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August 24, 2011 7:30 PM

The Bankruptcy Files: Lehman Fees Near $1.4 Billion

Posted by Brian Baxter

The Lehman Brothers legal bill mill continued to churn this week as the defunct financial services giant filed its latest monthly operating report with the Securities and Exchange Commission.

The company paid another $28.6 million in fees to outside financial, legal, and auditing advisers in July, according to its SEC filing, bringing its total tab in the nearly three-year-old Chapter 11 case to nearly $1.4 billion. Leading the way once again among the law firms was lead counsel Weil, Gotshal & Manges, which collected $7.7 million, increasing its haul in the case to $326.6 million.

Jones Day, special counsel to Lehman for domestic and Asian litigation, increased its bankruptcy tab to $55.6 billion by billing $1.45 million in July. Milbank, Tweed, Hadley & McCloy billed more than $2.5 million for its services in July as counsel to Lehman's official committee of unsecured creditors, bringing its total bankruptcy bill in the Lehman case to nearly $104.7 million.

Milbank played a key role in another hard-fought bankruptcy case making headlines this week in South Texas. The firm's client, mining giant Grupo Mexico—which won control of its former copper mining subsidiary Asarco in late 2009 after a four-year bankruptcy battle—will pay $123.4 million in fees and expenses to Baker Botts.

U.S. bankruptcy judge Richard Schmidt in Corpus Christi issued an order last week putting Tucson-based Asarco, now formally part of Grupo Mexico, on the hook for fees and expenses owed to its former bankruptcy lawyers at Baker Botts. Grupo Mexico, which was represented by Milbank in the Asarco bankruptcy case had fought the Baker Botts fee request in federal court.

Baker Botts, whose legal fees for Asarco hit the $100 million mark in August 2009, issued a press release touting Schmidt's praise for the firm's work on the case. The judge credited Baker Botts with winning billions for the company's creditors, a group that included governmental agencies responsible for cleaning up mining-related pollution as well as victims of asbestos poisoning.

"I've been trying cases for 39 years and I've certainly heard judges criticize plenty of lawyers," Baker Botts litigation partner G. Irvin Terrell, a one-time Am Law Litigator of the Week for his Asarco efforts, told The Wall Street Journal in the wake of Schmidt's ruling. "That's a good feeling for a lawyer to feel like he earned his fee, and the court even rewarded us for exceptional performance."

Schmidt awarded Baker Botts $113 million in fees and $6 million in expenses, as well as an additional $4 million in fees for services "instrumental in producing the exceptional results that were unanticipated at case commencement," according to a statement by the firm.

Other lawyers reaping the benefits of bankruptcy assignments this week included attorneys at Dewey & LeBoeuf, who are seeking $1.7 million for five weeks of work in the Chapter 11 case of the Los Angeles Dodgers, according to the Los Angeles Times. Dewey is also representing international bondholders for bankrupt Czech lottery operator Sazka who are demanding changes to sale conditions for the company, Bloomberg and Reuters report.

Kirkland & Ellis, meanwhile, has picked up the work advising Bahamas-based resort operator Kerzner International on its restructuring talks involving $2.78 billion in mortgage bonds, Bloomberg reports. Kirkland is also acting as counsel to bankrupt real estate investment trust Innkeepers USA, which saw a $1.1 billion sale of 64 hotels collapse this week after investment firms Cerberus Capital Management and Chatham Lodging Trust called off the accord. The proposed deal also generated work for Schulte Roth & Zabel and Wachtell, Lipton, Rosen & Katz, according to our previous reports.

Below are some of the latest bankruptcy filings of note to cross our desk . . .

Inner City Media Corporation

Creditors led by billionaire Ronald Burkle's Yucaipa Companies filed an involuntary bankruptcy petition August 19 in New York, seeking to wrest control of Inner City Media Broadcasting, a radio company with an African American audience that was founded by New York political figure Percy Sutton.

Cadwalader, Wickersham & Taft financial restructuring cochair John Rapisardi and partners Peter Friedman and Scott Greenberg are advising Yucaipa on its effort to force Inner City and 12 affiliates into bankruptcy proceedings. Schulte Roth partner David Hillman is representing two other Inner City creditors, both investment funds controlled by Fortress Investment Group. Inner City Media has been represented in litigation by New York's Meyer, Suozzi, English & Klein, Bloomberg reports.

The creditors claim they are owed a combined $254.1 million by Inner City Media based on a loan now in default. They also claim that Sutton's son, Pierre, chairman of the company, scrapped a proposed prepackaged bankruptcy plan that would have repaid unsecured creditors, Reuters reports.

ShengdaTech

ShengdaTech filed for Chapter 11 protection August 19 in Reno following an accounting scandal at the Shanghai-based chemicals maker. ShengdaTech, which is incorporated in Nevada, lists nearly $181 million in debt against assets of $295.4 million, according to Bloomberg.

