* Lehman fees cover bankers, lawyers, advisers
* Fees unlikely to be surpassed
* Freefall contributed to costs
By Caroline Humer
NEW YORK, Oct 15 When Lehman Brothers
collapsed, a whole lot of money vanished with it. Its
bankruptcy, on the other hand, just keeps on paying.
Lehman's record-breaking bankruptcy has produced a
staggering $1 billion in fees -- doled out to legions of
lawyers, advisers and bankers over the past two years.
The financial firm has been paying out, on average, more
than $40 million a month, and based on that rate, it passed the
$1 billion mark last month. September's details will be in the
monthly operating report due in mid-October.
A Lehman spokeswoman declined to comment.
The fees are a fraction of the $639 billion in assets that
Lehman Brothers Holdings Inc LEHMQ.PK was running when it
collapsed into bankruptcy in September 2008.
But it is still more than, say, the gross domestic product
of Caribbean nation of St. Lucia, or the combined average
salaries of 8,000 financial advisers.
Experts say that the fees, which continue to rise daily,
come at the expense of creditors seeking to be repaid.
"If you are a creditor, every dollar that is going to
(debtor) counsel is a dollar not going to a creditor," said
Stephen French, a managing partner at Legalbill, a Tennessee
company that advises companies on managing their legal bills.
But Bryan Marsal of Alvarez & Marsal, the advisory firm
running Lehman in the United States, said in an emailed
statement that his firm's work has improved recovery for
creditors by more than $5 billion and that the size and
complexity of the case justify the fees.
That has meant hiring an army of advisers and accountants
not only in the United States, but to close up shops throughout
Asia and Europe, where insolvency rules change in each country.
Allowed claims from creditors in the case are expected to be
about $365 billion. It expects to recover about $60 billion
before expenses to pay creditors.
Lehman expects to emerge from bankruptcy during the first
quarter of 2011. Then, it can start paying back creditors.
The company has worked on a reorganization plan that will
put most of its remaining assets and operations into a newly
created business called Lamco.
BREAKING IT DOWN
A look at the financial firm's August operating report
breaks down who gets what.
Most of the bills come from Alvarez & Marsal. Law firms
Weil Gotshal & Manges, in charge of the bankruptcy court
process, and Jones Day, which handles litigation, also top the
The court-appointed examiner who conducted an investigation
into the collapse of the firm, his law firm and his advisers
cost nearly $100 million.
The company also pays the people who work for some of their
creditors, such as the law firm Milbank Tweed Hadley & McCloy.
Others on the list: Bingham McCutchen, Bortstein Legal;
Curtis, Mallet-Prevost, Colt & Mosle; Dechert; Gibson Dunn &
Crutcher; Kasowitz, Benson, Torres & Friedman; Latham &
Watkins; McKenna Long & Aldridge; Pachulski Stang Ziehl &
Jones; Reilly Pozner; Simpson Thacher & Bartlett; Sutherland
LLP; and Windels Marx Lane & Mittendorf.
Lehman's running tab beats the next closest bankruptcies:
Enron and WorldCom, according to Lynn LoPucki, a professor at
UCLA Law School and a visiting professor at Harvard Law School
who studies bankruptcy fees.
"The question is, could you recover the same amount with
lower professional fees and I think that you could. The
professional fees in bankruptcy are extremely high and the
reason is that people are spending other people's money," he
FREEFALL OR FREE-FOR-ALL
One reason some cases have high bankruptcy fees is that
they are stuck in court, said Ken Buckfire, chief executive of
restructuring firm Miller Buckfire & Co.
"Uncontrolled hard money bankruptcies like Lehman are just
inevitably going to be very expensive, possibly because they
had no plan when they went in," Buckfire said. "They had no
planning and it was a free-for-all to try to grab as much value
as they could. Inevitably, that required armies of lawyers all
over the world arguing about everything."
(Editing by Robert MacMillan)