Old GM legal fees targeted
|April 29, 2010||http://detnews.com/article/20100429/AUTO01/4290352|
Old GM legal fees targeted
U.S. asks bankruptcy judge to withhold 10% of $54.7M owed until 1-year-old case is resolved
The Detroit News
The government watchdog monitoring General Motors Co.’s bankruptcy estate wants to withhold millions from a high-priced stable of lawyers and consultants who have submitted bills totaling $54.7 million.
The U.S. Trustee has asked U.S. Bankruptcy Court Judge Robert Gerber to withhold 10 percent of the fees until the end of the case, in part because the old GM has yet to file a plan of reorganization almost one year after the bankruptcy case was filed. Deferring a portion could moderate potentially excessive fees and provide an incentive for resolving the case, the trustee said in a recent court filing.
A hearing is scheduled for 9:30 a.m. today in New York City.
The filing raises questions about the costs associated with selling the unwanted assets GM left behind in bankruptcyand settling related business affairs, and about the progress being made in winding down the "old" GM.
"Whether the retained professionals performed services during the first fee period resulting in a benefit to the estates cannot be assessed at this time," the U.S. Trustee wrote in the April 22 filing.
The $54.7 million in fees and expenses is only part of the overall cost of administering the bankruptcy case. The real total is $82.5 million, which includes the amount charged by crisis managers AP Services LLC.
The only professional that should not be subject to the 10 percent withholding is Alan Chapell, a consumer privacy ombudsman. He is seeking $72,900.
Holding back 10 percent of the fees is justifiable because confirmation of a reorganization plan "does not appear forthcoming in the immediate future, and that uncertainty still prevails regarding the solvency of the bankruptcy estates," the trustee wrote.
Tim Yost, a spokesman for the old GM, now known as Motors Liquidation Co., said there is no firm timeframe for filing a plan other than "sometime this year."
"There may be more a communications time-lag issue here than anything else, in that (Motors Liquidation) has been making tremendous progress on virtually all fronts against the goals in this very big, very complex case, and we will be updating the trustee and others on that latest progress very soon," Yost said.
One major issue confronting the bankruptcy estate has been establishing a trust that will oversee environmental remediation and disposal of former GM factory sites and real estate.
Holding back a percentage of fees is not unusual, said Doug Bernstein, head of Bloomfield Hills law firm Plunkett Cooney’s banking, bankruptcy and creditors’ rights practice group.
"So there’s a reserve in case things come up and if there’s duplication or other reason why someone shouldn’t get 100 percent of what they’re asking for," he said.
It also is not unusual that Motors Liquidation hasn’t filed a reorganization plan yet given the case’s size and number of creditors.
"This one’s a little more complicated than the run-of-the-mill case," Bernstein said. "Under normal circumstances, sure, you’d like to think a plan’s been filed."
The judge must determine whether the professionals’ services were necessary and made a beneficial contribution to the bankruptcy estate or creditors.
The judge also must review fee applications, "lest overreaching…professionals drain (the estate) of wealth," the trustee wrote in a filing, citing a prior case.
The federal government provided $1.17 billion in financing, which is being tapped to pay a growing roster of more than 14 experts, lawyers and consultants.
If that money is depleted, creditors who lost billions could be forced to fight over an even smaller pool of money.
Unsecured creditors received a 10 percent stake in General Motors Co. plus warrants totaling 15 percent of additional equity.
That stake could be cashed in after the automaker launches an initial public stock offering — perhaps late this year or next.
But that 10 percent stake could shrink if the bankruptcy estate depletes the $1.17 billion in financing provided by the federal government.
The bankruptcy estate could sell some of the stock to raise cash and continue operating.