Legal Fees Paid by FDIC to Gunster, Yoakley, Valdes-Fauli & Stewart

(Audit Report No. 98-007, January 9, 1998)

Summary

The Office of Inspector General (OIG) has completed an audit of the legal fees paid to Gunster, Yoakley, Valdes-Fauli & Stewart, a law firm hired by the FDIC to provide legal services. The former Resolution Trust Corporation (RTC) OIG performed the audit for the FDIC OIG under a Memorandum of Understanding dated March 3, 1993. The audit was conducted by the independent public accounting firm of Doshi & Associates, P.C. through a contract with the RTC OIG.

The objective of the audit was to determine whether the fee bills submitted by the law firm present fairly the expenses and activities of the cases for which the fee bills were submitted. Accordingly, Gunster, Yoakley'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. Auditors identified questioned costs of $20,718 from an audit sample of $469,930 billed to the FDIC for the firm's professional fees and expenses.

Recommendations

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

The report recommends that the Assistant General Counsel, Legal Operations Section disallow the following:


(1) $10,710 for billing an unauthorized attorney with conflicts,
(2) $4,525 for block billing,
(3) $4,139 for billing unauthorized personnel,
(4) $1,225 for facsimile transmissions billed in excess of actual cost,
(5) $1,208 for mark-ups on computer research expenses,
(6) $891 for inadequate descriptions,
(7) $200 for unallowable secretarial overtime,
(8) $49 for long distance telephone charges billed in excess of actual cost, and
(9) $45 for a duplicate time entry.

Management Response

In a memorandum received on June 23, 1997, the General Counsel, FDIC Legal Division, responded to the OIG's draft report. The Legal Division's response provided the requisites for a management decision on each of the recommendations. Management disallowed a total of $1,395. Although management's corrective actions on recommendations 1, 2, 3, 4, 6, 7, and 8 differed from the recommended corrective actions, the OIG considers management's response as providing the requisites for a management decision.

Recommendation 1 recommended the Legal Division disallow $10,710 for billing by an attorney who was restricted from performing work for the FDIC. The Legal Division agreed with the OIG finding that Gunster, Yoakley violated a conflict of interest waiver but did not agree with the recommendation to disallow the fees charged by the restricted attorney. The OIG asserts that the firm's violation of the conflict of interest policies and its breach of contract are pertinent issues. The FDIC sent a letter notifying Gunster, Yoakley of the conditional waiver and its restrictions. However, the firm did not adhere to those restrictions. The FDIC established policies to protect its interests and prevent any damage from occurring. To make an exception to the conflict of interest policy defeats its purpose. The OIG will continue to question $10,710 related to the conflict of interest violation.

Recommendation 2 recommended the Legal Division disallow $4,525 for block billed time entries. In response to the draft report, the law firm provided supplemental information which adequately supports the questioned entries. Therefore, the OIG agrees to reduce its questioned costs related to this condition to zero.

Recommendation 3 recommended the Legal Division disallow $4,139 for billing unauthorized personnel. In response to the draft report, the law firm and the Legal Division provided supplemental information which adequately supports the questioned entries. Therefore, the OIG will reduce the questioned costs related to this condition to zero.

Recommendation 4 recommended the Legal Division disallow $1,225 for facsimiles billed in excess of cost. The OIG, through mutual agreement with the Legal Division, is excluding the projected overcharges of $634 from its questioned costs. The Legal Division has identified and accepted a mean price of $.20 per page for facsimile transmissions. As a result, the Legal Division has agreed to disallow $118 of the remaining $591 in mark-ups on facsimile charges. The OIG continues to disagree with the Legal Division's acceptance of this rate for all facsimile transmissions because the law firm is unable to support the long distance charges associated with the facsimiles. The OIG will continue to question $591 for unsupported facsimile charges.

Recommendation 6 recommended the Legal Division disallow $891 for inadequate descriptions. The Legal Division concluded that the description of services billed to the FDIC are acceptable within the Legal Division standards communicated to outside counsel. Upon further review, the OIG agrees with the Legal Division's decision not to disallow the $891. Therefore, the OIG will reduce the questioned costs related to this condition to zero.

Recommendation 7 recommended the Legal Division disallow $200 for unallowable secretarial overtime. The Legal Division accepted the law firm's explanation that the costs were for emergency time expended by staff as a result of requests from the FDIC. Due to the relatively small amount involved and the isolated occurrences of billing for secretarial overtime, the OIG will accept the decision of the Legal Division. Therefore, the OIG will reduce the questioned costs related to this condition to zero.

Recommendation 8 recommended the Legal Division disallow $49 for long distance telephone charges billed in excess of actual cost. The OIG, through mutual agreement with the Legal Division, is excluding the projected overcharges of $25 from its questioned costs. Therefore, the OIG will reduce the questioned costs related to this condition to $24.

The Legal Division accepted the law firm's explanation that the costs were for emergency time expended by staff as a result of requests from the FDIC. Due to the relatively small amount involved and the isolated occurrences of billing for secretarial overtime, the OIG will accept the decision of the Legal Division. Therefore, the OIG will reduce the questioned costs related to this condition to zero.

Based on the IPA's work, $20,718 was questioned in the draft transmitted to FDIC management. After considering additional information submitted by the firm and management's comments, the OIG modified the questioned amount. Consequently, the OIG will report questioned costs of $12,578 in its Semiannual Report to the Congress. .

Last Updated 03/27/01 contact the OIG