November 16, 1994 in City

Hanford: Lawyers get rich on fees paid by taxpayers

Karen Dorn Steele and Jim Lynch Staff writers
 
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Background and the latest updates

Fourth of five parts

On a winter’s night in 1992, five lawyers sat down to dinner at Ray’s Boathouse, a fancy Seattle restaurant with a stunning view of Puget Sound and the Olympics.

The occasion: A gourmet strategy session on how to fight a lawsuit filed by 3,500 citizens who claim radiation releases from Hanford caused their health problems.

The lawyers worked for General Electric, the company that ran Hanford’s plutonium factories after World War II - when huge clouds of radiation spewed over the unsuspecting people living nearby.

The five racked up a $448 tab, ordering off a menu that included Alaskan red king crab, mesquite grilled tenderloin and fine wine.

Who paid the bill?

You did.

`Corporate welfare’

Of all the people cashing in on the Hanford windfall, few are benefitting as handsomely as the lawyers.

Thanks to an arrangement that dates to the Manhattan Project, private contractors at Hanford and other weapons plants have had carte blanche to charge taxpayers millions of dollars in legal fees for cases large and small.

The money goes to firms from Seattle to Washington, D.C. - with little oversight by the U.S. Department of Energy.

Taxpayers paid the contractors who made Hanford’s mess, and now pay again to defend the companies against any harm they may have done.

This system continues at a time when Energy Secretary Hazel O’Leary tours the country apologizing for health damage caused by nuclear bomb-making.

There has been no incentive to settle cases, or to save taxpayers’ money while the contractors’ law firms rack up huge bills at premium rates - up to $300 an hour.

The result is out-of-control legal costs.

Attorneys representing six major contractors against the downwinders who blame Hanford for their illnesses have been paid $29.6 million since 1991.

The Northwest’s largest law firm, Perkins Coie, representing General Electric, assigned 44 lawyers to the case - including 17 partners who charged more than $200 per hour.

The DOE also has paid $5.82 million for several computerized databases to manage the downwinders’ case, which won’t go to trial until next year.

In other cases, taxpayers are picking up huge legal tabs for contractor disputes with Hanford workers.

Hanford whistleblower Ed Bricker’s case could have been settled for $60,000 in 1990. The legal bill is now over $1 million, and Bricker’s trial hasn’t even been scheduled.

A U.S. Department of Labor investigation found Bricker was harassed under a plan devised by Rockwell Hanford Co., which ran Hanford at the time.

The plan, dubbed “Special Item - Mole,” sought Bricker’s “timely termination” because he cooperated with a congressional investigation of safety problems at the super-secret Plutonium Finishing Plant where plutonium was refined for weapons use.

Westinghouse Hanford Co. attorneys continue to bill the public for Bricker’s case under an agreement signed when Westinghouse replaced Rockwell in 1987.

Bricker went to work for Westinghouse when Rockwell lost the Hanford contract. He now works for Washington state’s Department of Ecology.

“The amount the government spends to fight these cases bears no relationship to reality,” says Tom Carpenter, a Seattle attorney for the Government Accountability Project and Bricker’s lawyer.

“This system of indemnifying nuclear contractors is the most shocking example of corporate welfare in the nation,” says Leonard Schroeter, a Seattle attorney and a founder of Trial Lawyers for Public Justice, a law firm focusing on government and corporate misconduct.

`A bottomless pocket’

At the heart of this boondoggle is a sweetheart deal that shifts the legal risks from nuclear contractors to the taxpayer.

The government agreed to protect private companies against huge damage awards if they agreed to work at the secret and dangerous weapons plants.

This system, called indemnification, was born in the 1940s. Although the Cold War is over, the system’s still in place.

Tom Dellinger learned how it works when he sued ICF Kaiser Engineers Hanford for wrongfully firing him from a Hanford project. Dellinger won a large jury verdict in 1992.

“Kaiser refused to take me seriously, but I was in the right, and I won,” Dellinger says.

McCormick Dunn & Black of Spokane, who represented Dellinger, spent $230,600 on the case. Kaiser’s losing lawyers racked up $696,934 in bills passed along to taxpayers.

