Freedom’s Lawyers, Advisers Want $1.8M
17 April 2014
By David Gutman, Staff writer
Within the past week, Freedom Industries’ assemblage of lawyers,
consultants and advisers have submitted bills requesting more than
$1.8 million from the dying company.
Freedom, the company whose faulty chemical tank contaminated the
region’s drinking water in January, is represented by four law
firms. It has a bankruptcy counsel, a co-counsel and
special-conflicts counsel, a special counsel and a special
environmental counsel. It also has a financial adviser and a
special environmental consultant, which is developing the plans to
clean up its site along the Elk River in Charleston.
Also on the Freedom payroll is another law firm, which represents
some of Freedom’s bankruptcy adversaries — unsecured creditors,
the people and companies at the bottom of the list when it comes
time for Freedom to pay back its debts.
All the plaintiffs in the more than 60 lawsuits filed against
Freedom are unsecured creditors. Their lawsuits are mostly on hold
while Freedom goes through bankruptcy. More than half of those
lawsuits have dropped Freedom as a defendant, predicting that the
company will have little money left coming out of bankruptcy, and
are now suing only West Virginia American Water.
“Whatever money there is going to be is going to come from the
claims process, and that’s what you’re going to recover from
Freedom,” Anthony Majestro, a Charleston attorney who dropped
Freedom from his lawsuit, previously told the Gazette. “It’s
unlikely there’s ever going to be any litigation.”
The city of Charleston, Kanawha County and the Kanawha-Charleston
Health Department have announced plans to sue Freedom to recoup
Charleston Mayor Danny Jones said he is not optimistic about the
“That’s usually what happens in bankruptcies, the lawyers usually
wind up with the money,” Jones said, adding that whatever the city
could get in a lawsuit would pale in comparison to the damage done
by the leak of Crude MCHM, a coal-cleaning chemical.
Kanawha County Commission President Kent Carper recused himself
from the county’s decision to sue Freedom because his private law
firm is involved in litigation against the company.
Carper quoted his grandmother when asked for his thoughts on the
lawsuits against Freedom.
“You can’t get blood out of a turnip,” he said.
Meanwhile, a week ago, Frost Brown Todd, a law firm that
represents the court-appointed “committee of unsecured creditors,”
asked for $94,458 in payment from Freedom for its last month and a
half of work.
That request, like the requests for payment from all of Freedom’s
lawyers and advisers, is subject to approval by U.S. Bankruptcy
Judge Ronald Pearson.
At the end of March, Frost Brown Todd filed an objection with the
court to prevent Gary Southern, the president of Freedom
Industries, from receiving salary for the time since Jan. 17, when
Freedom filed for bankruptcy.
The law firm’s argument against Southern stands in contrast to its
more recent request for payment.
“As this Court is well aware, a limited amount of resources are
and will be available to satisfy the legitimate claims of
unsecured creditors,” Frost Brown Todd wrote. “Administrative
expense claims should be strictly and narrowly construed by this
Court and held to a minimum.”
Southern later withdrew his request to get paid.
In total, the seven law firms and consultants employed by Freedom
requested $1,836,128.78 from the company for work done between
Jan. 17 and March 31.
The biggest bill comes from McGuireWoods, a corporate law firm
with more than 900 lawyers in 20 cities around the world, which is
Freedom’s lead counsel in bankruptcy court.
McGuireWoods is requesting more than $640,000 in legal fees, plus
expenses, for a total of more than $675,000 for the two and a half
months from Jan. 17 to March 31.
McGuireWoods first submitted a bill on Monday for about $70,000
more than what it ended up charging, but corrected that number two
days later, with no explanation.
“We frankly just looked at wrong numbers internally and we found
and amended the statement,” Mark Freedlander, Freedom’s lead
bankruptcy lawyer, said Thursday. “It was a clerical error.”
The weighted average pay rate for McGuireWoods employees working
for Freedom is more than $618 per hour.
Compared to that, Freedom’s environmental lawyers — Babst,
Calland, Clements & Zomnir — are a veritable bargain, charging
a weighted average hourly rate of $308.
Babst submitted a bill asking for more than $335,000 for its
services since Jan. 17.
Freedom also has a Charleston-based law firm, Barth &
Thompson, to assist in the bankruptcy process. Barth &
Thompson has done the least work for Freedom, about 87 hours, for
a total bill of about $28,000.
Freedom’s lawyers keep detailed track of their time and expenses.
On Jan. 28, Stephen Thompson, of Barth & Thompson, spent 0.1
hours (six minutes) reviewing an order that set a date for a court
hearing. He charged $35.
Freedom’s Chicago-based financial adviser, MorrisAnderson, charges
a higher rate. MorrisAnderson’s two main consultants to Freedom,
managing directors Alpesh Amin and Mark Welch, charge $375 and
$425 per hour, respectively.
In March, Amin and Welch got two tours of Freedom’s facilities,
lasting about seven and a half hours, for which they charged about
Amin billed Freedom for more than $14,000 in airfare, spent over
eight weeks after the company filed for bankruptcy. He also
charged more than $1,100 in car rentals and more than $1,100 in
Amin and Welch did not respond to requests for comment.
Freedom also has a “special counsel,” Pittsburgh-based Pietragallo
Gordon Alfano Bosick and Raspanti, to represent it in pending
On an hourly rate, Pietragallo is the least expensive of Freedom’s
lawyers, charging a weighted average of about $273.
Pietragallo charged Freedom about $200,000 — $177,000 in fees and
$23,000 in expenses.
Those expenses range from less than $7, for FedEx deliveries and
conference-call services, up to more than $18,000 spent on “copy,
fax and reproduction costs.”
As it winds up its life as a business, Freedom still employs 24
people, down from 51 when it filed for bankruptcy, according to
its most recent court filing. In March, Freedom paid its employees
about $370,000, including payroll taxes, health insurance and
401(k) contributions. That’s about half of what it paid its
lawyers and consultants over the comparable time.
Freedom lost about $690,000 in March, not including any of the
payments requested by its lawyers and advisers.
The company estimates that it will make a profit of $1.8 million
in April, as it continues to sell its remaining inventory and
Reach David Gutman at firstname.lastname@example.org or 304-348-5119.
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