Weil Overbilled Bankrupt Ditech by $476,000, U.S. Trustee Says

(Bloomberg) -- An internal “work-in-progress” meeting attended by eight lawyers at a cost of $5,845. Two hours of exchanging emails for $1,380. A $133.34 taxi ride.

Those charges from Weil, Gotshal & Manges are among the issues raised by the U.S. Trustee overseeing the case of bankrupt mortgage servicer Ditech Holding Corp. Lawyers and professionals from other firms have applied to collect more than $50 million in fees and expenses. Some of those applications show “questionable billing judgment” and lawyers appear to have “simply disregarded” established guidelines, a U.S. Trustee lawyer said.

The U.S. Trustee said Weil billed the estate about $18 million for work done from the bankruptcy filing in February to Sept. 30. Weil's senior lawyers billed the estate at an hourly rate of $1,327, which is $116 higher than it charges non-bankruptcy clients, according to an objection filed Thursday by the U.S. Trustee.

A firm's rates should not increase because the client files for bankruptcy, said the U.S. Trustee, a division of the U.S. Justice Department which oversees bankruptcy cases.

A Weil representative didn't respond to a request for comment.

Crowded Meetings

Weil lawyers improperly asked to be paid for “vague entries” lacking the detail a reviewer would need to confirm the estate benefited from the work. Weil repeatedly sent more than four lawyers to internal meetings without justifying the need for either the meeting or each lawyer's participation, according to the objection.

Lawyers also filed expenses for meals and travel for days in which they worked less than four hours. For example, Weil wants to be reimbursed for a $133.34 taxi ride taken by Ray Schrock, the firm's co-chair of business finance and restructuring, on a day in July in which he only worked on the case for 2.5 hours, according to the objection.

Weil should reduce its fees by about $451,000 and its expenses by $25,000, U.S. Trustee lawyer Greg Zipes wrote in the objection. The law firm of Pachulski Stang Ziehl & Jones LLP, which represented unsecured creditors, also had issues with its bills and should have their fees reduced by almost $83,000, according to the objection.

A representative for Pachulski didn't respond to a request for comment.

Pricey Hotels

The U.S. Trustee noted that professionals from Alix Partners LLP filed expenses for hotels that cost over $500 per night. The firm has since agreed to reduce its expense request to no more than $500.

A representative for Alix didn't immediately respond to a request for comment.

Professional fees paid by a bankrupt estate like Ditech would otherwise go to lenders or other creditors.

The Ditech bankruptcy case was complicated by complaints filed by homeowners who said the company failed to properly credit payments or otherwise mishandled their mortgages. A settlement allowing the estate to sell its assets for $1.8 billion created a $10 million fund for homeowner claims against the company.

The federal bankruptcy judge overseeing the case gave interim approval for some of the professional fees at a hearing last month.

A hearing on the U.S. Trustee objection to professional fees is slated for Dec. 12.

To contact the reporter on this story: Josh Saul in New York at jsaul15@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Adam Cataldo, Christopher DeReza

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