Lawyers and accountants working on the Lou Pearlman and Trans Continental bankruptcy cases submitted bills this week that bring the fee and expense tally to more than $5-million — more than their efforts have recovered.
Pearlman, a former Orlando music producer, admitted stealing $300-million from banks and investors and was sentenced to 25 years in prison. Escalating fees make it more likely that Pearlman's victims will never see a dime.
Bankruptcy trustee Soneet Kapila has recovered about $4-million in assets since the bankruptcy process began in March 2007. Additional efforts are pending, including lawsuits against some of Pearlman's former associates. Kapila, his lawyers and accountants have been working without pay, hoping to recover money later. He said they delayed asking for payment until they had some results to show.
"We wanted to make sure that we had done enough work to demonstrate that the work wasn't wasted, he said. "It's a major financing burden to everyone who's working on the case."
The biggest bill is from the law firm Akerman Senterfitt, which asked for $1.9-million. Kapila's accounting firm, Kapila & Co., put in a $1-million bill, but Kapila said it does not include anything for his work as trustee. Some of the lawyers billed at a rate of $500 an hour.
Kapila said he will propose that only a portion of the cash collected be used to pay the lawyers and accountants a percentage of their fees. "We're not going to pay the entire $5-million," he said.
News of the legal bills prompted griping on the Times' MoneyTalk blog (blogs. tampabay.com/money), which has been following the Lou Pearlman case and has more details on the bills.
However, the chairman of the court-appointed creditors committee defended Kapila.
"The trustee and the professionals are not the guarantors of success and they have done as good a job as possible to date under the very difficult and complex facts of this case," said Lawrence Rifken. "They have provided the working capital for this case when no one else would or could."
Helen Huntley can be reached at firstname.lastname@example.org or (727) 893-8230.