ...

During the past 20 years, while the number of business bankruptcies has declined, the number of bankruptcy lawyers has ballooned, along with the fees they charge, said John Toothman, president of the Devil's Advocate, a fee-auditing firm based in Alexandria. Last year there were 38,450 business bankruptcy filings, according to the American Bankruptcy Institute.

The fees are particularly high in large bankruptcies such as WorldCom's, in which companies have to rework billions of dollars in debt, Toothman said. WorldCom, which has $25 billion in revenue, filed for bankruptcy after it could not make payments on its $30 billion in bank debt.

Large companies are focused on emerging from bankruptcy quickly and are not likely to quibble over multimillion-dollar fees, Toothman said. "It is not going to spend a lot looking at the charges," he said. "They are looking at much larger numbers." ...

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