Politics & Government
12:50 pm
Tue August 13, 2013

Consultant fees charged to the city of Detroit scrutinized

Bills being charged to the city of Detroit in its restructuring are under the spotlight.

Last month, legal fees charged by Kevyn Orr's former law firm, Jones Day, were highlighted in a piece by AM Law Daily's Sara Randazzo.

Randazzo wrote, "it pays to work for a financially crippled city," and noted that some lawyers were charging rates at up to $1,000 an hour. Randazzo noted that one of the lawyers had worked on Chrysler's restructuring.

She later wrote about how much the Michigan-based law firm, Miller Canfield, stands to gain in its contract with the city:

Initially executed while Detroit and Michigan officials sought to restructure the city's finances under an agreement struck in April 2012, the contract in question now encompasses the much larger task of helping [the] Motor City as it seeks to become the largest U.S. municipality to ever go bankrupt. That additional workload raises the contract's value to $1.2 million, according to details on the revisions available in public documents obtained by The Am Law Daily.

And today, the Detroit News obtained records showing how much the consulting firm Conway MacKenzie is charging the city.

The Detroit News questioned the rate being paid a young staffer:

City Hall’s estimated $1.4 million-a-month restructuring tab includes a consulting company billing $275 an hour for a 22-year-old financial analyst who graduated from college last year, according to records obtained by The Detroit News.

Wade P. Johnston got his bachelor’s degree in finance in 2012 from Michigan State University and is part of the team the consultants, Conway MacKenzie, have working to turn around city operations.

Emergency Manager Kevyn Orr's spokesman Bill Nowling defended the payments. He said the firm gave the city a 25% discount and that "the hourly amounts were negotiated by the city as flat rates within job classifications to save money."

The records show the consultants putting in 11 hour workdays on average. It remains to be seen whether all these consultants and lawyers can set the city back on solid financial footing.

AM Law Daily looked at the 14 law firms that made bids to be Detroit's "restructuring counsel." As we know, Jones Day won the big contract, but some of the other firms on the list continue to work on smaller projects for the city.