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March 29, 2012 6:54 PM

Power Failure: Shelving of Upstate New York Utility Means No Payday for Howrey Estate

Posted by Sara Randazzo

The bankrupt law firm's rocky assignment representing a fledgling public power company—and the potential $15 million contract that went with it—appears over after a key municipal official announced that he is abandoning the project.

More than a decade before Howrey's dissolution and drift into bankruptcy, the firm began working for a group called the Alliance for Municipal Power to help form the North Country Power Authority, a public utility meant to serve two dozen New York municipalities in St. Lawrence and Franklin counties along the border with Canada.

Envisioned as a means for cutting electric rates in one of New York's poorest regions, the NCPA, signed into law in 2010, has all but ceased functioning for the past year due to infighting and Governor Andrew Cuomo's delay in appointing enough board members to the group to form a quorum.

In the year before its dissolution, Howrey attempted to lock down a $15.5 million contract with the NCPA, at one point sending the authority a bill for more than $3 million. The firm never had an official retention agreement with the NCPA, however, says Kenneth Anderson, a former Howrey counsel who has been involved with the project.

According to Anderson, who has not yet joined a new firm, Howrey's chances of getting paid were entirely contingent on the NCPA's success, and, as he succinctly put it Thursday: "There ain't no success."

That would be hard to argue with, considering that this week the Alliance for Municipal Power's chairman suggested returning roughly $80,000 to the affected municipalities since the NCPA shows no sign of functioning in the near future, the Watertown Daily Times reports.

"We can hold onto the town and village money for only so long," chairman Robert Best, Jr., told the Daily Times. "At this point in time, I may call for a meeting and entertain the idea of returning the money to the towns and have North Country Power Authority go to them directly. My attitude is 'I'm moving on.'"

With the NCPA dormant, it appears unlikely the Howrey estate will ever see any money for the work it did to help get the utility established, or that it will ever secure that $15.5 million contract. The estate can use every dollar it can recover. Though the latest operating report filed in connection with the Howrey bankruptcy listed unknown liabilities, earlier filings listed $107 in total liabilities, and secured creditor Citibank contends that it alone is owed $40 million. 

Howrey trustee Allan Diamond confirmed earlier this year that the estate retains the rights to the NCPA matter—even though it no longer employs any attorneys to work on active matters—but that there was no work to do until the New York legislature acted.

Howrey still has a stake in a few dozen other contingency fee matters, according to The Am Law Daily's previous interviews with Diamond. Attorneys and other professionals working for the estate have devoted hundreds of hours to finding ways to collect on those old cases, according to court filings, as well as to retrieve some $30 million in unpaid bills.

So far, those efforts have produced little, and a February operating report filed with the court says the estate only realistically expects to collect about half of its unpaid bills.

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