By Jim Mackinnon
Beacon Journal business writer
The law firm helping the trustee in the years-long Fair Finance Co. fraud case says it is owed more than $12 million in services and expenses — almost twice the amount of money held by the bankrupt Akron company’s estate.
The trustee has filed paperwork asking U.S. Bankruptcy Court in Akron to review more than $7.7 million in new interim legal fees and expenses.
The fee and expense application will be among the topics discussed this morning in bankruptcy court.
Cleveland-based Baker & Hostetler, where Trustee Brian Bash works, says it is owed $7,263,478 in services — for slightly more than 21,000 billable hours — and $463,906.63 in out-of-pocket expenses for work from Sept. 1, 2012, through Aug. 31 this year. The combined amount was reduced by $120,000 following discussions with the U.S. Trustee’s office in Cleveland.
Baker & Hostetler also is seeking an additional $4,283,862 in fees from earlier in 2012 the court has not yet allowed.
That makes for a total of $12,011,246 the law firm said it is owed. Meanwhile, the money market fund where Bash has placed recovered money held slightly over $6.6 million as of Nov. 11.
More than 5,000 Ohio residents who were defrauded out of more than $200 million in the Ponzi scheme have yet to be paid any of the recovered funds.
Baker & Hostetler so far has been paid $4,666,544.77 from previously recovered money in the case, which dates to February 2010, according to court documents.
“We’re submitting these [latest] fees for review and approval,” said Kelly Burgan, a lawyer with Baker & Hostetler who represents Bash. “I understand the gut reaction from some investors. ... I understand they haven’t been paid at all.”
The submission of the application does not mean the court will approve the disbursement of all or even some of the money right away, Burgan said.
The paperwork is intended for the court to review and acknowledge what it finds is appropriate for payment, she said. The law firm is disclosing the work it has done and is requesting approval for payment of that work.
The bankruptcy process means professionals get paid first in order to bring money into the estate for eventual distribution, Burgan said.
“It can only be recovered through lawsuits. The investors can’t get paid unless someone undertakes that battle,” she said.
Disbursement is up to the court’s discretion, Burgan said. “We understand the amount of fees is more than is in the trustee’s money market fund. ... Our fees exceed what is there. We’re still doing the work.”
Baker & Hostetler was last paid in 2011 for the work it did on the case in 2010, she said.
Law firm staff have been working on more than 100 lawsuits trying to recover money in the complicated bankruptcy, Burgan said.
Hourly rates ranged from a high of $735 for a firm partner to a low of $75 for a librarian.
Baker & Hostetler incurred less than $20,000 in fees in all but 17 of the more than 100 cases, its application to the court shows. In five cases, the law firm had fees of more than $100,000.
The largest single bill, for $4,345,551, is for the ongoing $72.2 million lawsuit against Fortress Credit Corp., according to court records.
“Recoveries in this litigation present possibility for a significant distribution to creditors,” the law firm application says. “The firm has a team of lawyers devoted to this matter, with some working on it almost exclusively.”
The law firm disclosed fees and expense of $73,795.50 in suing former Fair Finance Co. owner Donald Fair. The lawsuit ended up with Fair paying $3.55 million to the estate. Fair sold the company, founded by his father in 1934, in 2002 to Indianapolis businessmen Timothy Durham and James Cochran.
Durham and Cochran are now in separate federal prisons following convictions in court last year on charges they bilked thousands of people who purchased $200 million in uninsured investment certificates from the business.
Other expenses include:
• $604,929 to sue Daniel Laikin, a friend and business partner of Durham’s, former Fair Finance director and former head of comedy movie maker National Lampoon. The trustee recently won a nearly $33 million judgment against Laikin, who is imprisoned on federal charges he pumped up the price of National Lampoon stock.
• $259,532.50 in an ongoing lawsuit against National Lampoon seeking more than $9 million.
• $39,447.50 to sue and begin collection proceedings against Durham.
Burgan held out hope that the estate will bring in enough money to make a distribution to creditors but could not say when that might happen. With about $6.6 million being held now and more than $200 million owed to creditors, any disbursement now would be pennies on the dollar and in some cases would not cover the cost of mailings, she said.
“We’re not going to deplete the estate,” Burgan said. “We’re not going to hold out on people. We’re not going to stockpile until everything is over.”
The monthly status hearing is scheduled for 9:30 a.m. today in U.S. Bankruptcy Court in the Seiberling federal building in downtown Akron.
Jim Mackinnon can be reached at 330-996-3544 or email@example.com.