13. Billing that puts
a law license in peril
At what level does “aggressive” billing turn into dishonest — or even criminal — billing? That’s a tough question. But with some regularity, lawyers are professionally disciplined and even criminally prosecuted for overbilling. Some go to prison.
Examples of lawyers who get into trouble
Generally, though, prosecution or professional discipline involves acts that go well beyond adopting questionable methods of accounting for time. To put your liberty or license in peril, you probably have to engage in some very deliberate, systematic fraud. Some examples:
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•The former managing partner of a Manhattan law firm was sentenced to a prison term of 33 months for defrauding the Federal Deposit Insurance Corporation and the Resolution Trust Corporation of about $1.4 million by overbilling. The firm began submitting bills that substantially inflated the hours of work performed. The managing partner carried out his scheme by making handwritten notations on draft bills that directed the firm’s office manager to increase the hours reported for individual attorneys, generally by one to four hours per day.
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•A Milwaukee lawyer who billed the Office of the State Public Defender for 24 or more hours on each of 106 days pled guilty to a misdemeanor theft charge.
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•A Florida attorney was disbarred for five years for overcharging a client by more than $2.5 million. The attorney turned in padded bills for an insurance investigation that he conducted on behalf of Lloyd’s of London. He was found to have overbilled by $300,000 for his own work, by $1.2 million for the work of his associates, and by $1.2 million for expenses.
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•A New York attorney performing work for a major Wall Street bank was accused of billing for hours not worked. He directed that actual time reported by associates be adjusted upward to meet desired billing levels. His secretary would first draft bills based on computer runs and then, at the lawyer’s direction, would inflate attorney hours in order to hike the overall bills. That lawyer was sentenced to more than five years in prison.
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•An attorney handling criminal appeals who bilked New York City’s Assigned Counsel Plan with bills for thousands of hours of padded time was suspended for three years — a surprisingly lenient punishment. The attorney billed more than 7,600 hours for work supposedly performed on all but eight days of two years. (One of the extraordinary things about a story like this is that it took the administrators of the Assigned Counsel Plan so long to figure out that something was wrong if a lawyer was billing for 3,800 hours a year.)
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•In perhaps the most famous billing scandal of all, Webster Hubbell — Hilary Clinton’s former law partner who was appointed by then-governor Bill Clinton as Chief Justice of the Arkansas State Supreme Court and then went on to be the number-three person in the Department of Justice under Bill Clinton’s presidency — was found guilty of over 400 instances of financial fraud, many of which involved overbilling clients. He was sentenced to nearly two years in prison.
Let me make one point clear, lest this book ruffles feathers more than is intended. The fact that I am talking about lawyers who engage in criminal conduct is not in any way intended to suggest that there is anything intrinsically dishonest about hourly billing.
Is hourly billing prone to being anomalous? Yes. Arbitrary? Yes. Irrational? Yes. Harmful to the attorney-client relationship? Yes. But intrinsically dishonest? No.
That said, a lawyer who pushes the envelope can stray from the merely arbitrary to the aggressive, and then from the aggressive to the unethical, and then from the unethical to the downright crooked. And it is quite difficult for clients and, indeed, colleagues, to know what is taking place. The billable hour involves a system that makes it easy for people to cheat and get away with it.
Most lawyers may do their best to remain honest within the system — even though that system has inherent distortions (such as operating on the fiction that the lowest amount of recordable time is six or 12 minutes). A minority exploit it for all that they can. Only a few of those get caught. At its best, it is an honor system. And not all who take part prove honorable.
Taking pennies out of the ethics jar
In the aftermath of an ethical collapse, one purpose of an ensuing autopsy is to discover where the problem began. Often, the answer is that there was no single act representing a massive ethical lapse that was the “but for” cause of all that followed. I suspect that most of the cases listed above did not begin with the lawyer suddenly deciding one morning to give up all the noble intentions that most people have when entering the profession and, instead, to become a criminal.
Rather, ethical spirals typically begin slowly when lawyers start taking pennies out of the “ethics jar” over prolonged periods — small ethical stretches here and there that, over time, lead to a distorted view of what is proper.
A constant series of close calls can end up creating a culture of amorality, if not outright immorality. Blind eyes are turned by others, perhaps. And then, in a small number of cases, things get really bad.
So there is nothing intrinsically “criminal” about taking the view that 12 minutes is the smallest amount of time that can be measured. Good people may have come to that conclusion. But, maybe, convincing oneself of the reasonableness of that obviously flawed proposition risks putting oneself on a slippery slope. Don’t go there.
Entire contents © 2008 John Derrick