Attorneys who represented thrift depositors in a class action lawsuit against the state should just keep the $3.9 million already paid to them and not receive any more of the $5.8 million fee previously awarded, a court-appointed official said.
In a report and recommendation to 3rd District Judge David S. Young, appointed special master James U. Jensen, a local attorney, called the amount of money paid to the four attorneys "on the high end of the range of a reasonable fee.""I recommend that the court amend its prior order to the extent necessary to limit counsel's fees to the amount previously distributed," Jensen said.
If Young agrees to the recommendation, it would mean depositors would receive about $2 million more from a $60 million settlement of a lawsuit where about 15,000 depositors sued the state for savings lost in the collapse of Utah's privately insured thrift industry.
Oddly, the organization representing thrift depositors doesn't favor the recommendation. "We agreed to the order approving the (original) attorneys' fees, so we don't understand why the issue has even come up," said Sheila Bohard, spokeswoman for Depositors of Insured Thrifts. As far as we are concerned they (DOIT's legal counsel) earned it and it's theirs."
Young previously approved paying depositors' counsel a $5.8 million fee - 20 percent of $29 million in cash the state agreed to pay up front in the settlement.
But in a lengthy review drawing from other contingency fee cases, Jensen, who was appointed by Young to review all costs to depositors, said his recommendation "reduces the appearance of a windfall attorney's fee and it gives greater weight to the recommended fee established by the Legislature in the settlement."
Legal fees were a major stumbling block in passing the settlement, as lawmakers meeting in special session last fall couldn't accept the fact that millions of dollars in state money would fall into attorneys's pockets. To get around the politically sensitive issue, the Legislature recommended a $1.25 million cap on legal fees in the case.
In his report to Young filed this week, Jensen also recommended limits in fees paid to other consultants, lobbyists and accountants hired by depositors in their court battle with the state.
Among the more controversial bills left to be paid was from Research Associates Inc., a local political consulting firm headed by former legislators David Irvine and Georgia Peterson. They were accused of a violating state law that prohibits lobbying when payment is contingent on a bill passing or failing.
Jensen said Research Associates hadn't violated the law. But, he recommended the court reduce the balance of the lobbying firm's bill from $438,850 to $304,080.
In a separate filing dealing with accounting firm Arthur Andersen & Co., which has handled distribution of the settlement to depositors, Jensen recommended lowering the hourly rate from as high as $235 to $70, which would reduce the firm's bill from $446,600 to $299,714.
Excluding Arthur Andersen's bill, Jensen's recommendation would reduce depositors' fees and expenses by $181,960.
Responding to the reduction in fees, DOIT spokeswoman Bohard said depositors had already agreed to pay the net balance of their bills and didn't see the need for further review and reduction.
"We reviewed every one of the bills and we thought the amounts submitted were appropriate," she said, noting that the costs of distributing the recommended savings to 15,000 account holders would make the additional amount of money "miniscule."
Jensen recommended that hearings be held to settle differences over the recommended payments, and that attorneys and others receiving fees be required to accept the recommended payments and not seek any further payment.
Total legal and consulting fees*$6.74 million
Amount paid by DOIT$4.19 million
Net balance$2.54 million
Special master's recommended balance$444,210
Additional money to depositors$2.09 million
*Not including fees of Arthur Andersen & Co.