“This was for the same amount of trial and appellate work they went through,” said Dellinger’s attorney, Bob Dunn. “How in hell does a group of lawyers outspend me 3 to 1? ”

Dunn’s $750,000 settlement offer was rebuffed by Eugene Pride, the DOE’s former chief counsel, who says the decision was up to Kaiser. Kaiser’s inhouse counsel and their law firm, Davis Wright Tremaine, refused to settle.

Two months later, a Benton County jury awarded Dellinger $794,564. With interest charges running, Kaiser appealed.

Last December, Dunn again offered to settle, this time for $941,824. That offer also was rejected. In April, the Washington State Court of Appeals upheld the jury verdict.

Kaiser paid Dellinger $982,922 in May.

Taxpayers got stuck with that bill, too, under the DOE’s agreement to reimburse contractors for all settlements and judgments.

“DOE could have stopped this, but they didn’t,” Dunn says. “Where’s the incentive to settle? You and I are paying for this, and it’s a bottomless pocket.”

Big bills go unchallenged

This feeding frenzy on the taxpayers’ wallet is most evident in the massive downwinders’ case lurching through the federal courts.

From 1991 until this fall, a dozen law firms representing the six contractors who have run Hanford since the ‘40s have had a piece of the Hanford downwinders’ case.

The DOE’s field office in Richland approved nearly every penny of the $29.6 million billed so far by the contractors’ lawyers without formal guidelines for allowable expenses.

“Very little was challenged by DOE,” says an investigator for the General Accounting Office who looked at 1992 bills in the downwinders’ case.

In a rare exception, Shea & Gardner of Washington, D.C., the law firm representing Rockwell, refunded $18,500 for first-class airfare after the Energy Department’s inspector general audited the firm’s bills last year.

But the DOE reimbursed the 12 firms for hundreds of high-priced hours, huge photocopying bills and Seattle dinners that averaged $80 a person, a GAO audit found.

U.S. Rep. John Dingell, a Michigan Democrat and the powerful chairman of a House committee that oversees the Energy Department, asked the GAO to investigate DOE’s legal bills this year.

The downwinder tab was paid “without sufficient information to fully justify the amounts charged,” Victor Rezendes of the GAO told Dingell’s committee in July.

The DOE has no standards for what is an acceptable legal cost and is paying much more than other federal agencies that have developed costsaving criteria, the GAO determined.

For instance, the Federal Deposit Insurance Corp. seeks a 5 to 10 percent discount from attorneys on hourly fees, and limits fax charges to actual cost.

The DOE has sought no discounts and paid up to $1.75 a page for faxes, or 134 percent over cost.

Since 1991, the law firm of Gibson, Dunn and Crutcher of Los Angeles, representing Atlantic Richfield Hanford Co., billed taxpayers $48,000 for faxing paperwork at $1.75 a page over three years. The firm billed another $175,000 in copying fees at 20 to 25 cents a page.

Half the faxes went between regional offices of the same firm, meaning it made “a significant profit off the government by sending faxes to itself,” says the House committee’s report.

The firm had 64 people working on the downwinders’ case, including at least 26 attorneys. Twenty-three billed over $200 an hour. Five charged more than $300 an hour.

Seattle’s Perkins Coie sent eight attorneys to an October 1990 meeting with General Electric for the downwinders’ case. The bill: $11,000.

“This was a lawyer’s full employment program,” says an aide to Dingell.

The case has provided lawyers with a program of fine dining and luxurious lodging.

Two GE attorneys and three Perkins Coie attorneys charged the Ray’s Boathouse feast to taxpayers. Three GE employees and four Perkins Coie attorneys billed $538 for dinner at McCormick and Schmick’s in Seattle.

Keith Girard, a senior partner at Perkins Coie, says the GAO only picked the highest meal charges, when the meals actually averaged $13 per lawyer over four years of work.

In 1992, a senior lawyer from Kirkland & Ellis, a Chicago firm representing Du Pont, dropped $215 a night for a room at the Willard Hotel in Washington, D.C. The posh hotel near the U.S. Treasury is known as the birthplace of the term “lobbyist.”

DuPont was Hanford’s first contractor during the Manhattan Project.

A Kirkland & Ellis consultant charged $250 an hour, even when traveling and eating. He billed taxpayers $6,500 for a 6-hour meeting in Washington, D.C., in October 1990, and another $1,172 for business-class air travel.

