Lawyers and other professionals fighting over the remains of Gulf USA Corp. in bankruptcy court have amassed fees large enough to pay retirees’ medical benefits for more than two years.
Since the bankruptcy began in late 1993, professionals have accrued $4.5 million in fees.
“I think the legal fees stink. It’s too much money,” said retiree Charles Tawney of Kellogg. “What about our benefits?”
Gulf owes lifetime medical benefits to more than 2,000 retirees, a debt valued at more than $50 million. According to a proposed bankruptcy reorganization, however, the retirees will be forced to accept cuts.
Even though retirees lament the mounting legal fees, their own lawyers figure to get a big piece of the pie being split up by professionals.
Attorneys and financial advisers working for the retirees have racked up $668,861 in fees, according to a report from the U.S. trustee’s office.
One of those attorneys, Lowell Finley of San Francisco, insists the retirees are getting their money’s worth.
“The retirees understand full well that they now have a settlement that, while requiring some painful cuts, is a very fair settlement for them,” Finley said.
A plan to reorganize Gulf’s debts gives the retirees a medical benefits package valued at more than $40 million.
Finley was among 14 lawyers at a Bankruptcy Court on Thursday, asking U.S. Bankruptcy Court Judge Alfred C. Hagan to approve fees. During a three-hour hearing, the issue of legal fees took just a few minutes.
Gary McClendon, an attorney for the U.S. trustee, expressed concern over mounting professional costs in court documents. But he declined to discuss the matter after the hearing.
However pricey, work done by attorneys in the Gulf case has generated more money than it has cost. For example, environmental settlements with insurance carriers have brought in $16 million. And property once considered worthless - Gulf’s coal operation in Pennsylvania - has been sold for $3 million.
“The professionals in this case have created the cash in this case,” said Larry May, Gulf’s lead bankruptcy lawyer. “There would have been no retiree medical payments without these professionals.”
Some retirees concede that May probably is right.
“I suppose everyone but the working class gets overpaid in our view,” said Elwin Shultz, a Gulf pensioner in Pinehurst. “The point is: Without our lawyers, we’d be sunk.”
Attorneys merely have asked for their paychecks; they haven’t received them yet. Professionals have been paid only a fraction of the fees that have accrued since the bankruptcy began in 1993. Their fees will be paid when Gulf’s bankruptcy is resolved, possibly by late spring or summer.
Said May, “We have, in effect, been sitting and waiting while others get paid first.”