ShengdaTech is represented in the bankruptcy by Greenberg Traurig business reorganization partners Bob Olson, Nancy Peterman, and Keith Shapiro, litigation partner Paul Ferak, and financial services partner Miriam Bahcall. Olson joined the office in 2008 from Lewis and Roca in Las Vegas, while Bahcall came to Greenberg that same year in Chicago from Morgan, Lewis & Bockius.

Skadden, Arps, Slate, Meagher & Flom, China's Jun He Law Offices, and offshore firm Conyers Dill & Pearman are serving as special counsel to a special committee at ShengaTech conducting an internal investigation of accounting and financial issues at the company.

On Monday, current ShengdaTech board members sued former CEO Chen Xiangzhi to prevent him from regaining control of the company, of which he is the largest shareholder, Bloomberg reports. The 15-page complaint, filed in U.S. bankruptcy court in Nevada, accuses Xiangzhi of stalling an internal probe of accounting and financial irregularities at ShengdaTech conducted earlier this year by O'Melveny & Myers and continued by Skadden.

According to a list of ShengdaTech's 20 largest unsecured creditors, the company owes $516,363 to Cadwalader for professional fees, and unspecified sums to nine individuals through shareholder derivative litigation.

SpectraWatt

Despite being backed by units of Intel and Goldman Sachs, solar company SpectraWatt filed for bankruptcy on August 19 in Poughkeepsie, New York. Bloomberg reports that SpectraWatt owes $38.7 million to creditors and plans to auction off most of its assets.

King & Spalding financial restructuring partner Mark Wege and counsel Scott Davidson are advising Hopewell Junction, New York–based SpectraWatt on its Chapter 11 proceedings. Court records show that attorneys from the firm are billing between $480 and $775 an hour for their services in the case. King & Spalding was paid a $100,000 retainer on March 11 that it has not yet drawn down on.

Evergreen Solar

Once a shining light in the alternative energy sector, Evergreen Solar had lost much of its luster by the time it filed for bankruptcy in Delaware on August 15. The Boston Globe reports that Marlboro, Mass.-based Evergreen, which makes silicon wafers used in solar panels, had shut one of its manufacturing plants earlier this year, citing increased competition from Chinese rivals selling cheaper products.

Bingham McCutchen bankruptcy partners P. Sabin Willett, Ronald Silverman, and Steven Wilamowsky are advising Evergreen, along with corporate partners J.Q. Newton Davis and John Utzschneider, and counsel Scott Seamon. Partners are billing between $605 and $1,095 an hour, of counsel between $425 and $1,085, and counsel and associates at hourly rates ranging from $375 to $730, according to court filings.

Pachulski Stang Ziehl & Jones name partner Laura Davis Jones ($895 per hour) in Wilmington is also serving as cocounsel to Evergreen in its Chapter 11 case. Court records show that the bankruptcy boutique received $250,000 from the debtor in the year prior to its bankruptcy filing.

Gerald Champion Regional Medical Center

After being hit with a wave of malpractice litigation, Alamogordo, N.M.–based Gerald Champion Regional Medical Center filed for bankruptcy August 16 in Albuquerque. The facility provides services to 70,000 patients in Otero County, New Mexico, and neighboring communities in the vicinity of Holloman Air Force Base.

White & Case financial restructuring partners Craig Averch and Robert Kampfner, in Los Angeles are advising Gerald Champion on its Chapter 11 case, along with Alamogordo-based local counsel John D. Wheeler & Associates.

White & Case received $349,961 from Gerald Champion in the 90 days prior to its bankruptcy filing, including a $250,000 retainer paid to the firm on Aug. 9, according to court records. Partners at White & Case are billing between $700 and $750 an hour for their services, while associates are ranging from $295 to $685 an hour.

Listed among Gerald Champion's 20 largest unsecured creditors are plaintiffs represented by Volk, Poulos & Coates, of El Paso. The debtor was hit with 47 lawsuits, most of which were filed between June and October 2010 over procedures designed to ease chronic back pain, according to local news reports.

Manistique Papers

A bankruptcy filing by Manistique Papers has hit hard the northern Michigan city of Manistique, where the company—known mainly for recycling—has been based for the past 90 years. Manistique Papers, which entered Chapter 11 proceedings Aug. 12 in Delaware, employed more than 150 people in a community with a population of just 3,500, according to local news reports.

Timothy Nixon, the head of the business finance and restructuring group at Godfrey & Kahn, in Wisconsin, is advising Manistique, along with partner Carla Andres, in Green Bay. Partner Eric Schwartz of Delaware-based Morris, Nichols, Arsht & Tunnell is also representing the debtor. Neither firm has yet filed billing statements with the bankruptcy court.

Manistique closed its factory earlier this month and announced that it would pursue a sale of its operations in bankruptcy court. The company, which claims to be the first manufacturer of recycled content newsprint in North America, stated in court filings that it has suffered from the rising cost of raw materials and a sharp decline in orders for its paper-related products.

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