The legal bills shock Hanford activists.

“It’s an outrage for DOE to waste millions of taxpayer dollars defending those who contaminated our citizens and our environment,” says Lynne Stembridge, director of the Hanford Education Action League.

Girard, a senior partner at Perkins Coie, defends his firm’s bills.

Dingell’s committee “portrayed the numbers accurately, but they never analyzed our work,” Girard says. The Hanford downwinders’ suit “has been well-defended,” he adds.

Some of the law firms protested having their bills made public.

In May, in-house attorneys for DuPont and GE sent identical letters to Dingell’s committee saying the bills were “privileged information” because they might reveal legal strategy. They said the bills should not be copied or released.

Dingell shot back, saying the bills are the public’s business.

No more first-class seats

Prodded by Dingell’s investigation, the DOE has promised to reform the 50-year-old indemnification system.

Energy Secretary Hazel O’Leary calls the legal fees “completely unacceptable.”

Now that the Cold War is over, the system should be revised, says Robert Nordhaus, the Energy Department’s chief counsel in Washington, D.C.

Six weeks after Dingell’s hearing on the legal costs in July, Nordhaus issued new guidelines aimed at cutting legal costs by 60 percent. They call for carefully scrutinizing all legal bills and settling cases early when possible.

The biggest targets at Hanford are whistleblowers’ litigation and the downwinders’ suit.

“In my view, the amount of money spent on handling the downwinders’ case was excessive,” Nordhaus says.

Nordhaus says he’s stuck with indemnifying current contractors - including Westinghouse - because it’s in their contracts.

The DOE will force the issue with contractors when their contracts come up for renewal. For Westinghouse, that’s in 1997.

Meanwhile, Nordhaus has collapsed the downwinders’ case from 12 to two firms to save money.

DuPont will oversee the case, using two law firms: Kirkland & Ellis of Chicago and Davis Wright Tremaine, Westinghouse’s Seattle law firm.

Perkins Coie is out.

“DuPont has taken over the case. I think consolidation makes sense at this point,” says Girard, of Perkins Coie.

“The reason there were so many firms in this case is that the contractors were doing what DOE told them to do” by hiring outside counsel, Girard says.

“When Dingell started his probe, they (DOE) changed their mind,” he says.

There is additional evidence that one firm still in the downwinders’ case has taken advantage of the blank check.

A Westinghouse internal audit obtained under the Freedom of Information Act shows Davis Wright Tremaine earned $888,966 in profit in 1991 for legal work done for the contractor.

The firm charged taxpayers as much as 50 percent over cost for legal research. The firm made 134 percent profit on faxes and 29 percent profit on 20-cent photocopies.

It also tried to nick taxpayers $6,000 for three first-class airline tickets for senior partner Randy Squires in the downwinders’ case.

The 1992 audit “was done at my direction,” says Robert Dutton, Westinghouse corporate counsel.

“We wanted to find out for ourselves whether (their) internal timekeeping was accurate. We did not reimburse them for first-class airfare,” Dutton says.

Westinghouse found other questionable charges in the audit. But the company didn’t ask the firm to reimburse taxpayers for the inflated charges because there was no formal agreement on allowable costs, Dutton says.

However, since the audit, Westinghouse has rolled back the firm’s charges for faxes, copies and legal research. It also requires a sliding-scale discount on legal fees.

If Squires wants to fly first class in the downwinders’ case now, “he does it on his own nickel,” Dutton says.

Westinghouse shared its audit with Dingell’s committee. The company and its law firm looked good compared to some of the other contractors, Dutton says.

“We came out in really good shape. We’ve spent $1.4 million in the downwinder case. We don’t deny that, but we are less than half of our closest competitor, Rockwell.”

Robert Carosino, who served temporarily this year as the DOE’s acting chief counsel in Richland, says his office is hiring a staff attorney to review legal bills.

The GAO is not completely satisfied with the promised reforms.

The DOE’s new directive “still leaves much of the cost control responsibility with the contractor,” says the GAO’s Rezendes. The issue is important. The DOE’s legal woes are expected to mount because of revelations about radiation experiments on humans.

O’Leary has said some of these subjects deserve a government apology and compensation.< GAO’s Rezendes says the past experiments are likely to trigger more lawsuits “and thus increased litigation costs for DOE.”

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